Camas city officials will soon consider raising utility rates to help keep up with rising costs and capital building needs.
Camas Public Works Director Steve Wall, along with FCS Group consultant Sergey Tarasov, presented utility rate analysis to the Camas City Council during the Council’s Sept. 5 and Sept. 18 workshops.
Wall said Monday that he plans to bring the issue back to the Council for more in-depth discussions during the Council’s second October meeting on Monday, Oct. 16.
“The costs of services in all areas of the City continues to rise, including utility services,” Wall told the Council this month. “Additionally, to continue serving both existing and new customers, and allow for necessary repair and replacement of equipment, the City’s capital improvement program is relatively large and puts additional pressure on the utility rates.”
Wall and Tarasov broke their discussion of possible rate increases into two presentations — with an initial water and sewer rate analysis presented during the Council’s first September workshop and a stormwater and solid waste (garbage) utility rate analysis presented to Council members this week, during their Sept. 18 workshop.
The Council adopted higher utility rates in 2018, to help support ongoing capital improvements and account for higher operating and maintenance costs. That rate adjustment increased the average residential customer’s monthly water, sewer and stormwater utility bill by about 4% — with the average monthly residential bill rising from $88.15 a month in 2018 to $107.55 a month in 2023.
“In the last study, in 2018, all three (water, sewer and stormwater) had some deficiencies,” Wall said, adding that rate increases were necessary “to keep up with capital needs and inflationary drivers.”
The city’s rate increases for its solid waste, or garbage, removal services have been “minimal” over the past few years, Wall added, with no increases in 2019 or 2020, and increases of 1% to 2% over the past three years.
“We were able to essentially hold steady over that five-year timeframe,” Wall said.
Tarasov said “quite a bit has changed” since city officials last considered adjusting utility rates in 2018.
“We have gone through a pandemic and experienced substantial increases in inflation, compounded by supply chain issues around the world,” Tarasov said.
“And if you look at specific component costs … they are off the charts due to supply chain issues, especially in the last couple years,” Wall added. “Costs have significantly gone up on the construction side over the last three to four years.”
Wall and Tarasov said Sept. 5, that operating and maintenance costs are expected to increase over the next few years, due to inflation of general, construction, labor and benefits costs. They predicted general costs would bump up by 4% in 2025 and by 3% a year through 2028; while construction costs were expected to increase by 6% in 2024, 4% in 2025 and 3.5% in 2026, 2027 and 2028. They also said labor costs would likely increase by 4% in 2025 and by 3% each year thereafter, while benefits costs would cost 6% more per year during the 2023-28 study period.
The city’s financial policies call for all utilities to have an 18% operating reserve fund to cover 66 days of operating and maintenance (O&M) costs as well as a capital contingency reserve to cover emergency repairs or unexpected facilities costs, which would be $250,000 for water, $750,000 for sewer and $100,000 for stormwater.
The September utility rate analysis presentations showed:
• The city’s current water rates would cover O&M costs and existing debt through 2027, but cannot cover existing debt beginning in 2028.
• The water utility also has “very limited capacity for capital funding” and — if rates stayed steady — the water utility would run out of its existing reserves by 2026, Tarasov told Council members during their Sept. 5 workshop. “We will use the majority of our reserves 2023 to 2025,” Wall added. “If we don’t adjust rates, we will go negative if we try to complete the capital (improvement) plan.”
The city’s water utility will likely need to add another full-time staff person in 2026 to help address requirements related to harmful per- and polyfluoroalkyl substances (PFAS), also known as “forever chemicals” because of their ability to persist in the environment and in animals’ bodies, which have been found in at least one of the city’s drinking water wells.
The water utility has “some big costs coming in the next couple years” related to capital improvements, including Washougal wellfield improvements, new booster stations and PFAS treatments.
• Operating expenses for the city’s sewer utility are expected to increase by an average of 3.6% between 2025 and 2028, and the utility has “major projects” that will be required over the next five years, including pump station improvements and wastewater treatment plant maintenance and upgrades.
The existing sewer rates are “sufficient to cover O&M and existing debt through the rate-setting period,” Tarasov said, and “provide capacity for some rate-funded capital.” However, keeping sewer rates steady through 2028 would also deplete the utility’s existing reserves by 2024.
• The city’s stormwater utility will need to add one full-time staffer and a vehicle in 2026, and has a master-plan update scheduled in 2024, as well as “major projects” planned through 2028, including wetland mitigation, dam upgrades, lake water quality improvements, and operation center projects.
• If the city’s stormwater rates remain the same through 2028, Wall and Tarasov said the utility will not have enough revenue to cover O&M costs and existing debt, much less capital projects, and will deplete its existing reserves by 2024.
• If the city’s solid waste rates hold steady, the utility would have sufficient funds to cover its operating and maintenance needs through 2027, but would have limited money to pay for rate-funded capital projects and would blow through its existing reserves by 2029.
Officials consider rate options
Wall and Tarasov presented several rate-adjustment scenarios to Council members this month, including two options for increasing water rates. The first option would fully fund the water utility’s ongoing obligations and policies, Wall said, but would increase the average residential water customer’s monthly bill by 7.5% per year from 2024-26 and by 3% in 2027 and 2028 – with average bills increasing from $38.33 a month in 2023 to $50.52 in 2028. The second option would increase the average residential water bill by 4.75% a year 2024-28 — increasing average monthly water bills from $38.33 in 2023 to $48.34 in 2028 — but also would increase the city’s debt financing.
Wall and Tarasov presented one scenario for the city’s sewer rates, which would increase sewer rates by 3.25% a year through 2028, with an average residential customer’s monthly sewer bill increasing from $55.67 in 2023 to $65.33 in 2028. This rate increase would fully fund the sewer utility’s ongoing obligations and policies, Tarasov said.
Council members are considering two rate-increase scenarios for the city’s stormwater utility. The first would raise rates by 13.5% a year through 2028, while the second would increase rates by 10% a year, but would increase the city’s debt financing and reduce coverage for emergencies and unexpected costs. Under the first scenario, the average residential stormwater customer would see their monthly bills increase from $13.55 in 2023 to $25.52 in 2028. The second option would increase the average monthly residential stormwater bill from $13.55 in 2023 to $21.82 in 2028.
Wall and Tarasov presented one rate-increase scenario for the city’s solid waste utility, which would increase rates by 2.5% a year through 2028. The average residential customer would see their combined garbage-recycling collection bills increase from $24.84 in 2023 to $28.13 in 2028.
Some Council members, including Councilman Tim Hein, said they would also like to see a “tiered” rate structure for the city’s water utility, which could incentivize users to conserve water.
“My priorities are service, quality and conservation and no debt,” Hein said. “I would like to look at a tiered approach that looks at conservation.”
Councilman Don Chaney said Sept. 5, that he believes explaining the need for utility rate adjustments might be more difficult this time around.
“Having done this a number of times …. I can’t remember, except in 2008, when we’ve been in more challenging economic times,” Chaney said. “(It may be) difficult to explain to our public the need for doing these aggressive things that, I’ve learned over time, have value.”
The Council is expected to review these rate scenarios Oct. 16, and would hold public hearings before approving any final rate increases. New rates would go into effect Jan. 1, 2024.
“We’ll bring all four utilities back … and have a discussion related to monthly billing,” Wall told Council members Monday. “That will give the Council a chance to see the whole package.”