Environmental Services Commission - Regular Meeting

Commissioner Wan, we're recording now.

All right.

Thank you very much.

all right it's 6 30 and i'm calling the june 18th environmental services commission meeting to order starting with a roll call commissioner letterman president commissioner hainash president commissioner laxson president commissioner margolis president commissioner tyson president thank you and commissioner dupertis is an excused absence uh good evening and welcome to the june 18th environmental services commission meeting We're going to approve the agenda. May I have a motion, please? Move to approve the agenda. Thank you. May I have a second? Second. Thank you, Commissioner Margolis. Are there any requests, changes, modifications to the agenda? All right. Hearing no objections, the agenda is approved as motioned. Moving on to oral and written communications. Oral and written communications are now open. Remember that there is a three-minute time limit per person and 30 minutes total per meeting. Public comment shall be limited to matters relating to the City of Bellevue government and to the subject matters encompassed within the power and duties of the commission. Persons participating in commission meetings must not engage in speech or conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of any meeting. Disruptions may include and are not limited to failure of a speaker to comply with the Commission bylaws concerning public comment. First off, Joe, are there any written communications?

Yeah, we did have written communications, and I want to acknowledge the emails that were submitted or shared with the head of today's ESC meeting on a number of topics, including budget development and capital recovery charges. Staff will work to address a number of these issues and comments in tonight's presentations and answer related questions the ESC may have on these topics. And several emails came in. So we've shared and I hope you all had a chance to look at them. I think we got them to you last Friday. Thank you.

Thank you, Joe. All right. That's it with the written communications. Now we're on to oral communications. We have Mr. Zimmerman registered to speak. Please, Mr. Zimmerman.

Thank you. Thank you. My name is Alex Zimmerman and I will speak with you about something that is absolutely critical. It's not because you're Damn Nazi fascist bastard. No, not because you're a debil and slave. No, because the situation that has happened for the last few years is absolutely critical. So two weeks ago, one guy came. He told we have noise four times more decibels than normal. Four times, guy. This can kill you. Who care about this? You, you ordinary Nedernoski, bastard. Yeah, it's number one. Number two article today in internet. So Bellevue grow almost 10% right now, comparable to Seattle, who fallen by 30% here. So all people from Seattle come to Bellevue right now. And look what has happened for last seven years, and exactly under my... Mayor Robinson, you know what I mean. It's not because she gave me trespass for three years because I against candidate her and cut my statement for election, but she acting like a criminal, like bandita. All consulate are pure bandita, always support her for seven years, destroy city totally. We have a mayor. We have a mayor who signed official document, not legal name. He signed all document by Moore. It's not his legal name. His name, Muhammad. You know what it means?

Mr. Zimmerman? May I remind you that the public comment is limited to powers and responsibilities of this commission. You have spoken for two minutes. No, don't tell me to shut up.

Otherwise, you should shut up. Stop the timer. You can talk for one hour.

You need to speak about the topics related to this commission, or you may leave. Exactly what is I doing? Not for the first two minutes.

No, okay. Because environment, very important. Everything what is I talking belong to environment. You don't understand because you're a debilite.

I've been giving you two minutes to speak about it. So please finish up in the next 40 seconds on topics related to this commission.

You're stopping this because you are a slave, a debile. You don't care about the city. The city has more people, 150,000 cars. We cannot breathe right now. The city goes bigger and bigger and bigger. So when the city goes bigger and bigger, the environment will be better? No, answer me, you bastard.

Yeah, you can take that up with the city council, not with this commission. Thank you so much, Mr. Zimmerman.

Stand up so I have a happy cow.

Take care. We'll see you next time. You're a real bastard.

I know there's more people. It's best. Best for environment.

All right, we're done with oral communications that have been registered. Now we will turn to anyone in the audience. If anyone in the audience would like to speak, please use the raise your hand feature in Zoom. If you're attending via Zoom or if you're attending via phone, press star nine.

Nobody remote.

All right. Okay. Then we will move on with updates from the City Council. Council Member Newenhouse.

Thank you so much. Great to be here with you this evening. No real updates from me, but I just wanted to give kudos to this commission and staff on just a great update and recommendation to the council on the rate relief program. Really, it was a tough job and so many considerations that you all just did a great job in looking at the data and what would be viable, what would be fair and equitable. And most importantly of all, give some real relief to folks that need it. Those that are on a fixed income, retired, et cetera, that really need that help. And the entire council was just really impressed by the recommendations and how thoughtful and thorough you all were. So I just wanted to say thank you.

Thank you. Joe, any staff reports this evening?

No staff reports tonight. Thank you.

right uh moving right on to the approval of the may 21st 2026 meeting minutes may have a motion please move to approve the may 21st minutes thank you commissioner letterman may have a second second thank you commissioner marcos um are there any requested changes or modifications to the minutes No, hearing none, the minutes are approved as motioned. We have no unfinished business from the last meeting, so we will now move on to tonight's new business. First up is the ESC recommendation on the proposed changes to the utility connection charges.

Good evening, Commission and Council members. My name is Dave Beisch. I'm the Assistant Director of Engineering for Bellevue Utilities. And with me here is Matt Hopson, our Fiscal Manager. He's going to help answer any questions you may have during my presentation. So we're here to come back to the Council and to the Commission and present on proposed changes to utility connection charges. We're here to continue the discussion we started in May and seek your concurrence on the recommended amendments to city municipal code for the water, sewer, storm, and surface water utilities related to connection charges. Here's our agenda for the discussion today. First, we'll do a brief recap to remind us all the goals and what we're solving for. share more on the feedback that we've received so far on our proposals next we'll talk about the actual proposed amendments and finally what the timeline may look like for our implementation if we are able to receive your concurrence today on may 7th we shared with you the outcomes we are hoping to achieve through the changes to utility connection charges as a reminder those overarching goals were to improve affordability which you'll see represented by the piggy bank icon on the upcoming slides, increase transparency, which you'll see represented by the paper icon, and preserve equity for Bellevue's growing and increasingly diverse community, which you will see represented by the balanced scale icon as we walk through our presentation tonight. As we consider the proposed updates, we are also looking to ensure the changes align with Bellevue's neighbors and industry best practice, as well as city policy that growth pays for growth. The three proposed changes include one, eliminating one of the connection charges, two, simplifying the charge calculation, and third, changing when the charge is collected. These are the two connection charges we reviewed. A capital recovery charge, or CRC, you can think of as a system buy-in charge, which is a fee for new connections that pays for the equitable share of the existing utility system. We've received some questions from the Commission on this charge during our last discussion, and to help ensure clarity, here's a quick example that helps understand the nature of this capacity charge. When a 50-unit apartment building is developed, the infrastructure, for example, waters and sewer pipes and pumps, must be built large enough to handle the maximum demand from 50 units from day one. Even if only 10 units are occupied at first, the utility still must build the larger system capacity up front. And the CRC is how each new connecting property pays for its share of that pre-built capacity. Now, DFCCs, or direct facility connection charges, you can think of as localized system expansion charge. This fee that recovers the city's costs of system expansion projects, such as sewer extensions, from new connections that directly benefit from it. As we mentioned last time, connection charges were last revised in the 1990s, when the system was still actively expanding and acquiring other utility systems. Now that the service area is mostly built out and the type of development has changed, it's an appropriate time to revise the connection charge methodology to better align with current development. When we came to you in May, we had shared with you our approach for how we've been gathering feedback. Community feedback is something we're gathering through existing and new channels. In existing channels, our customer service and billing team is a source of ongoing customer feedback. For new channels, in April, we held a listening session and gathered feedback on the proposed utility connection charge updates from Bellevue's development committee. As an output of that discussion, we created and distributed an engagement report summarizing their feedback. Since then, the community has also had the opportunity to review details on the project's website and continue to ask any questions or provide feedback. I will surface the community feedback received thus far as we look at each change individually. While we covered each of the proposed changes in some detail last time, I'll weave into the discussion today the outcomes and behaviors we expect if these changes were to be adopted. First, for DFCCs. To refresh, DFCCs are localized charges for cost recovery of the city's system expansion projects. For example, a city project to extend the sewer system into a neighborhood on Septic would be assessed a local DFCC. Any property with a new connection to that extension would be charged their portion of the project costs. This big upfront cost can be over $100,000 per connection, creating an affordability barrier. Our proposal to retire DFCCs and absorb through future CIP expansion costs via the Capital Recovery Charges, or CRCs, By absorbing DFCC costs into the CRCs will result only in a small increase to the overall charge. For example, a property connecting to a sewer extension project and paying via DFCC would pay $130,000 per parcel upfront. The same property connecting to the sewer extension project via CRC would pay just $172 more than their normal CRC fee. It's a much smaller increase. We expect this to promote development and help facilitate citywide expansion projects. A question we had received from the commission was whether this meant that this cost of this project would now be shouldered by existing rate payers. The answer is no. We expect this change to expedite the recovery of costs that the utility has already incurred for these projects. Since 1976, the city has recovered approximately $22.5 million of the $42.5 million in project costs. By retiring DFCCs and collecting via new CRCs, we will improve affordability and expedite cost recovery. lowering the impact on existing rate payers. Additionally, by recovering the cost via CRCs, we continue to be aligned to the equitable policy of growth paying for growth. During the listening session with Bellevue Development Committee, we broke out into smaller tables and gathered feedback on the proposed utility connection charge updates from Bellevue's Development Committee. On this side, you'll see a robust subset of what the table captains reported out from the discussion on the proposal to retire DFCCs and recover project costs via the CRCs. I'll give you a minute to... The general sentiment was neutral to supportive, with questions on what happens to CRCs over time. I'll leave it up to you for a bit to read the comments.

