Pasco council adopts water‑rights fee update to curb market transfers

Pasco City Council adopted changes to the municipal code that alter how the city collects and applies water‑rights in‑lieu fees and how transfers of water rights are treated.

Staff told council the city raised the in‑lieu fee in 2023 from $1,725 to $4,150 per acre‑foot after a market study. Staff said removal of commercial and industrial exemptions and the unchanged surcharge policy created a market incentive for some developers to sell water rights rather than pay the city fee, which staff described as an "arbitrage opportunity." The code changes approved in Ordinance 4824 eliminate those exemptions and introduce a 50% surcharge for rights removed from property within the relevant timeframe.

On grandfathering, staff told council that the lower fee ($1,725 per acre‑foot) would be grandfathered for preliminary plats that were already approved as of the 2023 ordinance, but the 50% surcharge for transferred rights would not be grandfathered. "Just the fee... would be grandfathered. The 50% surcharge is not grandfathered," staff said. Council members asked several clarifying questions and expressed support for moving the ordinance forward; Mayor Pro Tem Milne moved adoption and the council approved the ordinance.

The changes are intended to align Pasco’s water‑rights policy with regional water management obligations and to reduce the potential for speculative transfers that deplete city water entitlements. Staff noted additional work with the Washington State Department of Ecology remains necessary as the city pursues supplemental municipal water rights.