Template revised April 12, 2018.
COMMISSION
AGENDA MEMORANDUM
Item No.
8b
ACTION ITEM
Date of Meeting
October 9, 2018
DATE: October 2, 2018
TO: Stephen P. Metruck, Executive Director
FROM: Sandra Kilroy, Director, Maritime Environment and Sustainability; Director, Marine
Stormwater Utility
Srini Pendikatla, Marine Stormwater Utility Program Manager
SUBJECT: 2019 Marine Stormwater Utility Rates
ACTION REQUESTED
Request Commission authorization for the Executive Director to increase Marine Stormwater
Utility rates by 8.2 percent in 2019.
EXECUTIVE SUMMARY
The requested authorization will provide a 2019 rate structure to be adopted by the Marine
Stormwater Utility (utility), in support of utility obligations to protect water quality, rehabilitate
Port stormwater assets, and support property managers and tenants in compliance with
stormwater permit conditions.
JUSTIFICATION
A rate increase at the proposed level of 8.2 percent allows the utility to meet short-term goals
to complete the baseline condition assessments by the end of 2019, transfer funding of all
stormwater management activities from business units to the utility by 2020, and maintain
significant level of investment to improve the stormwater system to improve water quality to
meet the port’s Century Agenda environmental goals.
DETAILS
The utility was formed in 2014 to enable the port to provide services, facilities, systems, and
programs for surface water and stormwater management and pollution control. A benefit of
utility work is water quality protection in the Puget Sound. The utility collects stormwater fees
from the Port of Seattle, Northwest Seaport Alliance (NWSA), and tenants and reinvests the
income into maintaining and upgrading the stormwater infrastructure. Prior to creating the
utility, the stormwater fees paid by the port and its tenants to the City of Seattle were diverted
from the port properties to address city priorities. The port managed the expense of
administering the stormwater compliance program to meet all applicable regulations without
benefit of utility funds.
COMMISSION AGENDA – Action Item No. 8b Page 2 of 6
Meeting Date: October 9, 2018
Template revised September 22, 2016; format updates October 19, 2016.
The utility rates apply to all port-owned maritime property, which includes land managed by
the NWSA. Tenants pay stormwater fees based on the area of their leaseholds. The stormwater
fees for the remaining unleased land at a facility are paid by the operating business. The
operating business is either the NWSA or the specific port business (Economic Development,
Maritime Operations, Cruise, etc.) that oversees the unleased property.
The 2014 Utility Charter included rates for 2015 through 2017. The 2018 rates were approved
by the commission in November 2017. Utility rates need to be approved by the commission
annually.
Scope of Work
Since its formation, the utility has completed nearly 70 percent of a full system assessment to
obtain baseline conditions of the existing stormwater infrastructure. During this process, nearly
three dozen urgent repairs of stormwater infrastructure have been completed, reducing
hazards and allowing the conveyance system to function properly. A dozen tide gates have
been installed preventing the flow of tidal waters into the conveyance system. Additionally, the
port won the Comprehensive Environmental Management award from the American
Association of Port Authorities for the formation of the utility.
All revenue collected by the utility is separate from the port’s general funds and must be spent
on or for the benefit of the port stormwater system. The utility does not generate a profit. The
majority of the work to date has been expense activities such as the assessments to obtain
baseline data on stormwater lines, urgent repairs, and administrative costs including policy
creation, billing, and assisting tenants and port business units comply with stormwater
regulations. The projected expense and capital budget in 2019 is approximately $6.5 million,
which will be used to:
Complete the system assessments,
Repair severely damaged stormwater pipes and infrastructure,
Perform existing stormwater management activities such as dock cleaning,
Perform additional maintenance under the Utility such as sweeping properties covered
by the municipal stormwater permit (currently expense under business units),
Implement green stormwater infrastructure,
Complete the current capital program portfolio including the Terminal 18 outfall
renewal and replacement project, and
Cover operational and administrative expenses including staff costs, utility taxes and
allocations.
The following criteria were used in considering the 2019 rate:
(1) Maintain adequate budget to meet the port’s Environmental Long Range Plan and
Utility Charter responsibilities including rehabilitation of stormwater infrastructure
COMMISSION AGENDA – Action Item No. 8b Page 3 of 6
Meeting Date: October 9, 2018
Template revised September 22, 2016; format updates October 19, 2016.
and covering budget of all applicable stormwater management activities of the
stormwater compliance program by 2020.
(2) Continue progress on Century Agenda goal to complete port-wide stormwater line
assessments by end of 2019.
(3) Maintain adequate funding to maintain and improve a high functioning stormwater
system to benefit the water quality of the Puget Sound.
(4) Build toward a six-month operations and maintenance expense reserve by 2023 for
financial prudence consistent with port policy and best practices.
The Utility’s five-year projected rate path has been developed using the five-year budget
forecast. The forecast includes sufficient spending to continue investment in the stormwater
system, protecting water quality and meeting the port’s short-term and long-term
environmental goals. The projected rate path assumes an annual increase of 8.2 percent
through 2023, subject to annual commission approval, to build a financially stable and
sustainable program for long-term operations. It also allows the utility to increase spending on
the stormwater program, providing the improvements envisioned when first created while
staying below the City of Seattle’s fee structure. The projected revenue growth keeps the port’s
utility rates between 15 – 25 percent below the city over the five-year time period. The table
below shows the comparison between the city and the port for the “very heavy” rate category,
which is the highest of the five rate categories.