hey dave could i just can you just give us a sense of what the crc would be in that example that you said the crc would increase by 172 dollars above the you know for a sewer new sewer connection yes like on average right yeah so the right now and i'll use a single family residential property they're the most likely to connect to a sewer extension project right now our crc combined for water and sewer

and stormwater for a single family customer is just over $7,000 as a one-time fee. And so the fee would increase from about $7,000 to just under $7,200. And to emphasize Dave's point, all collection charges would go up by that $200. So not just those customers who wouldn't pay that DFCC.

And then can you provide some context on that third comment? Was that meant as a pro or a con when he said that or when that table captain said that?

It was meant as a pro, yeah, that it's incentivizing development by reducing those high cost barriers. Especially if you think about neighborhoods that are currently on septic, they're limited in the amount of development or expansion they can do on those properties. And so by eliminating this and those cost barriers, it helps promote development in those neighborhoods. As we look ahead to the future growth projects within the updates to the water and sewer utility comprehensive system plans, Bellevue Utilities is planning to contract for an independent third-party study to recommend policy options to the CRC methodology that comply with the City of Bellevue's growth pays for growth financial policy. These policy options will likely be presented to the ESC in 2029. This proposal would still preserve the equity of the charge because all growth pays for growth. There were no other additional community feedbacks on this topic via the comment form on the website. The second area we reviewed last time were the limitations of the single-family equivalent or SFE-based calculation methodology for water and sewer CRCs. In particular, the complexity of the charge, which relies on factors such as the number of units and fixture counts. The proposed CRC calculation will rely on the size of the water meter. This means that the charge becomes more predictable while preserving equity. We expect that for some multifamily projects, the water and sewer CRC amount based on the meter size will be lower than if it based on single family equivalents, because it does not increase based on the number of units and fixture counts. The water meter size base charge could also encourage water conservation designs by developers looking to keep the CRC amounts lower. Similar to how I laid out the feedback for the first proposal, this is what we heard at BDC on the proposal to switch from single family equivalent to meter capacity equivalent. The general sentiment was that the transparency and predictability was valuable to the community. Addressing the concern for having to pay for extra for fire sprinkler capacity, we will model this similar to how Cascade Water Alliance charges their fee. For CRC calculation purposes, the meter will be assumed to be one size increment smaller than the installed meter, and any additional capacity requirement required solely for fire flow will not be subject to CRCs. For this proposal too, there were no other additional community feedback on this topic via the website. Any questions on these comments? Change three, lastly, we reviewed how currently Bellevue has a regionally unique practice of collecting the water and sewer charge on property utility bills for up to 10 years with interest. This appears as an unexpected additional cost to customers, given that it has nothing to do with the usage of water or sewer services. The new operational practice we propose is to shift the timing of when we collect this charge. Instead of collecting it via the utility bill, the new process would collect CRCs at the time of permitting, consistent with all other Bellevue development fees. In situations where the entity developing the property and the person occupying the property are not the same, this proposal changes who is responsible for paying for the fee from the property owner to the developer. We do not expect a change to development in Bellevue as a result of this revision. The new practice simply aligns Bellevue to neighboring cities and industry best practice. As a reminder, here is what the water and sewer fee schedule for new connections would look like based on water meter size if this change were in place this year. You'll see that the bigger the size of the meter, the higher the CRC amount. You'll also notice the meter size caps the charge. Most single family developers would pay close to $7,000 if they're connecting the water and sewer for the first time. As of June 1st, we currently have 1,012 accounts that are in the midst of their 10-year cycle of paying CRCs via their utility bill. 76% are single-family residential. Sometimes the person paying this on their utility bill is a tenant, and they have very little information on why this charge applies to them. Customers who contact us are surprised by connection charges appearing on bi-monthly utility bills and are trying to understand it. Customers often have a negative perception because they either perceive it as something they're paying for twice or something that ought to have been paid for at the time of construction. The confusion about this topic leads to a call into our customer service and billing teams, and nearly all calls about this topic end up as an escalation to our billing service manager. One example is from a senior housing center that had to divert funds away from planned programming and instead use that to pay the CRC charge they didn't expect. Here you'll see a subset of what the table captains reported back at the Bellevue Development Committee from the discussion on Proposal 3. It's a mixed bag. This feedback on affordable housing from the attendees at the BDC aligns with the senior housing example we saw earlier. One suggestion that was surfaced was to consider charging at the start of construction instead of at the time of permit issuance. In addition to the discussion at the BDC, we also received some feedback on this topic via the comment form on the website, which we'll take a look at next.

One observation in this commission, you guys give us lots of presentations and it's interesting to me that sometimes the idea that Bellevue does it differently is promoted. And sometimes you tell us we're out of line and we need to get in line. And it's really important that we get in line with the best practice of how everybody else is doing it. So we hear it both ways. So sometimes I'm not sure how to, if that's like a, what to do with that particularly.

Yeah, that's good feedback. And I think in this case, we're trying to show you why alignment is a negative, the concerns and cons of that in this instance. So I don't know if you wanted to add anything else.

Yeah, I would say that you're right. It does depend on the topic, as we would expect. And I think Dave said it best. Our current structure was developed in the mid-'90s when that structure made sense, when we were growing horizontally. And it is considered best practice, according to the American Water Works Association, to evaluate both the basis, the structure, and the costs for your connection charges on a frequent basis. Because development, the type, the intensity do change. And so in this particular case, yeah, it does make sense, but it may make other sense in other cases. So we'll be mindful to mention that.

