Food processors urge city to avoid steep PWRF rate hikes as 2025 startup leaves utility in deficit

Pasco city staff told the City Council on May 20 that the Process Water Reuse Facility (PWRF) — the city’s industrial wastewater plant that treats food-processor effluent — ran into a budget shortfall during its 2025 startup and now faces a larger projected deficit for 2026 unless the city and partners act.

Director of Utilities Sarah (Director Sarah) said the expanded facility began full operation in 2025 after a multi-year upgrade. Staff reported the fund ended 2025 approximately $800,000 in deficit after using reserves to cover a larger operating shortfall. Updated projections shared with the council show a cumulative shortfall that could be materially higher in 2026 without changes.

The expansion added new biological treatment and renewable natural gas (RNG) refining components managed by a private partner under a 30-year treatment agreement. Director Sarah said the city pays the private partner for capital amortization and operations; the contract and revenue shortfalls for RNG contributed to the unexpected budget gap.

The PWRF serves a small set of local food processors and the companies’ representatives told the council that recent rate increases already imposed are unsustainable. Shamshi of Grimway Enterprises said Grimway’s wastewater charge rose markedly after the new rate model took effect, and called for alternatives to further rate increases: “We can’t afford to pay more than what we’ve been paying for 2025,” Shamshi said. “This facility was sold as a service to clean wastewater — not as a vehicle for selling RNG, which hasn’t produced promised revenue.”

Jodie Fleshman of Simplot and Dale Goer of Twin City Foods echoed those concerns. Fleshman said processors do not oppose reliable wastewater treatment, but that they had not signed up to absorb cost overruns tied to RNG or operator performance: “We want the service. We can’t carry the burden of equipment or performance failures,” she said. Goer added that Burnham, the private operator, had both large operating over-runs and substantially lower RNG proceeds than projected in 2025, producing an outcome that “must be examined” before asking customers to pay more.

Staff said they convened a technical work group including the processors, city finance and public works staff and the mayor to identify alternatives and to vet solutions before returning to council. Options under consideration include: renegotiation with the private operator to reduce costs; limited use of the city’s restricted federal tax-credit proceeds as a short-term subsidy; operational improvements to increase RNG yield; and, as a last resort, fee changes. Director Sarah emphasized the city is not proposing rates tonight and that any increase would be brought back to council after stakeholder review.

Mayor Grim and several council members stressed urgency. Council Member Parales said he opposed any rate increase without clear evidence it was needed and suggested the city look first at using available tax-credit proceeds and negotiating operator costs. City Manager Stewart said staff is also exploring legal and contractual options with counsel.

What’s next: staff plans continued work with the processor work group next week and said it will return to the council with a range of vetted alternatives — including the city’s estimates of how much reserves or tax-credit proceeds would be required — before any change to rates. Several processors warned that prolonged uncertainty would complicate their operations and investment plans.

The city’s presentation and the industry responses left clear, immediate choices: whether to draw municipal reserves, renegotiate contract terms with the private operator, accelerate operational fixes to increase RNG revenue, or ask processors to pay more. City officials said no decision would be made without giving council and affected businesses a formal opportunity to review proposals and supporting analyses.