Municipal Utilities.

Cities and towns (cities) are authorized to acquire and operate waterworks for the provision of water to the city.  The city may charge for the use of its water, but any rates that the city charges must be uniform for the same class of customers or service.  A city may not charge a rate that is less than the cost of providing the water and service to the class of customers served. 

Cities are also authorized to acquire and operate sewerage and solid waste handling facilities.  Rates for these services also have to be uniform for the same class of customers or service.

In setting customer or service classifications for water or sewerage, the city can consider:

• differences in the cost of services to customers and in maintenance and operation of the system;
• the location of the customers;
• the character of the service provided;
• the quantity or quality of the service supplied and the time of its use; and
• any other reasonable grounds for distinction. 

In setting water user classifications, cities can also consider water conservation goals and consider discouraging wasteful water usage practices.  In setting sewerage user classifications, cities can also take into account the user's public benefit nonprofit status.

Cities may also construct and operate gas and electrical utilities, and regulate the use, distribution, and price of those services. 

Connection Charges.

Aside from the rates that cities can charge for the use of water and sewerage services, cities can also charge connection fees to property owners as a condition of being able to connect to the water or sewerage system.  These connection fees can represent both the cost of the connection itself and a reasonable charge to ensure that the connecting property owners bear an equitable share of the cost of the system.  This equitable share may include interest charges from the date of construction of the system until its connection, or up to 10 years, whichever is less.  The interest rate charged may be the same interest rate that was applicable to the city at the time of the construction or of a major rehabilitation of the water system but may not exceed 10 percent per year; however, the aggregate amount of interest cannot exceed the equitable share of the cost of the system allocated to the connecting users.

Cities may also charge service connection fees to connect properties to gas and electrical utilities. 

Municipal Utility Connection Charge Waivers.

Cities may waive or delay utility service connection fees for water, sewer, solid waste, gas, and electric services operated by the city for people with low income under a program established by an ordinance.  

Cities may also waive electricity or gas connection charges for people with low income who purchase their property from a nonprofit organization.  Waivers for the same class of electric or gas service must be uniformly applied to all qualified properties. 

Waivers for Properties Owned by Certain Housing Providers.

Cities may also establish, by ordinance, a program to waive water or sewerage system connection charges for properties owned or developed by, or on the behalf of, a nonprofit organization, public development authority, housing authority, or local agency that provides emergency shelter, transitional housing, permanent supportive housing, or affordable housing.  Connection charges are defined as one-time capital and administrative charges authorized for connecting to water or sewerage systems that are imposed by a utility on a property owner for a new utility service and costs to physically connect a property to such service.  Any waived connection charges must be funded using general funds, grant dollars, or another identified revenue stream.  If a property that received a waiver is no longer eligible for a waiver, any waived connection charges become immediately due and payable as a condition of continued service.

For the purposes of this waiver, the following housing definitions apply:

• "Affordable housing" is residential housing for which the monthly costs, including non-telephone utilities, do not exceed 30 percent of the monthly income of a household whose income is:
  • 60 percent of the median household income for the county in which the household is located for rental housing; and 
  • 80 percent of the median household income for the county in which the household is located for owner-occupied housing. 
• "Emergency shelter" means a facility whose sole purpose is to provide temporary shelter for the homeless and does not require a lease or occupancy agreement. 
• "Permanent supportive housing" is subsidized, leased housing with no limit on the length of stay that prioritizes people at risk of, or currently experiencing, homelessness and who need support services to retain tenancy.  It uses lower barriers to entry than would be typical for other subsidized or unsubsidized rental housing, and is paired with on-site or off-site voluntary support services for persons living with complex and disabling behavioral health or physical health conditions.
• "Transitional housing" provides housing and supportive services to homeless persons or families for up to two years, with the goal of moving homeless persons and families into independent living. 

Connection Charge Waivers for Properties Owned by Certain Housing Providers.

In a county east of the crest of the Cascade Mountains with a population of greater than 500,000, municipal utilities are authorized to waive water or sewerage system connection charges without an explicit requirement to pay the exempted connection charges from general funds, grant dollars, or another identified revenue stream, through a waiver program established by ordinance for properties owned or developed by, or on behalf of, a nonprofit organization, housing authority, or local agency that provides emergency shelter, transitional housing, permanent supportive housing, or affordable housing, if the waiver is conditioned upon requiring the developer to record a covenant with the applicable county auditor or recording officer that:

• prohibits using the property for an unauthorized purpose;
• addresses price restrictions and household income limits; and
• provides that if the property is converted to an unauthorized use, the property owner must pay the applicable connection charges in effect at the time of the conversion.

(In support) This bill would allow low-income housing developers in Spokane to waive connection fees for low-income housing as long as the fees are paid back if the housing is turned into market-rate housing.  This bill originally applied to the whole state, but there were some concerns from municipal utilities outside of Spokane, so now the bill is focused on Spokane. 

Low-income housing is becoming more expensive due to rising insurance rates and construction costs, among other things.  This bill is one mechanism to make things less expensive for developers.  Spokane needs 100,000 new places for people to live in the next 20 years, and over 60 percent of those homes are needed for people making below 80 percent of the area median income.

Up until recently, waivers were allowed without a backfill requirement.  The backfill requirement was added to state law in 2023.  The City of Spokane has recently increased general facilities charges by over 500 percent in a two-year period, but the City was not allowed to waive these charges for low-income housing even though the city policymakers wanted to do so when they passed the increase.  This has created problems for affordable homeownership projects by adding tens of thousands of dollars in costs per apartment, or nearly $100,000 for a large apartment project.  This is a burden that will break a lot of affordable housing projects.  This bill is a focused solution that will help developers continue to build affordable housing stock.

(Opposed) None.

Senator Marcus Riccelli, prime sponsor; Ben Stuckart, Spokane Low Income Housing Consortium; and Dana LeRoy, Habitat for Humanity Spokane.