Lake Oswego and Tigard city councilors were able to agree on a rate model for water infrastructure shared between the two cities at a joint meeting Tuesday, but they put off a decision on how their water partnership will be governed.
The Lake Oswego-Tigard Water Partnership, which began supplying drinking water from the Clackamas River to Lake Oswego and Tigard last year, is designed to serve as the primary water supply for both cities.
"The issue is, 'How do we pay the bills?'" explained Dennis Koellermeier, the program director for Tigard. "How do we equate the costs of running the facilities into bills to go to the two partners?"
Those facilities include a new intake station on the Clackamas River in Gladstone and an upgraded water treatment plant in West Linn, along with new pipes to carry water between the two facilities and then on to Lake Oswego and Tigard.
Water rates for consumers are determined by the two cities separately. The rate model presented at Tuesday's meeting was, as Tigard Councilor Jason Snider put it, simply "the rate we charge ourselves" as a city for the operation and maintenance costs of the jointly-owned infrastructure.
Lake Oswego hired a consulting firm to develop a rate model last year, and Project Director Joel Komarek presented the results to the two councils, along with a question: Should the rate include funding depreciation?
Tigard Mayor John Cook explained that by adding a funding depreciation charge to the rates, the cities would be setting aside money for unforeseen future capital projects such as facility expansions, major repairs or even the replacement of the entire shared water supply infrastructure when it reaches the end of its operational lifespan.
"If you fund depreciation fully," he said, "then when you need to build the next facility, you have that cash."
Without that reserve, future generations would be on the hook for the cost of new facilities. But that's more or less what happened with the current project, which was funded by large hikes in municipal water rates in both cities.
Today, both councils are reluctant to raise rates even further.
"It's hard to say to ratepayers, 'Hey, you need to start saving for this water treatment plant we need in 75 years,'" said Lake Oswego Councilor Joe Buck, "when both cities have other problems that need funding right now."
The project's oversight committee, which consists of Cook, Snider, Lake Oswego Mayor Kent Studebaker and Lake Oswego Councilor Jackie Manz, had recommended that the depreciation be delayed for five years, and most of the other councilors appeared to agree at Tuesday's meeting.
However, there was also general agreement that the fee should not be delayed indefinitely. Tigard Councilor John Goodhouse suggested that a depreciation charge could be calculated and placed "on the books" now, with the stipulation that it automatically take effect after five years.
The two councils approved that suggestion, and tasked the oversight committee with developing a depreciation fee and deciding whether it should be implemented wholesale or phased in after the five-year waiting period.
The group also unanimously voted to add a small cost to the established rates for each city in order to begin saving for four big-ticket items: replacing the granular activated carbon inside two of the filters at the treatment plant and adding an additional pump at both the intake station and the treatment plant in order to keep up with projected increases in demand. Those projects are too big to be covered by the maintenance budget, but they're also not factored into the depreciation fee because they're known costs.
Tuesday's second major discussion item was about how the water supply will be governed. The construction phase was managed by Lake Oswego, but the Tigard council is now pushing for a joint management structure to run the facilities in the future.
"The basic question here is whether we want to continue as we are now — with Lake Oswego staff managing the facilities — or form a new body like a water board to manage it," Studebaker said.
Snider presented Tigard's perspective, declaring that he and the other councilors wanted a new governing entity to control the supply system, with equal oversight that could "withstand the tests of time" and ensure that the water supply is "not dependent on politics."
"I think the best way to really 'share water and connect communities' is to have a joint board," added Goodhouse, invoking the partnership project's tagline.
Buck said he appreciated Tigard's perspective and could support a separate board, but other Lake Oswego councilors seemed less certain. Councilor Jeff Gudman questioned whether a new board would be a "distinction without difference" when compared to the current arrangement.
"I'm kind of wondering what's so wrong with what's going on right now," Studebaker added. "Why do we need to change?"
Snider pushed the group to consider situations far in the future, when new elected officials will be making the decisions and water resources might not be as plentiful. The current oversight committee, he argued, has an advisory role but not direct control.
"If you're the entity that essentially has control," he said, "what kinds of decisions could be made?"
Manz suggested that the Lake Oswego council needed more time to discuss the matter internally, and both groups agreed to table the issue until a future meeting.