Year
City Rates
City Rate %
increase
Port Rate %
Increase
*
Port Rate %
Lower than
City Rate
2018
$134.85
9.69%
7.75%
15.73%
2019
$147.26
9.20%
8.20%
16.80%
2020
$161.54
9.70%
8.20%
18.42%
2021
$177.53
9.90%
8.20%
20.28%
2022
$191.56
7.90%
8.20%
19.95%
2023
$200.56
4.70%
8.20%
16.07%
*
Note: 2018 rates are approved and rates for 2019 through 2023 are proposed.
The city rate was approved by Seattle City Council in November 2017 per Resolution 31760. The
future increases shown are a projected average increase across all rate structures. The city’s
final dollar amount in future years is an estimate and may vary based on the city’s rate
adoption methodology. Port rates for years 2020-2023 are also provided as projections based
on current conditions and are subject to annual commission approval.
Schedule
Once approved by the commission, the 2019 rates will be adopted by the utility effective
January 1, 2019. The utility notifies tenants of the upcoming rate change in the fall consistent
COMMISSION AGENDA – Action Item No. 8b Page 4 of 6
Meeting Date: October 9, 2018
Template revised September 22, 2016; format updates October 19, 2016.
with past practices. Tenants can dispute billing fees at any time by contacting utility staff. A
decision will be made within sixty days of receipt of the dispute.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Increase rates by 2%; maintain expenses similar to 2018
Cost Implications: Projected revenue in 2019 will be $5,476,236 with a projected expense of
$6,172,171. The utility has a cash reserve of $1.8 million to cover the difference.
Pros:
(1) Full system assessments will be completed by end of 2019.
(2) Lowest 2019 rate increase of rate setting scenarios that still allows for adequate
spending to improve water quality.
(3) Lower rate increase than in previous years.
(4) Port rates will be on average about 25 percent lower than city drainage rates in 2019.
Cons:
(1) Greater rate increase necessary in future through 2023 (projected up to 15 percent) to
meet six-month reserve and maintain adequate spending to benefit water quality.
This is not the recommended alternative.
Alternative 2 – Increase rates by 9 percent; increase expenses to cover stormwater compliance
program in 2019
Cost Implications: Projected revenue in 2019 will be $5,852,056 with a projected expense of
$6,964,354. Utility has a cash reserve of $1.8 million to cover the difference.
Pros:
(1) Full system assessments will be completed by end of 2019.
(2) Funding of stormwater compliance program accomplished in 2019, one year earlier
than goal of 2020.
(3) Port business units will have reduced expenses for non-leased properties and common
areas.
(4) Port rates will be on average about 17 percent lower than city drainage rates in 2019.
Cons:
(1) Highest initial rate increase of all rate scenarios.
(2) Higher rate increase than in previous years.
(3) Increased short-term spending results in higher average rate increase over five-year
projections than recommended alternative.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. 8b Page 5 of 6
Meeting Date: October 9, 2018
Template revised September 22, 2016; format updates October 19, 2016.
Alternative 3 – No change in rates (0 percent increase); maintain expense similar to 2018, delay
utility administering of stormwater compliance program until 2021, and decrease maintenance
expenses in 2020
Cost Implications: Projected revenue in 2019 will be $5,368,859 with a projected expense of
$6,163,516. Utility has a cash reserve of $1.8 million to cover the difference.
Pros:
(1) Full system assessments will be completed by end of 2019.
(2) No change in expense to tenants, NWSA and port business units in 2019.
(3) Port rates will be on average about 28 percent lower than city drainage rates in 2019.
Cons:
(1) Reduction in maintenance expenses reduces ability to benefit water quality and meet
the environmental goals of the stormwater program.
(2) Greater rate increase in future through 2023 (projected up to 16 percent) to meet six-
month reserve and build to adequate spending levels to benefit water quality.
(3) Goal to administer the stormwater compliance program delayed by one year to 2021.
This is not the recommended alternative.
Alternative 4 – Increase rates by 8.2 percent; increase expenses to administer select activities
of stormwater compliance program one year early
Cost Implications: Projected revenue in 2019 will be $5,744,679 with a projected expense of
$6,485,598. The utility has a cash reserve of $1.8 million to cover the difference.
Pros:
(1) Full system assessments will be completed by end of 2019.
(2) Projected expense and capital spending levels allow utility to continue investing in
stormwater system to benefit water quality.
(3) Port business units will have reduced expenses for property maintenance due to utility
funding additional activities of the stormwater compliance program.
(4) Future rate changes are projected to be stable at 8.2 percent through 2023.
(5) The average rate increase over the five-year projected path is the lowest of all
alternatives.
(6) Port rates will be on average about 18 percent lower than city drainage rates in 2019.
Cons:
(1) Higher rate increase than in previous years.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
All revenue collected by the utility is separate from the port’s general funds and must be spent
on or for the benefit of the Port stormwater system. The proposed rate increase has a number
of positive implications including:
COMMISSION AGENDA – Action Item No. 8b Page 6 of 6
Meeting Date: October 9, 2018
Template revised September 22, 2016; format updates October 19, 2016.
Maintain funding for critical stormwater infrastructure improvements,
Build a six-month reserve as sound fiscal policy consistent with standard port procedure,
Reduce operating costs funded by the port by funding additional maintenance activities
(sweeping) from business units and select tenants, and
Keep rates lower than the City of Seattle.
ADDITIONAL BACKGROUND
The utility maintains a separate accounting fund, known as the stormwater utility fund, to
conduct all business. This fund is separate from the port general funds and cannot be used for
any purpose other than administering, operating, maintaining, and improving the port’s
stormwater system. The utility may borrow money from the port funds as needed, provided
that such funds are payed back in full to the originating funds.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
November 14, 2017 – Approval of Maritime Stormwater Utility Rates for 2018.