Frequently Asked Questions

Like cities throughout Washington, Washougal sets rates in order to recover the actual cost of service and invest in system improvements and maintenance. A rate study is periodically conducted to determine the necessary rates to recover operating, capital, and debt service costs. The rates are presented to the City Council for approval. Washougal has been conducting rate study updates on a five-year cycle. By state law, utilities are independent enterprises and are required to pay for themselves. They cannot and do not subsidize other parts of city budgets.

The rate setting philosophy includes the following principles:

• Adequate Revenues: The rates and fees must generate adequate revenue to operate and maintain the system and invest in the system to provide necessary and mandated improvements.
• Equity Among Customer Classes: Rates are evaluated to provide equity among and between all customers and customer classes (residential, multi-family and commercial), so that one customer or customer class is not subsidizing another.
• Stability: The proposed rates must provide a stable revenue stream in order to provide reliable operation of the system.
• System Growth is Supported by Growth: System expansion (treatment capacity, piping requirements, etc.) is supported by fees, called System Development Charges (SDCs), collected with new development. The Council has adopted SDCs at the highest lawful rate to ensure that growth is paying its fair share.  The cost of operations and capital replacements are paid by existing and new customers.
• Maintain Credit Ratings: Rates are set to maintain good credit ratings in order to lower the cost of borrowing funds for large capital projects.

• The City held an open house on November 5, 2022, to introduce the community to the study. 
• The city also conducted a series of interviews with community members to better understand their concerns about rates and to answer questions about the rate study. 
• After the open house and interviews, the city convened the Community Advisory Committee (CAC) made up of residential, small business, and commercial customers. 
  • The CAC met 6 times over 9 months to dig into the details of the three utilities and to provide advice to the city council on new rates that will ensure the city can provide these essential services and that will have minimal impacts on ratepayers. 
  • The CAC initially weighed four general options for future rates: 
    • maintain existing rates
    • decrease existing rates by 10%
    • increase rates considering inflation and 5-year capital needs
    • increase rates by considering inflation and programmed 10-year capital needs. 
  • The CAC felt that the “maintain existing rates” and “decrease rates by 10%” options were financially irresponsible and would only result in “passing the buck” into the future while putting the city’s water, sewer, and stormwater systems at risk. As the CAC reviewed the other two options, and several other iterations of those options, they determined that it would be their advice to city council to adopt new rates that would limit annual increases for the average residential customer to 3% annually for a combined water, sewer and stormwater bill over the next five years, while ensuring equity between customer classes. This results in the following system wide annual increases: 2.9% single family, 2.3% Multi-family, 3.3% Commercial and 3.3% Large Commercial.

Upcoming Outreach

• The City is holding a public open house on November 29, 2023, to review the rate study process with the community. 
• The City is also holding two informal drop in sessions on the rate study and will share details about those events once they are scheduled. 
• City Council is scheduled to consider adopting the new rates in January 2024 and, if adopted, the new rates will take effect in February 2024.

While we won’t know the exact rate increase until City Council takes action in early 2024, for the average residential customer the city is currently considering a 2.9% annual rate increase in the combined utility bill each year between 2024 and 2028. This equates to an increase of roughly $8.08 per each bi-monthly bill, or $4.04 per month for the average residential customer. The rate increase amount is consistent with what our consultant is seeing with other cities, and in some cases it is less.

Without a rate increase we would have to reconsider the pressing needs of our aging systems and prioritize those that are most critical to ensuring public and environmental health. We would be forced to defer major infrastructure projects, which would, in turn, leave our existing systems vulnerable. This short-term “gain” of no rate increases would only result in higher costs for needed upgrades, dramatic future rate increases, and possible increased regulatory oversight by permitting agencies in coming years – essentially kicking the can down the road. 

There are also regulatory issues to consider. For example, the city’s wastewater treatment plant requires significant upgrades to meet mandated regulatory requirements. If we don’t make those upgrades, we will be out of compliance, which could result in fines and increased costs in the future. 