There was a recent meeting where there were two presentations and both of those were argued differently.

Appreciate you bringing it up. In your agenda packet, you have the feedback from all four BDC members that reached out via the comment form. The desire to be able to have flexibility of payment during the permit phase came up here as well. To mitigate the concerns of needing flexibility, we will monitor and quantify what percentage of new projects request such flexibility before determining the ideal solution. Until then, our proposal is that the CRC amount be due at permit issuance, consistent with all other fees charged on the condition of development. We will continue to be listening for feedback from developers, residents, and property managers to inform our administrative practices. To that end, we will be keeping the website updated with the continued opportunity for feedback. In addition to the developer perspective, we will be reaching out to property owners to keep them informed of any changes that apply to that. Here's our high-level timeline and next steps. Following the discussion today with the commission, we will engage city council for approval in quarter three of this year. To summarize, we are proposing three changes to our utility connection charges to improve affordability, increase transparency, and preserve equity. Retire the use of DSCCs and absorb them into CRCs. Two, change the water and sewer CRC calculation to be based on water meter size. And lastly, change the timing of the CRC charge from utility bill to permit issuance. We will monitor applications that will inform administrative practice to provide flexible options for those that request it. All of these align with regional and industry best practices. What questions can I answer before we move forward with the motion?

What's your plan for those thousand customers currently in that 10-year cycle?

Yeah, we've discussed that with our city attorney's office, and the plan is they will need to continue paying CRCs until their term is up.

Do you expect that to be a welcome, or they'll be unhappy with that?

We're already in that. They're already paying.

Yeah. I'm sure they would advocate for trying to eliminate it. The question would be, on an equity standpoint, how we would absorb that fairly and administer it.

Yeah. And I guess just for context, 76% of those accounts are single family. So does that mean that they are paying the 7,000 or so over 10 years? So that's the context. Okay. And they're going to keep, they're going to continue to pay that. Okay. Thanks. I just had a question on, and maybe you're going to answer this later, but how does this change affect the revenue projection for the budget or is it unchanged for this cycle? Right.

From two perspectives. One, by state law, we cannot use connection charge revenue for operations. It can only be used for capital projects. So any dollar we receive connection charges automatically gets put into our renewal and replacement account. And so from that perspective, there's not a direct impact of money we receive catching charges on rates because we can't use that money to smooth out rates or to use it for operating expenses. That's observation number one. Observation number two is, you know, development isn't a reliable entity it comes and goes and we can't depend on that type of cash flow for our capital projects as a result we conservatively forecast connection charge revenue because of its volatile nature third point is as a source of funding for our capital projects Combined DFCCs and CRC charge revenue make up less than 3% of our capital funding sources. 90% of our funding comes from the annual transfer from operations for our asset renewal and replacement program, about 7% from interest and grants. So we don't anticipate an impact to service rate increases.

Any other questions?

I move the Commission adopt staff recommendation on item 1 to retire the use of DFCCs.

All right. We're going to be voting proposal by proposal, just so you know. May I have a second, please?

I second.

Thank you, Commissioner Hainash. Opening up to discussion for the commission. Any discussion points you want to talk about before we vote on proposal number one, retiring the use of DFCCs? Just checking in, Commissioner Tyson. Any questions from you?

No, no questions for me.

Okay, thank you. Looks like there's no comments or discussion. So I'll go ahead and take a roll vote for this motion. Commissioner Tyson.

I vote yes.

Yay. Okay. Commissioner Hainash?

Yes.

All right. Commissioner Margolis? Yes. Commissioner Laxon?

Yes.

And Commissioner Letterman? Yes. All right. And I vote in the affirmative yay as well. So it is a unanimous vote for proposal number one. We have a motion for proposal two.

I move the Commission approve staff's recommendation and forward to Council for recommendation of item 2 to make the CRCs calculated on meter size.

All right. May I have a second, please?

Second.

Thank you, Commissioner Margolis. So once again, open it up to discussion by the Commission on proposal number 2. No. All right. There's no discussion. We'll take a vote on proposal number two. Commissioner Letterman? Aye. Thank you. Commissioner Lacson?

Aye.

All right. Commissioner Margolis?

Aye.

Commissioner Hynash?

Aye.

All right. Commissioner Tyson?

Aye.

Okay. And I vote in the affirmative as well. So also unanimous on proposal number two. And finally, proposal number three. May I have a motion, please? Aye.

I move that the commission approve staff's recommendation and forward to council approval of CRC's collector upfront at permit issuance.

I second.

Oh, thank you, Commissioner Tyson. Any discussions on this topic?

I move to amend my motion that the collection period be at certificate of occupancy rather than permit issuance.

All right. Is there a second for that amended motion?

I'll second.

All right. Before we vote, I'll also open up the floor for discussion on this amended motion.

So I saw the comments from both the Development Commission doing that as well as the emails, and I understand what you told us here about, yes, we need to upsize those, but I would say you're victims of your own success that we're planning the capacity of the system so far in advance. It's my sense, and tell me if I'm wrong, that... that these capacity improvements have mostly already been put in place. So a particular, one particular multifamily housing is not opening, is not going to need, mean we have to buy four more pumps next week. That's my sense of...

The majority of the system is built out, but where we're seeing the largest... And so that does have significant.

And I understand that. And with the South Maiden Bower storage, we're already planning that way in advance of needing that capacity right now. Correct.

That's correct.

Yeah. So, and then you're in the memo it talked about having the costs up front for affordable housing. It's my understanding affordable housing has waivers on connection charges anyway, is that accurate.

We can waive connection charges if we have secured an alternate source of revenue.

So there needs to be an equal amount of revenue that's not coming from the newly connected customer. In this case, the most common source is the state of Washington provides grants.

I see. So the city of Bellevue is not giving up that income. They're just looking to a different source, like the state of Washington Commerce Department for that. Got it. Okay. So those were my concerns about making the amendment on untiming.

Thank you, Commissioner Letterman. Any other questions, comments?

Yeah, I mean, I guess I want to clarify that difference. So instead of having it at permit issuance, it's at occupancy, so it shifts the burden of payment to the resident then? Would it automatically do that, or is it still the development?

It would still be during the permitting and development stage. It would just administratively be charged at a different time than the rest of the permits.

So in terms of who pays that chart?

It would still be the developer.

It would still be the developer. Just probably a couple years later?

It's dependent on their schedule of their development, right? Sometimes it can take years from permanent issuance to certificate of occupancy. The other concern we had with administering a certificate of occupancy is not a condition of some single family development. And so we'd have to find other ways of administering it for that type of development.

Sorry, can you explain that again? What do you mean by it's not a condition for a single family occupancy?

It's not part of the permitting process for some single family development and remodels. You mean getting a certificate of occupancy?

Yeah.

but it is for multifamily and commercial. But there's other ways that we can, let's see. So the question is, what are some ideas to provide flexibility during the permitting phase? The answer is we have a couple operational templates to rely on. There's a liens on property, followed by the transportation department for deferring impact fees, which are much larger than the CRC fees. It could have an unintended consequence of delaying sale if the lien is not paid off prior. Certificate of occupancy, an option to delay to the collection of the fee until the certificate of occupancy phase of permitting. Currently, our administrative process has the step for large developments and not for single family homes. Creating a new administrative step would cause slowdown, and we have to be mindful of that.

I mean, is a developer, though, obligated to pay that? I mean, they'll know that this is going to be... Yeah, it'll be assessed during the permit application.

It's just when they actually pay. And if you remember, if this is mostly affecting single-family developers, we're talking about $7,000 as a part of their development cost for a single-family home. So it's assumed to be a small percentage of the development cost.

