City Council Budget and Finance Committee

**Utility Rate Crisis and Infrastructure Needs** The city faces an unprecedented infrastructure financing challenge driven by decades of deferred maintenance and regulatory requirements. The 2022 cancellation of the wastewater solids project left critical facility upgrades unfunded, while the water system requires extensive pipe replacement for infrastructure installed during the 1920s-1930s growth period. Mike Olinger emphasized that delaying rate increases would only compound the problem, potentially pushing annual increases even higher. Gordon Wilson's affordability analysis revealed Bellingham's unique challenge: middle-of-the-road utility rates combined with exceptionally low incomes. The city ranks 10th-12th among Washington's largest cities in median household income but maintains rates in the middle range, resulting in utility costs consuming 2.3% of median household income—higher than any comparable city surveyed. The proposed rate structure assumes significant capital borrowing to maintain the city's 1.7 debt service coverage ratio required for bonding. Water rates would increase 11% annually for four years, then 9% for five more years. Wastewater presents the steepest challenge with 18% increases for two years, followed by 12% increases for two more years—and this excludes future nutrient removal projects awaiting state regulatory finalization. **Customer Assistance Program Expansion** Staff proposed tripling the customer assistance program over two years by removing age and disability restrictions while maintaining the three-tier discount structure (25%, 50%, 75% based on income levels). Currently serving 741 households, the expanded program could …

**Mike Olinger, Interim Public Works Co-Director:** Strongly emphasized the urgency of rate increases, warning that delays would only compound future costs. Supported holding Lake Whatcom watershed fees constant based on current cash reserves and program manager assessment that existing rates suffice for the five-year planning period. **Gordon Wilson, FCS Bowman Consultant:** Presented comprehensive affordability analysis showing Bellingham's unique combination of low incomes and middle-tier rates creates exceptional burden on residents. Supported customer assistance expansion but cautioned about administrative complexity and rate impacts on other customers. **Council Member Michael Lilliquist:** Challenged multiple major capital projects, requesting independent review of rate studies and questioning whether some infrastructure upgrades reflect outdated zoning assumptions rather than realistic development patterns. Supported assistance program e…

**Mike Olinger, on rate increase urgency:** "Delaying this only makes it worse. So the more that we try to push this down the road, instead of talking about like today we're talking about 12 and 13 percent rate increases in water and even higher in wastewater, that only extrapolates and makes those numbers higher if we delay this out and push it out another year or two." **Gordon Wilson, on Bellingham's affordability challenge:** "If you have middle of the road utility rates but very low incom…

**Policy Shifts:** - Customer assistance program eligibility expanded from seniors/disabled only to all income-qualified households - Nonprofit housing discount reduced from recommended 25% to 20% to minimize rate burden - Lake Whatcom watershed fee held constant rather than increasing with water rates **Financial Projections:** - Combined utility rate increases set at 11.8% (2026) and 12.2% (2027) rather than original higher projections - Customer assistance program costs capped with annual monitoring triggers instead of three-year review only - Budget development approach shifted from growth-…

A structured study guide helping readers understand the meeting's content and context. Written for a general civic audience — assume no prior knowledge of the issues. ### Meeting Overview The Bellingham City Council's Budget and Finance Committee met on May 19, 2025, for 81 minutes to discuss two critical financial challenges facing the city: dramatic utility rate increases needed for aging infrastructure and the city's structural budget deficit affecting the 2026 budget. ### Key Terms and Concepts **Water System Plan:** A comprehensive long-range planning document that identifies infrastructure needs for the city's water utility, including pipe replacement, storage expansion, and regulatory compliance projects. **Customer Assistance Program (CAP):** A utility bill discount program that currently provides 25%, 50%, or 75% discounts to qualifying low-income households headed by seniors or disabled individuals. **Debt Service Coverage Ratio:** A financial metric requiring the city to maintain 1.7 times the revenue needed to pay debt obligations, ensuring the city can secure bonds and loans for infrastructure projects. **Alice Households:** Asset Limited Income Constrained Employed households - working families who earn too much to qualify for traditional assistance but struggle to afford basic necessities. About 40% of Bellingham residents fall into this category. **Structural Budget Deficit:** A persistent gap between revenues and expenses where costs grow faster than income, requiring ongoing budget cuts or new revenue sources. **General Fund:** The city's main operating fund that pays for basic services like police, fire, parks, and administration through taxes and fees. **Lake Whatcom Watershed Fee:** A separate charge on water bills that funds environmental protection efforts for the city's primary drinking water source. **UGA (Urban Growth Area):** Designated areas around the city planned for future development and annexation, which must be included in infrastructure planning. ### Key People at This Meeting | Name | Role / Affiliation | |---|---| | Lisa Anderson | Committee Chair, Fifth Ward Council Member | | Daniel Hammill | Committee Member, Third Ward Council Member (attended remotely) | | Michael Lilliquist | Committee Member, Sixth Ward Council Member | | Mayor Kimberley Lund | Mayor of Bellingham | | Mike Olinger | Interim Public Works Co-Director | | Forrest Longman | Deputy City Administrator | | Gordon Wilson | Senior Project Manager, FCS Group consultant | ### Background Context Bellin…