In addition to these capital project issues, the City’s utility cash reserves would be depleted, leaving the utilities vulnerable. Cuts would be required to operations and maintenance, resulting in reduced staffing, compromising our ability to adequately maintain and operate our systems. 

In a worst-case scenario, the state of Washington could take control of the utility and manage it without input from the City of Washougal.

The city understands that the format of the current bill can be confusing and is planning on rolling out an improved billing format in early 2024.

The most typical bi-monthly utility bill for Washougal ratepayers varies by billing cycle and season, depending upon water use. However, the average bi-monthly bill for residential customers is $286.14 (comprised of water - $94.28, sewer -$156.69, and stormwater - $35.17). This equates to $143.07 on a monthly basis; water rates include a base rate and a usage charge. 

It is true that our utility rates are generally higher than other cities in Clark County. However, compared to other communities in the region and state, our utility rates are nowhere near the highest. There are a number of communities with higher utility rates than Washougal, some much higher. The chart below provides a comparison of utility rates in and outside of Clark County for a residential customer using 15 ccf of water (11,200 gallons of water per year).

Exhibit 1: Utility rates comparison

Rates vary between utility providers for a variety of reasons that can be summarized in four categories: the number and type of customers; the timing of past investments in infrastructure; the current and future need for infrastructure investments; and the specific utility rate policies adopted by the organization. Each city is different, which makes it difficult to do “apples to apples” comparisons, and even though some cities may be similar in one of these categories, differences in the others can have a dramatic effect on rates.

• Number and type of customers: Typically, cities with higher populations have a larger and broader rate base with more customers and can spread costs more easily than cities with smaller populations. The type of customers within a city also makes a difference. Cities with more businesses and commercial/industrial customers can recover a higher proportion of required revenue to run their utilities from these customers. These customer types use more water and pay a higher rate because of their usage levels. For example, the City of Camas has about 10,000 more residents than Washougal and has more commercial and industrial customers (244 and 38 respectively according to their 2015 Water System Plan). Not all larger cities have lower rates. Sometimes there are other issues facing larger systems which can cause their rates to be relatively higher. 
  
  Some smaller cities receive services from larger utility providers or are part of a larger partnership. This is true for the utility systems in Battle Ground and Ridgefield. Battle Ground is immediately contiguous to Clark Public utilities and during peak water use in the summer receives a portion of their water through a large “intertie” to the CPU system. This allows them to benefit from CPU’s much larger water rate base of over 39,000 homes and businesses. Both Battle Ground and Ridgefield are part of a partnership for waste-water treatment. They do not operate their own treatment plant like we do in Washougal. Their wastewater is sent to the Salmon Creek Wastewater Treatment Plant, which is owned and operated by the Discovery Clean Water Alliance (DCWA). The DCWA is made up of a consortium of municipal agencies including the City of Battle Ground, City of Ridgefield, Clark County, and Clark Regional Wastewater District. The smaller cities benefit from the wastewater customer base of over 120,000 people. Decades ago, Washougal decided to develop its utility infrastructure without being part of a larger system. This was likely due to the realities of our location and geography.
  
  
• Timing of past investments: Over time cities make investment in their infrastructure to make sure the pipes, pump stations, reservoirs, treatment plants, wells, etc. are in good shape and can adequately serve current and future populations, and to ensure compliance with significant federal and state mandates regarding drinking water, wastewater and storm water. The timing of these investments can affect rates. In the past, the federal government provided significant contributions to water utilities’ infrastructure needs. However, as you can see in the figure below, the federal government’s contributions to water utilities have dropped significantly since the 1980’s. Since then, local governments, and their ratepayers, have had to foot most of the bill for water infrastructure improvements. Most of Washougal’s significant existing utility infrastructure investments have occurred in the 1990s and 2000s. Recently, the federal government has increased funding. Washougal is working hard to secure low interest financing from this increased funding, which will take some pressure off of our rates.
  