How much effort is it to... create a new step here for the certificate of occupancy?

That's a good question. I think we would need to assess that a little more.

And can you put the meter size charge chart back up there? Yes. Yeah. So the developers of commercial or multifamily, they're paying these two or three-inch meter costs by and large? Yeah.

Correct, yeah. The multifamily and commercial pay the much higher fees. And the general sentiment from those developers is they want to pay it up front as a development cost because they're typically both the developer and the owner of this property. And so they want to finance it as a development cost and not pay for it as an operational cost after they're operating and maintaining those facilities.

But under the amendment, we would still accept a check upfront if the developer wanted to include it in the package cost of financing.

Correct. Yeah. Yeah. Either our recommendation or moving it to certificate of occupancy would still be paid for upfront during the development phase. Yeah.

I think Commissioner Lutterman's point is the developer has the option to pay it at time of permit. It doesn't have to wait until the CO is being issued to pay. Right. So then, therefore, they can tie the cost into their development financing and pay it up front if they want to, like your current recommendation.

You're still paying it during the development phase and utility bill during operations.

Does the utility department, I know one of the comments that we saw you shared with us earlier was someone's comment, a table captain collecting a comment that asking to postpone that fee till the CO phase because developers are concerned about upfront costs. Correct. And is your recommendation then not addressing that issue at all because you're saying pay it at the permitting stage?

Our recommendation, yeah, is to initially require a payment at permit issuance and then continue to monitor feedback and administratively adjust that flexibility of when they pay if we're getting a lot of feedback that that would be beneficial.

Yeah, okay. Uh, any other comments commission? Oh, council member, you announced.

Um, since we have the meter sizes up, I just wanted to ask when you talk about upsizing for fire flow, are you saying that you would put in for new residential, like a one inch, but charge at the three quarter inch for the CRC?

That's exactly right.

Okay. Thank you.

Curious, what would happen if a developer started a project and for whatever reason walked away, went under? Who would we collect if it was a certificate of occupancy situation? Who would we collect the fee from at that point?

Yeah, it would have to be the property owner and probably through a lien. Yeah.

OK. Is that clearly spelled out? the property did change hands for whatever reason?

It would have to be an administrative. Yeah. Okay.

Would it actually in that scenario not even be due yet because they haven't finished their work? The CEO is not being issued if the developer stopped midstream in construction because of financing or other issues. And then you would be waiting for hopefully another developer to come and finish the work and then pay the fee. Yeah.

Are there other scenarios where whoever started it, the project, is not necessarily the person who is getting the CO? Are there times when things are transitioned for other reasons?

Yeah, we have seen property sale or pause and then developers and owners change. That happens often, yeah.

But by and large, the new owner is purchasing all the assets and debts and obligations of that property there.

I guess any other comments from any commissioners? I'll just, before we vote, I'll just also make an observation. I think, you know, from a developer standpoint, the amounts that we're talking about are relatively small compared to development costs, even of a single family home. So I don't know when they're building it into their development costs and getting funding and loans, they're probably baking it in. So I think from their standpoint, it doesn't really matter when they pay it. And so from my standpoint, it's probably whatever is administratively easiest for the city. And if having creating a new step to collect it later means we might forget to collect it or we have to hire new people to collect it, then that may be not as good. So I'll just put that out there for someone to consider as we take a vote.

Based on your recommendation, it sounds like the city wants to get the money up front. You'd rather...

Let's get the money when you Yep, consistently with the other development fees that we charge for. For instance, Cascade Water Alliance has a fee that we charge at permit issuance. That's actually larger.

Chair one, I think that was a very good encapsulation of the conversation. I think you really landed the plane on that point.

Thank you, Commissioner Tyson. So air traffic control now asking for a vote. All right. With the motion on the table as amended, we'll take a vote now.

We should vote on the amendment first. So either the amendment is up or down. Correct.

Okay. I thought that's what I said, but no.

You said motion.

Motion as amended.

No.

No?

Because that would be voting on the whole thing. We're voting on just the amendment to move it to certificate of occupancy.

Yes.

And that's either a yes or no.

Okay. Very well. Thank you. So with that commissioner Letterman.

Yes.

Yes. Moving it to certificate of occupancy.

Yes. Just moved to certificate of occupancy.

Thank you. Commissioner Laxon.

No.

All right. Commissioner Margolis.

No.

Commissioner Heinash.

No.

And commissioner Tyson.

No.

All right. And I'm also voting in the negative. So one yay and five nay for that amendment. So with that, do we need to re-motion the original?

No, but now the amendment's gone. So now we're voting on the original motion to CRC's collected upfront at permit issuance.

Correct. And we do not need to motion that again. So with that, we'll take the commissioner's vote. Commissioner Tyson.

Yay.

Thank you. Commissioner Heinash?

Yay.

Commissioner Margolis?

Yay.

Commissioner Laxson?

Yay.

And Commissioner Letterman? Yay. All right. And I vote in the affirmative yay as well. So it's an unanimous vote for the original proposal number three for the pay up front during the permitting. All right. That's great. Thank you. Thank you. Great discussion. And with that, I think we are done with this business item. We'll move on to the utilities 2027-2032 rate forecast update.

The purpose for tonight's 15 minute briefing is to provide the Commission with a revised utility rate forecast based on the capital and operating budget proposals that we provided to you all two weeks ago in the most recent briefing. No formal action is being requested tonight. However, I will Um, be asking you all at the end of the meeting. Um, if there's any additional types of information or research that we can provide after you see this information for the upcoming commission meeting two weeks from now. Once again, the July two meeting, the intent is that the commission would take action on a recommendation to the city manager's budget. The agenda tonight is as follows. As with previous meetings, we'll circle back to the budget review calendar and summarize how this presentation tonight both builds upon previous meetings and how it sets us up for a couple meetings down the road. We'll then provide a brief recap of the 2027-2028 proposed operating budget proposals that we presented last meeting. I'll also highlight some of the key changes that we've seen from the early outlook forecast that we provided to you all in May to what you'll see tonight. Then we'll provide and present the rate forecast by utility fund and the corresponding impacts to single family residential and multifamily residential typical bills, as well as a benchmark of Bellevue's utility bills, both today and forecasted next year, relative to some other municipal utilities in the region. I think I've almost committed this calendar to memory. I'll briefly highlight tonight's meeting once again, how it fits into the sequencing here. So back in May, we presented an early outlook rates forecast. And what that included was at that time, the latest forecasts from King County and from Cascade Water Alliance for our wholesale service cost obligations. It also included the rate impact of the preliminary capital improvement program that Dave and Barol presented back in April, and it included general inflationary increases to our operating budget line items. Very high level, very early outlook rate forecast. Then 2 weeks ago we came to the Commission and presented a much more detailed set of budget proposals for the next 2 years. The purpose of tonight's forecast takes that information you saw 2 weeks ago and puts it into our rate models. And so it's a much more surgically precise rate forecast. There have been recent updates from both of our wholesale providers on their forecasts, and those are also included into these these estimates. Also, before we jump into here, just wanted to briefly summarize some of the work that we have been doing as a department on outreach for our budget process. Over the last month, we've held three Community Connect meetings at the North Bellevue and South Bellevue Community Centers, also at City Hall. We also held a virtual town hall meeting last Thursday, and I think, Kurt, you were there, right? And so we've recorded that session. It's available on our website, as is some of the information that we'll be sharing with folks over the next couple of months. So the slide here is a recap of what you saw two weeks ago. It is the proposed 2027-2028 operating budget. When Lucy was here two weeks ago, she talked about the two flavors of budget drivers for utilities. The external drivers are those slices on the right of this pie. and those are our financial obligations to others including taxes both state and local and wholesale service costs and the proposed budget about half of our budget are for those external cost drivers the other half of the budget shown on the left side of the pie chart are the internal drivers and those costs are the ones that are required to operate maintain and replace the local portion of the piped utilities About one-third of our proposed budget goes to support the six-year capital improvement program and the 75-year long-term asset renewal and replacement program. The remaining 15% of our budget drivers are the ongoing local operating costs, including operations and maintenance, engineering, customer service, financial planning and analysis, and then department administration. Talk briefly about some of the key changes from May's forecast. So first, the King County executive transmitted a revised treatment rate forecast earlier this month. which included a forecast with slightly higher rate increases for the last two years of this six-year forecast, 2031, 2032. The treatment rate forecast increased in both those years by 25 basis points, up to 11.50% each year. Second, we have revised our initial outlook for the cascade wholesale cost increases by fifty basis points in the next two years, both twenty seven and twenty twenty eight up to nine point five zero percent for both years. The board, the cascade board is in the process of reviewing and adopting the budget later this summer. Due to the recent and significant changes to Cascades member charge forecast, this slight upward adjustment provides a degree of conservatism to the supply forecast. We plan to revisit the forecast one more time in September after Cascades adopted the budget. The most significant change to our forecast accounts for the anticipated increases to utilities share of general insurance expenses. So exciting. But it is the biggest change from May to now. I'll talk briefly about that. The cost increase is being shared across all city departments and is driven by two main factors. There is an increase to expected liability claim costs and the corresponding required reserves for those future claims. As a reminder, Bellevue is self-insured. Um and second, in addition to our self insurance, we also pay for excess liability through premiums and the estimate that at this point is that cost will increase 35% year over year. This these 35%. These are estimates at this point. We have not received formal um uh cost forecast. We're still waiting for those. But this is the latest information we have from our internal financial management department. This change translates to a $3 million increase to our expenses next year that were not included in the early outlook forecast. For context, this cost is equal to almost a 1.5% across the board utility rate increase just by itself. About $2 million of this cost increase is expected to be borne by the Water Utility Fund. The remaining portion will be borne by the three other utility funds. Any questions on this one? This was the main change from May to today.

