City staff previews 2026 water-rate model, cites Olympic gravity system costs and timeline

City staff presented an overview of the city’s five-year water-rate update process and the legal and operational context that will guide new rates set to take effect Jan. 1, 2027. The presenter said the city updates its water system plan every 10 years and reviews rates every five to ensure enterprise utilities pay their own costs and comply with Department of Health and EPA requirements.

The presenter said the city moved in 2021 to a usage-based water supply agreement with the local paper mill, which pays about $1.24 per 1,000 gallons for raw water. "That roughly equates to about $4,500,000 a year that the paper mill pays and about a half $1,000,000 a year that the city pays for water," the City staff member said. Staff described those receipts as flowing into the Olympic Gravity Water Fund to pay operation, maintenance and capital replacement for the shared gravity system.

Why it matters: staff said the city must set rates now because the current rate ordinance expires on 2027-01-01. The presenter outlined a public schedule: staff will produce a draft rate analysis by September, bring the model to council for information by August, and aims for first and second readings in October–November so an ordinance can be adopted in December and take effect Jan. 1, 2027. The first customer bill reflecting the change would appear in February, staff said.

Key technical points and affordability measures: staff told the council operational costs were underestimated in the 2021 agreement and condition assessments showed targeted sections of pipeline at higher risk, requiring capital reallocation and emergency repairs. The presenter also described an expanded income-based discount program to be reflected in the 2027 rate model: the discount eligibility was broadened from 200% to 350% of the federal poverty level with tiered discounts (examples discussed by staff: about 200% → 75% discount; 300% → 50%; 350% → 25%).

Infrastructure and resilience: staff described a planned rehabilitation of the East Dam to meet seismic standards and said the project is expected to raise lake elevation by roughly three feet, which would add an estimated seven to eight days of storage in low-flow periods.

Next steps: staff will contract with an outside firm this summer to run the rate model, complete an O&M manual and update the capital-spending plan. The council was given a calendar for the fall ordinance readings and staff said public engagement and a workshop will follow before the council votes on any ordinance.