  Exhibit 2: Federal Contribution to Total Infrastructure Spending
  
  
  
  
  • Current and future needs: Just as cities have made investments in the past based on needs, they also must consider current and future needs. Some cities can afford to put off future investments because they have made significant upgrades that will meet their needs for the foreseeable future. Washougal is in a period where it needs to make investments to ensure the city has high-quality and reliable drinking water and compliant wastewater treatment over the long-term. Two significant such projects are mandated upgrades to our wastewater treatment plant. In 2013 we completed a $17M upgrade for phase 1 of the requirements. Phase 2, a mandated biosolids handling facility and related enhancements is estimated to cost $30M and will be under construction next year.
    
    
  • Utility financial policies: There are multiple financial policies that are involved in setting utility rates. Cities make different policy choices regarding these. One example is the concept of Replacement Reserve Funding. One component of utility rate setting is planning for future utility system costs. A utility’s infrastructure (e.g., treatment plants, storage reservoirs, wells, pumps, valves, transmission/distribution/collection pipes, etc.) is a critical element of serving the City’s customers. Establishing a financial plan for the eventual replacement of these assets ensures system reliability and integrity. This practice is known as Replacement Reserve Funding (RRF). There are different policy approaches for how much RRF to target, and how quickly to achieve the target. Each policy choice has a different impact on the utility rates necessary to meet the chosen RRF targets.  It is kind of like saving for a down payment on a home or a car. A utility system can accumulate funds toward these future expenses, but this requires higher rates. However, less debt is required later to fund the future expenses, taking pressure off of rates at that time. Washougal chose to accumulate RRF funding over the last 10 years. This has resulted in our ability to borrow much less for the pending biosolids project.

High bi-monthly bills are typically related to high water usage, and most often customers will see higher bills for billing cycles that include the summer months when many water their lawns. Everyone in our system generally pays the same base rate, but customers who use more water pay a higher volume rate. This structure was adopted by city council to encourage conservation. 

Like police and fire, operating and maintaining the city’s water, wastewater, and stormwater systems are fundamental to the community’s health. The city strives to find the right balance between affordability, operating and maintaining our systems in compliance with the various requirements and mandates, and providing a high level of service to its customers. A rate study determines exactly how much revenue the city needs to provide these services and develops rates that pay for the operation and maintenance of the utilities – no more and no less.

The City is committed to finding a balance between affordability and the need to ensure that adequate revenues are generated to provide for reliable and safe drinking water, and effective and compliant wastewater treatment and storm water management, now and into the future. 

We conduct rate study updates to ensure we are on track and are only charging what is necessary to accomplish this. Particular emphasis has been recently placed on pursuing grant funds and low interest financing, to take some pressure off of rates. 

In 2021 we were awarded a $1M low interest loan toward funding design of required enhancements to our treatment plant. In 2022 we were awarded a $1M federal grant toward these upgrades. This year we were awarded a $10M low interest loan (the maximum allowed in the loan program) for construction of these enhancements, and we applied for additional low interest financing. We are waiting to hear if we will be awarded this additional low interest financing. Also, this year there is another $1M grant pending at the federal level. We hope to learn that this has been finalized soon, pending the federal government adopting their new budget.

The city is currently evaluating changing from a bi-monthly bill to a monthly billing cycle. The advantages of this change include giving customers more of a real-time view of their water usage and less of a lag between when their meter is read and when they receive a bill. For example, currently the July-August bill is received at the end of September and under a monthly cycle the July bill would be received at the end of August. 

Monthly bills also mean that each bill will be smaller (by roughly half), which makes bill payment more manageable. However, there are some costs associated with monthly billing, including more frequent meter reading, increased administrative costs for printing and mailing bills, as well as software and outreach costs. 

The Citizens Advisory Committee considered all of these issues and is suggesting that the Council conduct future outreach to the community to see if community members would support a minor increase in rates to fund the added costs of moving to monthly billing.