So when you say Bellevue is self-insured, it means the city of Bellevue has a bank account that we have set aside a pot of money.

Both to pay for current claims and a reserve in case those claims are available cash.

How is that allocated across the city departments? Is it by headcount?

Historical claims.

Historical claims. Because I was going to say, transportation may have more claims than utilities, for instance.

I can get that information.

But I don't need to know the specifics. But by claim history. Yeah. Okay. Thank you.

Matt, can you just explain how it... The allocation between the three utilities is done. You said that water gets most of that.

Yes. So it currently has the highest expenses amongst the pipe utilities for insurance premiums. And Joe, you may have more experience on this front.

Believe risk will set a five-year running. claims experience, water does have the most. Yeah, it's based on the claims themselves. Water with the water main breaks we get with the AC pipe tend to be catastrophic or more intensive. Yeah.

The information that we've received thus far is that the increase in our costs is not translated. It's not a function of somehow increased historical claims to water. It's a general increase to our insurance cross across the entire city city organization. So our allocated share has not increased the overall cost of insurance has increased. Um, including our because we're self insured, we have to both pay for claims and have reserve account to be able to manage the significant ups and downs of claims versus annual revenue. There are questions or follow up that we can provide.

The cause for that increase is just that the everything is more expensive to fix and to claims just get bigger.

I can follow up with, yeah, this is not my area of expertise, obviously.

Somewhat anecdotally, the homes in Bellevue have gotten more expensive, continue to rise. The things that are in those homes are expensive. And over time, with inflation to replace things that are damaged, everything has gone up. 35%, certainly understand it's a big number. So we'd have to look into that. But that's the general outlook. General driver is things have gotten more expensive in Bellevue and other cities as well.

I just I think in the water side, at least what I've heard, too, is that just claims are going up across the board. And so insurance is going up for a lot of water utilities, climate change events, things like that.

The welfare insurance is similar kind.

And I'll reiterate once again, right now, these numbers I've given to you are estimates, internal estimates provided by the city of Bellevue's finance department. We are still waiting for the actual premium estimates for excess liability. And so I'm not sure what that story is going to be down or higher than I'm giving the numbers now, but we'll know by our next rate update, rate outlook update to the commission.

And maybe you said this and I missed it. Can you say again, what's the timeframe of that 35%? Does that mean year over year? That's what you're expecting?

35%. That's a good question. We will see a sharper increase from 26 to 27% and then a slight decrease in 28, but not going back to 2026 levels. So think of a new baseline and then gradually increasing by some measure of inflation beyond that. But we'll see a spike. We're anticipating to see a spike in 2027. So why a spike?

Why would it? Why would the curve look like that?

Because we have to both pay for the increased cost of claims and maintain adequate financial reserves. So our reserves have, as you buy on more claims, you're using both revenues and reserves, and you have to replenish those reserves. So this in 2027 is both paying for increased claims costs as well as replenishing your financial reserves that you may have used in previous years.

Why wouldn't that continue? I don't think I understand that. Why are we in a situation where, There's a hole that you're filling. I don't think I understand. And why wouldn't there be another hole the next year?

I'm going to, this is my homework assignment for our next meeting. So I don't want to misspeak. This is not my expertise. So I'll follow up on that one. I'm going to move to the other two items. They are not the major drivers. I just wanted for information purposes only. Two weeks ago, Dave presented a revised six-year capital improvement program to the Commission that was about $20 million lower than what we presented to you all back in April. This cost adjustment results in a redirection of funds that we would have spent on the capital program, and now we'll redirect to our long-term asset renewal and replacement fund. And as a result, there's no impact to the rate increases from that change. Well, I can speak to that. The the long-term liability of our assets are twenty million dollars. Why, it would provide some relief to our customers in the short term. We have some major significant projects coming up beyond the next six years across all three funds. Water main replacements will continue to be a major cost driver, and I think we showed that chart back in in the may outlook forecast that over the next six years we will be putting in very little money back into our water renewal and replacement account that we're actually drawing from the reserve account over the next six years and then as we move into the next 2032 and beyond on the sewer side that's when we're actually looking at the sewer lake line management plan did you say that the lower 20 million lower

is not going into the R and R. It's going to the asset management.

