Director outlines Spokane's rate-setting approach; initial water/wastewater proposals due May-June

Marlene, the director, told the committee the first step in the rate-setting process is establishing how much revenue the utilities need to cover operations, maintenance, debt (principal and interest), capital projects and reserve targets. She said staff will use cost-of-service studies that allocate costs across customer classes so each class covers its own portion of system costs.

"The first step is to determine how much revenue we need," Marlene said, describing analyses that examine operating and capital debt and reserve targets and that evaluate multi-year revenue sufficiency rather than one-year snapshots. She noted the city uses growth-fee (GFC) rates to shift growth-related capacity costs to new development and funds renewal and replacement through rates.

Marlene described rate-design choices staff will consider, including fixed versus variable charges and residential tiers to support conservation. She highlighted programmatic affordability measures already adopted: the council doubled the senior and disabled discount from $10 to $20 per month over the past two years. Staff intends to present detailed cost-of-service results for water and wastewater in the coming months and to bring an initial rates proposal in the May'June timeframe, with a goal of council approval by early fall and an effective date of Jan. 1 to align with the overall budget process.

Committee members pressed on affordability and bill volatility. One member described constituents seeing steep increases in recent years and asked what the city can say to residents who report large percentage jumps in their bills. Marlene and colleagues said the increases are often cumulative since 2021, and emphasized affordability is a top priority; they recommended measures residents can take (smaller garbage carts, reduced water use) and reiterated that staff will seek to smooth rate impacts over time.

The presentation also noted other revenue sources and structures that affect rates: grant funding is the least costly revenue because it requires no repayment, while revenue bonds are the most costly. Staff will model different funding mixes and report on trade-offs between using cash versus debt to fund capital projects.

The committee did not take formal action during the presentation; staff committed to returning with the cost-of-service results and rate-structure recommendations for committee review in late spring.