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April 20, 2006

Sound financial practices keep county sewer rates lower than forecast despite rising commodities prices, fuel costs

Ratepayer's sewer rates will be lower than expected over the next two years under a rate proposal from King County Executive Ron Sims. Sound financial practices, low interest rates and a cost-conscious approach to building sewage improvement projects will enable King County to keep sewer rates lower than originally forecast.

The county is carrying out one of the most ambitious sewer improvement programs since the utility was created in the 1950s, yet it has held sewer rates steady for the last two years. However, rising inflation, higher global commodity prices and increasing energy costs are creating a challenging economic climate for the county's Wastewater Treatment Division. 

"People want clean water, and we must continue to deliver enough capacity to meet their needs as our population and economy grow," said Executive Sims. "We are protecting people's health and our environment and providing dramatic improvements in systems to stop overflows into Lake Washington and Puget Sound during storms." 

The county is proposing a $2.90 monthly rate increase to $28.50 through 2008. The new rate will protect King County's high bond rating and enable continued major system expansion and improvements needed to protect public health and environment in our growing region.

The good news is that the cost-saving measures implemented by Wastewater Treatment Division employees have kept the proposed two-year rate below what was originally proposed in last year's budget forecast.

"The current proposal reflects the Wastewater Treatment Division's ability to successfully and efficiently complete capital projects," said Sims.

The table below identifies the substantial rate savings in the 2007-08 rate proposal forecast as compared with last year's sewer rate forecast.

The rate proposal is consistent with the county's financial policies that require its sewer utility to pursue stable rates while securing sufficient revenue to preserve the county's favorable credit rating. Maintaining the credit rating is crucial to minimizing costs of the planned borrowing needed to finance critical projects to prevent sewer overflows, meet the needs of growth and control the amount of surface water that gets into sewer pipes.

The Wastewater Treatment Division's proposed capital spending is $295 million in 2007 and $418 million in 2008, which includes the new Brightwater treatment system as well as nearly two dozen other vital sewer improvement projects now underway or planned for this year. For details, visit http://www.metrokc.gov/exec/news/2006/0308sewers.aspx.

In addition to the monthly sewer rate, King County also relies on a capacity charge of $34.05 to fund new sewer improvement projects. The monthly capacity charge is levied on newly connecting customers throughout the 420-square-mile service area, consistent with the county's "growth pays for growth" policy.  The capacity charge will remain stable through 2007.

The county also achieved success in containing operating expenses, largely through the Productivity Initiative program. The program gives employees the flexibility to apply some business practices used in private industry to cut operating costs, increase productivity, and maintain a high level of service and environmental protection for county residents.

Sims said that it was possible that an even lower rate could be proposed following a bond sale now planned for early May. "If we secure a lower interest rate and refinance our existing bonds, I will submit an amended rate proposal."

The King County Council is now reviewing the proposal and will vote on it in June. If adopted, new rates would go into effect on January 1, 2007.

People enjoy clean water and a healthy environment because of King County's wastewater treatment program. The county's Wastewater Treatment Division protects public health and water quality by serving 17 cities, 17 local sewer utilities and more than 1.4 million residents in King, Snohomish and Pierce counties. Formerly called Metro, the regional clean-water agency now operated by King County has been preventing water pollution for more than 40 years.