Ask MRSC - Utilities & Telecommunications

Pursuant to RCW 35.67.025, all public property shall be subject to the same rates and charges as private property. The statute specifically states:

Except as otherwise provided in RCW 90.03.525, any public entity and public property, including the state of Washington and state property, shall be subject to rates and charges for stormwater control facilities to the same extent private persons and private property are subject to such rates and charges that are imposed by cities and towns pursuant to RCW 35.67.020. In setting these rates and charges, consideration may be made of in-kind services, such as stream improvements or donation of property.” [emphasis added]

RCW 90.03.525 is an exception for the Washington State Department of Transportation (WSDOT) with respect to state highway right-of-way or any section of state highway right-of-way for the construction, operation, and maintenance of stormwater control facilities. These properties shall be 30% of the rate for comparable property. This exception does not appear to apply to other property owned by WSDOT, only highway rights-of-way.

Additionally, RCW 43.09.210(3), known as the “Accountancy Act,” requires agencies to provide true and full value for services rendered from another agency or department. It specifically states:

All service rendered by, or property transferred from, one department, public improvement, undertaking, institution, or public service industry to another, shall be paid for at its true and full value by the department, public improvement, undertaking, institution, or public service industry receiving the same, and no department, public improvement, undertaking, institution, or public service industry shall benefit in any financial manner whatever by an appropriation or fund made for the support of another.

Local governments are not allowed to benefit financially from other local governments or even other departments within one agency.

We recommend that you discuss this matter with your city attorney who will be in the best position to advise you further. Our guidance is general and not a substitute for the advice of the city’s legal counsel.

General facilities charges (GFCs) are referred to in the statute as connection charges which are authorized at RCW 35.92.025. GFCs are assessed so that property owners “bear their equitable share of the cost of such system,” so it follows that such revenues should only go to capital costs of the system. The statute does not give examples of specific costs or delineate between staff versus contractor work. It should not matter if the work is done by city staff or by a contractor, so long as the work is for an eligible capital project of the utility that collected the GFCs since “[c]onnection charges collected shall be considered revenue of such system.” The city should make sure that it can demonstrate the work was for an eligible capital project through proper documentation.

Although local governments often hold public hearings and provide prior notice about utility rate increases, state law does not require published notice and a public hearing, unless the rate increase is for a solid waste utility. So, the new water and sewer rates could go into effect as soon as the ordinance goes into effect (which would be five days after publication of the ordinance per RCW 35A.12.130, unless a different effective date is listed in the ordinance).

In contrast, when a solid waste utility rate is increased, then there is a 45-day notice requirement in state law before the effective date of the increase. See RCW 35A.21.152 and RCW 35.21.157. These laws require that the public be notified at least 45 days in advance of a proposed effective date of the rate increase for a solid waste utility, either by mail or by publication once a week for two consecutive weeks.

MRSC provides a page on Utility Billing Procedures with guidance on, and examples of, utility billing procedures applicable to sewer, water, storm drainage, gas, electric, and solid waste. And here is an example of a rate change ordinance, Royal City Ordinance 22-06 (2023), which sets water rates to be charged in the city and includes an effective date five days after publication of the ordinance (note: Royal City is also a code city).

Note that there may be a local policy or procedure to follow for providing notice of rate increases to utility customers. It may also be good customer service practice to include advance notice of a rate increase with utility bills and also on an agency’s website. This would be a policy decision for city leadership to make.

Finally, while the new rate could go into effect five days after the ordinance is published, the city could not impose that rate on utility usage that occurs prior to the effective date. So, it would likely need to wait a billing cycle so that a customer is only being charged the increased rate for utility usage starting on the effective date of the rate change.

I recommend you consult with the city attorney, as well. Our guidance is general and not a substitute for the advice of the city’s legal counsel.

Generally, local governments are allowed to go back six years for underbilling. RCW 4.16.040(2) provides for a six-year statute of limitations for an account receivable, which is defined as “any obligation for payment incurred in the ordinary course of the claimant's business or profession, whether arising from one or more transactions and whether or not earned by performance.” MRSC published a blog post in 2021 covering this topic, A Quick Guide to Utility Account Overcharges, Undercharges, and the Statute of Limitations, which you may find helpful.

As stated on our Collection Practices for Delinquent Utility Accounts page, utilities may set up payment plans with customers, but they must charge a reasonable rate of interest. We recommend working with the customer to determine a reasonable schedule to repay the delinquency. You may also have a local policy that covers repayment plans. If so, that policy should be followed.

Chapter 70A.145 RCW, related to fire suppression facilities, does not specify who is responsible for hydrant maintenance. RCW 70A.145.040 says a city, town, or county may contract with purveyors for fire suppression facilities, services, or both. This can be in the form of a franchise agreement, an interlocal agreement, or an agreement under other contracting authority. RCW 70A.145.030 allows the water purveyor to pass the cost of fire suppression facilities and services to its customers.

One statute that agencies should consider is the “local government accountancy” Act (RCW 43.09.210) which requires that local governments receive the “true and full value” for all property and services transferred from one department or public entity to another. What is “true and full value” is determined by the legislative body.

Here are two examples of franchise agreements that address fire hydrant maintenance:

• Highline Water District/Normandy Park Water System Franchise (2017) – Hydrants are included as something the district is required to maintain.
• Shoreline/Seattle Public Utilities Public Water System Franchise (2017) – Hydrants are included.

Below are some code examples of processes for waiving sewer and/or water connection fees. Some jurisdictions use system development charges and connection fees interchangeably, so you’ll see a few instances of that below (e.g., Concrete and Yelm). You’ll also see this reflected in the examples on MRSC's Affordable Housing Techniques and Incentives page section on Reduction/Waiver of Fees.

• Concrete Municipal Code Sec. 13.10.035 – Low-income water and sewer system development charge waiver.
• Ephrata Municipal Code Sec. 13.04.112(g) – Water connection fee waiver for low-income housing.
• Langley Municipal Code Sec. 13.50.040 – Connection and permit issuance.
• Yelm Municipal Code Sec. 13.08.107 – System development charge and inspection fee waiver and deferral.

The statutes that authorize loans or waivers related to assisting low-income persons with utility charges and housing development include RCW 35.92.380, RCW 35.21.685, and RCW 35.21.305. And per this recent MRSC blog post, New Bills Address Utility Connection Charges, Service Disconnection for Non-Payment, a new bill allows city and town utilities to waive connection fees for certain organizations that provide affordable and emergency housing. All have low-income criteria because of the state constitution’s prohibition on gifts of public funds except for necessary assistance for the poor or infirm. If the low-income criteria are not met, then the connection charges need to be sufficient to cover the actual work performed by the utility.