City Council OKs dollar-for-dollar water rate cut, tax hike

December 27, 2009

By Warren Kagarise

NEW — 6 a.m. Dec. 27, 2009

City Council members cut the municipal water rate and added a utility tax Monday night — a move meant to be cost-neutral to customers.

The decision followed a 2008 state Supreme Court ruling related to how cities pay for municipal fire hydrants. The court ruling — Lane v. Seattle — said hydrants are a general government service, and cannot be paid for as a utility.

The city collects $129,000 through water rates to pay for municipal fire hydrants. Since the court ruled, municipal officials across the state have searched for ways to remove fire-protection costs from utility rates.

City Council members cut water rates 2.28 percent — worth $129,000 — and adopted a 2.33 percent utility tax on city water — to raise the $129,000 lost by the rate decrease. The council voted unanimously for the dual measures.

The tax will enable the city to use money from the city general fund to pay for hydrants.

“There will be no change in what the customer pays,” City Attorney Wayne Tanaka said during the meeting. “It’s how it’s categorized.”

Councilman David Kappler decried the added step the court decision required the city to undertake.

“I can remember, many years ago, when we were so happy to try to work out ways to get rid of the taxes on our utilities,” Kappler said. “It was a big deal and quite an accomplishment.”

Officials said the rate reduction, coupled with the utility tax, would be the same, dollar-for-dollar, for every customer. The rate cut measures will go into effect during the first full billing cycle next year.

“The tax is on the city, but the cost is going to be passed along to the customers,” Tanaka said.

Customers will notice a breakdown on water bills — a line with the lower water rate and the new utility tax.

City Public Works Engineering Deputy Director Sheldon Lynne said the city plans to negotiate agreements with Bellevue and the Sammamish Plateau Water and Sewer District. The agencies provide water for customers inside Issaquah.

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