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Commission recommends 5-year phase-in after sewer cost-of-service findings show multifamily subsidy
Summary
Utilities staff told the Environmental Services Commission that the city’s multifamily sewer rate structure is unintentionally subsidizing single-family and commercial customers; after discussion the Commission recommended a 5-year phase-in for correcting the inequity and gave staff guidance on four rate-design options.
Utilities staff presented results from a sewer cost-of-service study and proposed rate-design changes at the Environmental Services Commission’s Nov. 6 meeting, recommending a phased correction to what staff called an “unintentional subsidy” embedded in the city’s multifamily billing structure.
Matt Thurber, utilities, introduced the presentation and turned technical details to fiscal manager Matt Hobson, who explained that the multifamily class pays a bimonthly fixed charge that includes an 11-CCF flow allowance. "On average," Hobson said, "an apartment unit uses about 7.5 CCFs every 2 months, but that fixed charge assumes they're using 11," which drives a higher cost-recovery level for multifamily accounts and leaves other classes underpaying relative to cost of service.
Staff presented three phase-in options — 3, 5 and 7 years — and four rate-design recommendations focused on simplifying single-family flow tiers, indexing fixed charges to King County treatment rates, restructuring multifamily fixed and flow charges so flow is billed from 0 CCF, and aligning nonresidential minimums with County indexing. Hobson summarized the practical effect: "Rate design is revenue neutral. We are not gonna generate any more revenue or less revenue from these recommendations than we would do otherwise." He added that the changes shift how costs are collected, not the total revenue requirement.
Commissioners questioned how multifamily bills are passed to tenants and whether owner-paid accounts would realize savings. Commissioner discussion weighed faster equity correction against potential "sticker shock" for some customer groups, especially given King County's projected increases in treatment costs. Staff noted roughly half of Bellevue households are in multifamily units (about 33,000 of the city's roughly 60,000 dwelling units) and that bill impacts vary widely by property and usage.
After discussion, the commission took a formal motion to recommend the staff-recommended 5-year phase-in to the City Council. The roll-call vote recorded 4 yays and 2 nays. Staff said that direction provided the information needed to model rate designs and prepare materials for Council consideration in the spring and for potential implementation in the January 2027 rates.
The commission also requested a forthcoming briefing on the utility bill assistance program so staff can demonstrate current program metrics and planned outreach as rate changes are developed.
What happens next: staff will refine rate-design schedules consistent with the 5-year phase-in recommendation and present the results to City Council as part of the 2027–28 budget and rate process.
