New sewer rate promotes cost stability over the next two years

Monthly rate of $31.90 comes in lower than earlier projections; growth still pays for growth

 The Metropolitan King County Council today unanimously adopted a two-year sewer rate for 2009-2010 that provides stability, predictability and certainty for ratepayers and remains lower than earlier financial projections despite recent turmoil in the financial markets.

“During challenging economic times, it is important that we keep sewer rates as low as possible over a longer, two-year time frame for consumer stability,” said Councilmember Larry Gossett, a member of the Regional Water Quality Committee and prime sponsor of the ordinance. “It is also important to keep the capacity charge at a minimal level, with cost-saving options for our customers.”

The new monthly sewer rate of $31.90 per month will support construction of Brightwater, the region’s third major wastewater treatment facility, and offset moderate increases in the cost of maintenance and operation of the regional wastewater system that serves customers in King County, south Snohomish County and a small portion of Pierce County. Recent turmoil in the municipal bond markets due to the subprime mortgage crisis also raised the cost of borrowing money and reduced the return on investments.

Despite those rising costs and reduced returns, the new monthly rate beats earlier projections that called for a 2009 rate of $32.96 per month and $35.75 a month for 2010. The two-year rate represents an average annual increase of 7 percent over the current monthly rate of $27.95, lower than the 9 percent average annual increase proposed by the County Executive for the same period.

“It is important for taxpayers to know that King County is working to provide necessary services in a cost-effective manner,” said Councilmember Bob Ferguson, who chairs the Council’s Operating Budget Committee. “By capping this rate for two years, citizens can budget accordingly, and know that King County is committed to curtailing operating costs.”

In line with the Council’s long-standing policy that “growth pays for growth,” the Council also approved a sewer capacity charge for new sewer hook-ups in 2009 of $47.64 per month, an amount that incorporates a 3 percent inflationary adjustment from the 2008 monthly charge of $46.25.

The capacity charge for new hook-ups is paid by owners of newly-constructed homes and businesses who create the growth in demand that requires the construction of new treatment facilities such as Brightwater. It is assessed for 15 years after connection as established by state law, but property owners can save 5 percent of overall charges if they choose to pay a lump sum upfront.

The new sewer rate will be billed starting in January to the 34 cities and sewer districts to which King County provides wastewater conveyance and treatment. Those jurisdictions independently set the rates that appear on bills sent to customers. Today’s vote ensures that King County meets it contractual obligation to have the sewer rate for the coming year in place by June 30 of this year.

The Council today also adopted legislation calling for the issuance of up to $900 million in bonds to fund construction of Brightwater and other wastewater construction projects. As a result of the Council’s due diligence, those bonds can be issued either as revenue bonds backed by future sewer rate revenues, or as lower-interest “double-barreled bonds" that are backed both by future sewer revenues and the full faith and credit of the County.

The legislation takes advantage of the County’s strong bond rating by authorizing the refinancing of up to $200 million in existing sewer revenue bonds at lower interest rates, replacing similar bonds issued between 1998 and 2005. If the County’s financial goals are met, the refinancing would save ratepayers up to $700,000 a year, or a total of $17 million over the life of the bonds.

“By lowering borrowing costs, we’re using ratepayers money more efficiently and saving them money on their utility bills,” said Councilmember Larry Phillips. “We’re a constantly working for opportunities to leverage the County’s strong financial ratings into savings for ratepayers.”