We will be taking less from the R and R fund because of this. So the water main replacement program was already going to have to require use of reserves to fund the next six years. We just require less use of those same reserves from the R and R account. Does that make sense? Okay. In May, we presented a rate impact of expanding the bill assistance program of 1.2% next year. This estimate has been adjusted downward to nine tenths of 1% to account for the fact that we'll be able to rely on other revenue sources in addition to rates to fund the assistance program, most notably interest earnings. It's not, wasn't part of our initial revenue assessment because we don't know what those are until we're doing the more holistic rate design. And then as I mentioned earlier, while the early outlook assumed broad inflationary adjustments across our day-to-day operating expenses, the revised forecast only includes inflationary increases on budget line items for which we cannot absorb within our existing base budget. So as a result, the net effect of these changes is that the forecast of our local internal rate drivers is lower than what we presented back in May. So we did kind of across the board vanilla inflationary adjustment on all line items. When we submitted our budget, we're only doing very specific adjustments to our base budget. As a result, the request is lower than what we submitted back in May as an outlook. The next three slides illustrate the changes from the early outlook to the revised rate forecast for the three piped utilities. The first column in each year shows the wholesale and local rate drivers from the early outlook forecast, and the second column in each year shows the same drivers for the revised rate forecast. Due to the higher general self insurance costs that we expect to pay next year, as well as the conservative estimate for cascade wholesale supply costs over the next two years, we've revised our rate outlook for the next two years upwards by 80 basis points to 7.7%. The last four years of the forecast remain unchanged in aggregate. Pause here. Huh? You know, my goal is to have these never change. So I appreciate it, yeah. Any questions on water? Otherwise, I can move to sewer. Similar to the water utility, we've adjusted our sewer rate forecast in 27 and 28 to account for the expected increase in insurance costs. In this case, 20 basis points to 10.1%. We've also adjusted the later years in the forecast to a similar level to account for the revised treatment rate forecast released by the county earlier this month. No change is recommended at this point for the stormwater rate forecast. We are holding the forecast at 6% each year over the next six years. I want to point out that the stormwater utility is expected to see increased liability insurance costs. But in this case, those cost increases are being offset by decreases to other indirect overhead costs that are specific to the stormwater fund. The final four slides of tonight's presentation provide additional context to the forecasted rate increases. First, the Commission requested that forecasted rate increases be compared to rate increases from prior years. The blue line in this graph shows the annual percent change to the combined utility bill for a single family residential customer from the previous five years, as well as the next six years. From 2022 to 2026, the annual increase ranged from 3.9 to 7.9 percent. And by comparison, we are forecasting annual rate increases over the next six years that are higher than recent history, including 9.8 percent next year and ranging from 8.1 to 10.5 percent from 2028 to 2032. As we've discussed in previous briefings, the variation in annual rate increases is largely explained by wholesale cost increases from Cascade and from King County. For context, I've included the annual changes to these costs on this graph. The teal dotted line is the increase to Cascade wholesale costs over the same timeframe. The last five years, we have seen cost increases from cascade ranging from zero to 2%. By comparison, we anticipate cost increases at around 9% per year over the next six years to support the upcoming phase one of the cascade supply program. And then the dotted orange line shows King County's treatment cost increases the last five years ranging from four to 7%. Looking forward, we are facing increases of 12 and three quarters percent over the next four years, followed by 11 and a half percent the last two years of the forecast. This is just to illustrate where that pressure from the next six years is coming from. You can see that in Cascade, particularly we're seeing just a sharp departure from historical cost increases and then increases for King County that are consecutive and sustained. I'm going to pause here to answer any questions that you all have.

So, Matt, I was just looking at these rates compared to the early outlook for it, financial forecast for the combined bill. So, in 2027, I think these are comparable. It was 8.1 percent. Yep. Yep. Now it's 9.8. Yes. And so, yes. And so that's a 1.7% difference, which I'm trying to look for that in the sewer and water increases. Yep. I saw the next slide.

I think we address why is that Delta there? Thank you. And it has to do with timing of the early outlook forecast relative to the sewer cost of service analysis results and recommendations. The 8.1% essentially was an across-the-board rate increase. This is specific to single-family residential. And we can itemize the rate pressures here in the next slide.

But I know that my math is not accurate the way I'm doing this, but that means that in 10 years, it would double somebody's bill?

I think we have that number here on the slide. So it'll be... The next six years, it'll increase by about 50%, I think is what I'm showing here, but we'll get there and then I can confirm my math, yeah. The next two slides provide the detail of forecasted rate increases from the perspective of monthly and bimonthly bill impacts for both single family and multifamily typical bills. To orient folks to the slide here, the typical monthly bill for single-family residential customers is projected to increase 9.8% next year, followed by 9.7% in 2028. You can see that at the top row of the table there. And that increase is driven by four key rate drivers. Our cost changes to wholesale services are expected to add $10.53 per month next year. Expending the bill assistance program will add $2.06, which is less than what we originally showed the commission last month due to interest earnings being a funding source for the program. All other local rate drivers, which include taxes, inter-fund expenses like insurance, our capital program funding, and local operations combined will add $6.95. And then consistent with council direction, the rate forecast includes a sewer rate equity adjustment over the next five years to move single family residential sewer rates towards full cost recovery. If you look to the far right of that row, you'll see that there is no sewer equity rate adjustment in the sixth year of this forecast. This aligns with that five year phase and strategy that the Commission reviewed and recommended. So the difference, Anne, why we went from 8-1 to the higher one is because of the equity adjustment. Yeah. Okay.

Thank you.

In total, we project a total monthly bill increase of about $22 next year and $24 the year after. Customers who qualify for the existing bill assistance program would see a typical monthly bill of about $100 next year. Customers who would begin to qualify for the expanded bill assistance program would receive a 35% discount on the utility bill, and that would result in their typical monthly bill being about $176 next year. And the last row of the slide shows the forecasted bimonthly bill impacts. I'm going to pause here. There's a lot of information there and just another perspective of the rate drivers. Yeah, Michael, you asked a question on the rate trajectory, so 250 to 400.

The previous one you showed, the graph, I think, was 2022 to 32, and that's why it looked like it was, that was the time frame I was grabbing, doubling, or I was guessing, estimating. It's like 252.

Two more slides. The next slide is identical. It's just showing showing a multifamily typical bill. We are projecting the typical multifamily residential bill to increase 8% next year, 8.2%, excuse me, and 6.5% in 2028. This is an estimate because most multifamily households pay for utility services as part of their housing costs. And so what you're seeing here is the equivalent bill per dwelling unit for a typical multifamily residential account. For the most part, the rate drivers are similar to the single family residential household. Our largest increase will be coming from wholesale costs at $6.33 next year. Expanding the bill assistance program would cost on average $1.11 per month. All other local rate drivers would add $4.02. The key difference between the typical bills for a multifamily and a single family household is the impact of the sewer equity analysis. In this case, we would gradually be bringing the multifamily residential class rate revenue down to its fair share of the sewer costs. And there was a series of rate reductions over the next five years that are added to the typical bill estimate. And that equity adjustment next year would be just under $1 per month. Customers who qualify for the bill assistance today would see a monthly bill of about $53 per month next year. And for new customers who qualify for the expanded program, their bill would be about $96 per month. I'll pause here to see if there's any questions on this one.

Fine. Oh, yeah. I have a really random question. How does this compare if somebody's on septic? Like, what happens? Does this encourage a behavior that people will not connect?

Someone who only connects via water and uses their own septic system?

I don't know.

Yeah. We have very rare occurrences in this area. Go off the grid.

Uh, no King County. Uh, if you're within a certain number of feet of an, of a system, a system, you, you have to connect if your septic fails you. However, the DFCC is being absorbed into the CRCs is a wonderful driver for, for some of the homes who are not having good luck right now with their septic tanks in the city, um, to get on board. We do a project and, and they're able to connect and it's not an impediment to getting them off septic. And I think that is the one thing environmentally that really wasn't covered in that previous discussion too heavily. And that is a huge benefit in my mind.

Finally, Bellevue's utility rates will continue to be on par with other municipal utilities in the region. This graph is a comparison of 2026 monthly utility bills for water, sewer, and stormwater for Bellevue and surrounding cities. In 2026, Bellevue's combined utility bill was lower than Seattle and Mercer Island and then higher than cities like Issaquah, Kirkland, and Redmond. We've kind of maintained this comparable position for several budgets at this point. Um, I've also included, you know, I, I don't enjoy doing this because, you know, we're the only one on this chart that I can put 2027, but I do it for transparency. So, um, our 2020 to 27 forecast agility bill is on there is that transparent bar. Once again, it's important to remember that we anticipate every other city on this chart to also be exploring rate increases next year. Um, every one of these cities is part of the King County system. Most of them are part of the cascade system. However, we're not showing those because we don't know what action their commissions and or councils will be taking. We do anticipate them facing very similar rate drivers, though. This concludes the presentation for our revised rate forecast. I'm happy to answer any questions you all have now. Also, if there's additional research that we can provide in two weeks, if you can let us know and give us time to prepare that material. Thanks for your time tonight.

