Chehalis staff recommend multi-year utility rate and connection-fee increases; public hearing continued to Feb. 10

City staff and the consultant who prepared the rate study told the Chehalis City Council on Jan. 27 that the city needs multi-year rate increases and updated capital facility charges to pay planned capital projects, rising operating costs and projected debt service.

The recommendation from consultant Chris Gonzales of FCS Group would move the utility customer billing cycle from bimonthly to monthly, add an option for electronic billing, and implement a 2025–2029 rate plan that staff and the consultant said is intended to phase in needed revenue rather than impose a single large jump.

The rate study’s revenue-need forecast reflects large water capital needs the consultant said total roughly $36 million through 2029, including distribution work, source investments and water-right purchases. Gonzales said grants and cash are expected to cover about 26% of that cost, with the remainder funded largely by debt; the additional debt would increase annual water utility debt service by roughly $1.9 million by 2029.

Gonzales summarized the recommended monthly bill changes (monthly figures presented by staff): wastewater would increase by about $2.93 in 2025 followed by modest annual increases through 2029; stormwater would rise about $1.51 in 2025 with smaller increases thereafter; water would rise about $7.68 in 2025 with larger jumps in 2026–2027 and smaller increases in later years. Combining water, wastewater and stormwater, staff presented an illustrative total residential monthly bill increase of roughly $12.12 in 2025, $14.11 in 2026 and $16.38 in 2027, with smaller increases in 2028–2029.

On connection fees, the consultant said the maximum justifiable capital facility charges (CFCs) increase substantially under the revised cost basis: water CFC from $2,071 to $4,093 per ERU (equivalent residential unit), wastewater CFC from $3,030 to about $5,103 per ERU, and stormwater CFC from $489 to $1,342 per ESU. Gonzales noted the city could adopt lower charges; lower CFC recovery shifts more of capital burden onto existing ratepayers.

Council members pressed staff and the consultant for detail on the timing and drivers of the larger near-term increases. Gonzales said a revenue ramp is needed to cover planned borrowing and that 2026–2027 include a debt-service “hump” related to planned water capital work (including water-right purchases and a so‑called “pinch point” project). He said the plan uses reserves to smooth increases but still requires a steeper ramp in those years. “We are using utility reserves to smooth that increase in over the 3 years, but if we extend it further, then we’re going to fall below recommended balances,” Gonzales said.

Councilors asked for project-level detail tied to the capital plan; staff said a draft capital improvement plan (CIP) exists and will be provided and that council will be able to revisit rates after the CIP is finalized. City staff recommended adopting a five-year rate plan and updated CFCs but emphasized the council could delay or stage action. The council opened the public hearing on the rate study, heard staff presentation, then recessed and continued the public hearing to the Feb. 10 council meeting to give the public more time to digest information and to allow staff to correct ordinance language.

At the same meeting, council members identified a procedural problem in the draft ordinances: the capital facility charges as updated in the study were present in one ordinance file but not consistently included in the water and wastewater ordinance amendments the council had before it. Councilors asked staff to ensure the updated CFC amounts appear in the appropriate ordinance language before a vote. A motion to table the rate ordinance action until the Feb. 10 meeting passed (mover/second not specified on the record).

What was discussion only: staff and the consultant’s recommendation to adopt the 2025–2029 rate plan and the updated CFCs, and the staff plan to switch billing to monthly with a proposed 60‑day notice and an opt-in electronic-billing option. No ordinance adopting rates or CFCs was enacted on Jan. 27; formal action was tabled for further review.

Why it matters: the consultant’s plan funds an aggressive capital program—especially for water—and would increase customer bills and the city’s debt service obligations in the short term while aiming for multi-year stability. Council directed staff to provide project-level CIP detail and corrected ordinance language ahead of the Feb. 10 hearing so the public and council can review the exact charges and implementation timeline.

Quotes from the meeting (verbatim): “the revenue requirement forecast, that looks at how much revenue does each utility need to generate to cover its costs.” — Chris Gonzales, consultant, FCS Group “We are using utility reserves to smooth that increase in over the 3 years, but if we extend it further, then we’re going to fall below recommended balances and things like that.” — Chris Gonzales, consultant, FCS Group “It will be about, estimated $1,200 a month extra in billing to just get the papers out.” — Lance Bunker, City staff

Ending: The council continued the public hearing and asked staff to correct ordinance language and provide a draft CIP and itemized project list tying capital needs to the rate plan. The council scheduled final action and a second hearing for Feb. 10, 2025.