All right, questions from any commissioners?

Matt, can you flip to the previous slide? I just want to say, this is so much detailed good work. And I just want to thank you and your team for this. This is a lot of work to be able to break it out between all these different increases, sewer equity adjustment, everything. just thank you for everything, you and your team. It's really informative for us and helps us make our decisions. So I just want to give everybody that perspective, because to do this in just whatever, a couple of weeks, it's a lot. Thanks, Anne.

Thank you, Commissioner Hayash. Any other questions? Commissioner Tyson, any questions?

No questions for me, Chair Wan.

All right, thank you. I have a question. Matt, if you can go back a couple slides to the graph, that one there. What would it take to lower 27's rate to somewhere between 7.5% to 8.5%? 20% rate decrease. Oh, thank you.

We would need to identify roughly two and a half to three million dollars in recurring operating expenses to reduce. Going back to the proposed budget, half of our costs we don't control. 35% of our costs fund our capital program. And so we're looking at that last 15%. what that would take in terms of $3 million. I can tell you right now, we're not submitting, I think the sum total of all of our budget requests that are local are, if you don't count the bill assistance program, well under $3 million. And so there are options. If the Council Commission wants to direct us to look at options, we can. We'll have to also present the corresponding service impacts.

Well, I asked that question because I know a couple and I can't name the policies, but I know that going through three budget cycles, I have a sense, you know, we're trying to prevent rate spikes. And this definitely looks like a rate spike to me from 26 to 27, given the historical numbers. And I also know the sacred cow, which is that, you know, city council policy is such, which is why I'm so glad Councilmember Newhouse is here. There's city council policy about how, you know, we do not, we have to build in the capital for long-term, right? We don't pass, I forget what it's called, but you can memorize it, right? And we are in a very, it's a unique time. I mean, in this, as I'm a rate payer, I'm looking at this and I know council had comments when I was presenting about how expensive it is getting to live in Bellevue and its utilities. I'm just wondering if there's a way to get the rate down, if it requires, I don't know, city council issuing a one-year suspension of the policy to not put as much into the R&R funds to get you to, because I know what you're saying about the two, three million on the operating expense. I totally get it. If you cut that in the operating expense, things are gonna start falling apart in the city and we're not gonna get water delivered seamlessly. The only place I can see giving is on the R&R fund, but I know there's a longstanding city council policy about that, and you're building in all this money so that we can have money to fix all the piping down the road. But something's going to have to give if we want to try to lower the rate to something where residents aren't feeling like they're being priced out of the city. I'm not saying that 9.8% or 9.7% is going to price them out, but... I think, and I know those other cities on your last slide there, Issaquah and whatnot, they don't have that policy. And that's why they can be much lower. They're not building in all this reserve to fix things. But I do think we're in the top three of that chart. While you say we're competitive, I say we're competitive, but we're way at the top there. So just kind of put it out there for discussion.

Most likely. I like your question, though, and I think it's if the commission agrees, I think it might be worthy of some further research in terms of if we could, what would that look like? Putting a pause for one year pause on some some some projects. What would that mean? What would the impacts potentially mean further down the road? And then, you know, how could we get there? And that, well, I guess maintain that 1% then too reduction, right? Would it just spike right back up? Because you're absolutely right. That's always been policy and a solid policy in my mind always, because I've... always have heard the horror stories of those uh you know not i mean look king county is going through this right now perfect example right they kept deferring maintenance and that unfortunately that's now hurting us and every other municipality that needs to connect to those sewer services right so We're all feeling the pinch to that. But I would be all for taking a look at it. But where that $2 million to $3 million would come from in order to get that reduction of 1%, I'm not sure where it would. But I would be certainly more than willing to entertain it if the commission felt it was worthy of staff's time and effort. But I would love to get staff's perspective on that as well.

I have a feeling Scott is ready to answer that.

Well, I would say one of the reasons I came up to the table here is for exactly Council Member Newenhaus' point. I was going to speak to King County and their track record of deferring maintenance, of reducing how much they're investing in their infrastructure. And I think we are all reaping, unfortunately, the byproduct of that. The outcome is very real. One of the things that keeps Bellevue sort of in my opinion, standing alone and apart from other jurisdictions, is how much we consistently invest in our infrastructure, and we remain committed to that and the levels of service that we provide. Again, to Council Member Newenhaus and his points, if you wish to consider investing you know, rate reductions or suppressing rate increases. I think Matt spoke to we would have to assess service level impacts as a result of doing that and would need to kind of include both a balance of perspectives there. But I'd also ask maybe Matt to maybe consider his approach to it. But that's where my mind goes. You can consider less in terms of rate impacts, but there is absolutely at this stage with the level of scrutiny that we put into our operating budget and the proposals that have come forward, we have absorbed as much as we possibly can. And our proposals are really about sustaining existing levels of service. So if we start to impact materially the funding levels, then we would have to consider what is the impact of services that we provide to the community. And we would have to assess that and come back with that picture for you. Just understand.

And just to clarify, you say it would require reduction in service level. if we were to try to find two to three million to suppress the rate increase?

Not with certainty. I would say that most of what we propose, it's built into the proposed budget that we presented a couple of weeks ago, is about sustaining existing levels of service. It's not really enhancing. Our largest proposal and increase was the utility bill assistance program and providing assistance to larger members of the community.

everything else was about sustaining the services that we're providing really at the levels that we provide them if we don't continue to do that then that's where we get get into adverse service impacts correct so i i hear you and that's not where i was going with that and which is why i was asking if we can have a one-year suspension of the sacred cow policy and reducing money going into the reserve not reducing your service level so i just want to make sure we're clear yes i'm absolutely clear because i think service level and service is important uh and um and listen i heard clearly we have lots of stuff going on coming up in the next six ten years lakeline replacements, et cetera. So I get that, but I also get, we're at a tension point where you're raising rates close to 10% to try to maintain what we do. And I believe it is a very sound policy. I'm just wondering if given where we are uniquely situated in this year, given gas prices, inflation, where we can maybe suspend, not eliminate the policy, but suspend it. So that's my point.

It's a good question. It truly is. But another piece of this, I also worry about where our growth centers, be it downtown, Bell Red, Wilberton, all of those areas need this infrastructure in order to continue to build for our economy, for housing, especially affordable housing, etc., I don't know if there would be impacts to that, but potentially there could be. But you're right, it's a balance. Maintaining the infrastructure needed for that growth, but at the same time understanding, as you heard so well during that council meeting, it's top of mind for me. I hear it every day from folks who feel like they're getting priced out of this city. For all the different, be it gas, groceries, housing, you name it. Anywhere I feel that we can make a cut or a temporary reduction if we can, I think that'd be great. But I think it would be a big ask of the council as well, unless we can show no long-term detrimental impact to the services that we provide or to the infrastructure that we would defer, you know, maintenance or growth for that year. You know, that would have to be, you know, clearly laid out for sure.

And that would definitely be what we're asking staff to think about.

Exactly.

So I'm going to first respond with, that's going to, Give me two weeks. But I do want to speak in a high level kind of perspective. And then we provide a more detailed response as part of our next engagement in two weeks. So from my professional stance, and I mentioned this during the early outlook forecast, our water utility is an active replacement. So we don't have financial capacity to lower that rate increase for water because we're using every dime that comes in and then some right now. Um, for the sewer utility. Yeah, we're not it's not an active replacement, but that is just outside of this 6 year window. And it's a great point that if we defer a dollar today, it is going to have. Rate impacts short term and long term on sewer. Our initial we're still looking at draft estimates. The lake line project will be measured in billions of dollars. So, well, those two out of the way where I would begin looking at an option to respond to you to the request of the Commission would be have to be on the stormwater side. I just that that's kind of where that's the only place that we could potentially look at an option for consideration.

One more.

I'm unable to hear the discussion.

So hopefully that was just me and not everybody. If we had to pause those projects, I mean, there would be a detrimental impact, I think, in terms of the contracts, which might need to be redone potentially. If they come back with another bid, that bid might be higher than what was originally agreed to. Yeah, yeah. So I'm assuming all these things would, you know, have to be looked at.

Yes.

Yes.

You know, very succinctly, yes. Absolutely. I don't know to what extent and that we would absolutely want to involve Dave Beish and our engineering team in any discussion along these lines because we go to such great lengths to plan our capital program and the phasing of projects and when we're in design and entering into construction and all of that. and so we'd have to go back very intentionally and look at the six-year plan for our capital program we do have active projects that are under construction and likely is not it would not make a lot of sense to pause active projects in construction you'd have to look at what you're planning for over the next two or three years and ramping up funding to support how would you alter those projects that are getting ready to enter design or enter construction and so it would like likely and largely affect those nearer term projects i don't know if you have anything i'm just going to say

they would have a ripple effect and a snowball effect and the ripple is maybe intended unintended consequences. And the snowball is you're going to catch up later, um, with this kind of big chunk that's going to get done more quickly later. Um, We have some tools. We do outsource a lot of our design engineering. So that's helpful because obviously you want to keep your staff momentum going with the projects you have going. And institutional knowledge is critical. But there are some tools out there. It would be the rate making capacity. A pause isn't just a pause. It goes on. So you either make it up or it's permanent later. So it's challenging.

I'm hearing all the caveats. I think I'm just asking you guys to look at it. I mean, you look at that chart too, the tail drops off. And I'm saying, can you just change the trajectory so it's a slow rise instead of a spike and then a drop? That could also be a possibility, given what you just said, not looking at deferring active projects, but the projects later on. So just look at it.

I would echo that as well. I think just looking at these rates and I mean, we see in each meeting all the hard work of staff and really, you know, drilling into the numbers, but it's still shocking to see these kinds of rate increases. And this is before it's even out to ratepayers. We can only imagine what their response and their reaction would be to seeing these kind of increases. So I think the general sentiment is, you know, help us understand where there is potential to make this, you know, more fair to ratepayers, both in the short and long term.

I have a question on if you can go to the table with the bill impacts, I guess, for the total bill. Is there a way, because we see the actual dollar amount of $22 a month, right, for in 2027, for what is it, seven CCF? Right. So is that seven, I guess I'm trying to think, is there a way to show us how many customers that impacts, how many customers are impacted at a lower level? You know, because they're going to be paying, you know, we're talking about $22 a month, right? Is that 50% of the customers? Single family, I guess. Is that, you know, I don't know, and I don't want to ask you for more work, Matt. I know this is really a lot of work, but to give a framework of $22 per month, how many customers would that impact? And how many customers are going to be paying $5 a month or, you know, $10 or something, right? Because that's your scale. It's all based on your usage. We use three, you know, so we're not going to have that kind of an increase, right? Yeah.

Yeah, and yes, we have that table already set up. And so we can have an example, a bill impact analysis based on use. Here's your total dollar increase and then a distribution curve. What percent of customers face that? The number on screen is the... arithmetic mean of our total water divided by total counts. So you're going to have probably a majority of customers to the left of that curve because you have some big outlier water users that stretch out the mean.

Yeah, it'll help us put it in context, I think, from an actual dollar standpoint, because I know these rate increases sound pretty high. I will just, there's one thing that I know I've said this before, we cannot do, you know, something with the 50% of our budget, but I really am concerned that we have to look at our local budget and think about stressing that. I'm concerned that I want to go the other way, right? I want to be doing more replacement. at the same time balancing the rate impact. So I just want to make sure we're looking at it from the framework of what's the actual dollar impact and really trying hard. We can't compromise our local operations because of what King County and Cascade are doing. That's kind of how I feel.

One comment that came up during our discussion on this was becoming less dependent on King County. Is there a path forward there? I think some other municipalities like North Bend and others have developed their own like sewer system or sewer treatment. Is there a path forward for that if we wanted to do that? Or are we always going to be dependent in some respects on King County?

I believe it's the latter. But I know that Matt did have an opportunity. I believe that you spoke with North Bend on their experience, but perhaps you have something to add.

Point of personal privilege. One person who used to sit here before I was here, Martin Shaw, was the utilities finance director manager for a while. He's now the finance director at North Bend. So I had a chance to talk with him. And Councilman, you are right. North Bend stands independent with their own treatment plant. Some of that is because of the distance between North Bend and the King County system. Um but but the I would say moving detaching from King County um that is if that were an option it would be beyond the next 10 years we are currently under contract with the county through at least 2036.

Um yeah that's that's it doesn't solve the immediate issue I agree but uh just wondering if that was even a possibility so but it doesn't really sound like it.

I'm going to defer to my boss. I agree with my boss. I think that's an engineering question. So we did some planning level estimates.

And I won't even give you the number, but I will say what we looked at. We looked at Brightwater, what that costed. And that was, I think they built that in 2012, 2013. That was, I think, around $1.5, $2 billion or something. And then We threw it into AI and got some really great ideas on what you'd have to build out, one would being like 20 acres of property at the right elevation. That's usually going to be lakefront around here. All right? And then you're going to have to discharge that into, say, Lake Washington and the secondary tertiary treatment you're going to have to do. and the regulations, it quickly becomes very daunting. And that's the level we got to with it, just to get the things on the table to think about. And then we thought about the lake line and other competing projects that are coming up. And then you've got a real spike to cover that. And certainly with the lake line, we are looking at other funding approaches to try to smooth out that curve. For now, we're not spending a lot of time on this. Yeah. Okay.

Thank you for that.

Yeah.

All right. Any other comments from anybody in the room? If not, thank you, Matt, Scott. All right. Last second, the last item on the agenda. Joe, would you like to review the calendars, please?

It's a couple weeks ago. It's been a lot of time, but I will point out on the calendar in July, the cascaded budget rates, the supply program, the community council. And then on August 4th, thank you for your recommendation today on the connecting priorities. JoAnne Hanrahan- You can you Joe I think your microphone maybe Mary Mary I apologize, thank you yeah i'm sorry Council will be hearing on cascade budget rates on July 14. Dave Kuntz, And then we'll be coming back to Council on August for to speak on utility connection charges and study session Council won't be voting on it that way at that time it's just a study session to get them up to speed, it would be covered in an ordinance later on in the year. um. And you've seen much of this. Matt has already said he's got it memorized. So I'm going to just leave it at that and we'll move on from the calendars. Thank you.

All right. So next meeting in a few weeks in July is the big budget recommendation vote. So I hope as many commissioners as make your efforts to attend, except for Commissioner Loxley.

And that's July 2. So don't leave town early.

All right. So with that, I may have a motion to adjourn.

Move to adjourn.

All right. Thank you, Commissioner Heinash. And thank you, Commissioner Letterman, for a second. Meeting is adjourned.