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November 21, 2019 | 4:52pm
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Record tax increase, utility rates and city budget increases expected – what you need to know

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FERNDALE, Wash. — 2020 is gearing up to mark significant financial changes in Ferndale. Work on the Thornton Street overpass, said to be the largest capital project ever undertaken by the City, begins. In addition, big upgrades and expansions will begin at the water and wastewater treatment plants in order to keep up with Ferndale’s high growth rate. To help pay for these upgrades and expansions, utility rates are getting a lot of attention and are expected to increase, something that should have occurred decades ago according to some and could make Ferndale too expensive to live in according to others. In addition, the City’s annual property tax levy for 2020 could see its biggest jump in recent memory. The draft 2020 budget will incorporate all this and more.

Below are summaries of what is being discussed and how it may impact both the City’s financial stability and your personal budget.

Property Tax Levy

During the October 16th Finance & Administration City Council Committee meeting, City Administrator Jori Burnett said “We have been living beneath our means for so long that Council will be asked to take 100% of our banked capacity on November 18th. Staff fully supports that.”

By “banked capacity,” Burnett was referring to a 1986 provision in state law. Prior to 1986, taxing districts that did not adopt the allowable increase each year had no ability to capture that tax revenue later. This resulted in a “use it or lose it” situation that led to always increasing by the allowed amount. This was seen as not fiscally responsible, so legislators added a provision that encourages cities not to increase the amount they collected by the lesser of the rate of inflation or 1 percent unless they needed it. The provision allowed cities and other taxing districts the ability to “bank” what they did not collect in case there was an unforeseen need in the future.

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If the city wanted to increase property taxes by more than the 1% allowed and they did not have sufficient banked capacity to cover the difference, a public vote approving the increase would be required.

The City of Ferndale has accumulated a total banked capacity of about $1.4 million but little of that is a result of foregoing 1% increases. A large portion is the result of when Ferndale was annexed into the WCFD7 service area in 2016. This meant the city did not need to continue paying WCFD7 on behalf of the citizens since the citizens would be taxed the same amount directly by the district. This reduced the total amount of property tax the city collected by $1,407,575. Since the city could have continued to tax the citizens at the higher level and used the revenue somewhere else, city staff consider that reduction in property tax collected as additional banked capacity.

It has been estimated that if the City were to impose a property tax levy in 2020 that included all of the banked capacity plus the allowed 1% for the year, the tax on a property with an assessed value of $300,000 would increase from the 2019 level of about $230 for the year to about $457, a 100% increase. This is intended to generate $2.6 million in annual property tax revenue – $1.4 million more than the $1.2 million the city collected in 2019.

In 2021 and future years, the city will be able to maintain the levy amount at the $2.6 million mark plus the allowed additional 1% if needed without requiring a vote of the people.

City Budget

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While the budget has yet to be made available to the public, there has been a lot of talk about it by city staff and councilmembers. City Council member Teresa Taylor noted during a recent Chamber of Commerce candidates forum in the Pioneer Pavilion Community Center that the proposed 2020 city budget is reportedly 40% bigger than the 2019 budget.

The larger budget will include the unusually large projects; The Wastewater Treatment & Water Treatment Plants expansion project and the Thornton Street overpass project. In both cases, the expenses are matched by revenues (e.g. loans, grants) related to the 2 very large capital projects. In the case of the treatment plants upgrades/expansions, loans have been received to cover a portion of the costs. These loans will be repaid using utility billings from the associated utility services. As a result, rate changes are being considered using information and recommendations provided by consultants hired by the City to conduct a utility rate study.

Utility Rates

During the October 16th Finance & Administration City Council Committee meeting, Mayor Jon Mutchler said it was about 6 years ago when the water and sewer rates were lowered. The consensus in the room seemed to be just the opposite needed to be done and much earlier.

Burnett said the need to increase rates to cover projects and maintenance should have been done as far back as the 1990s yet hasn’t been done. “This is something that must be done and it sucks,” he added.

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Given that Ferndale’s high rate of growth is the reason behind the treatment plants expansions and upgrades, the question was asked, can’t the city put a hold on further developments? Burnett said there is no such thing as a permanent moratorium on growth. They are done in 6-month intervals and can only be continued if progress is being made to resolve the reason for the moratorium. Growth is expected and the state mandates through the Growth Management Act that cities make plans to accommodate it.

Consultants hired by the city have compiled the costs associated with both operating the utilities and expected capital projects, such as the plant upgrade and expansion project. They also look at customer usage and identified different groups of customers based on their usage volumes. From this information they are recommending 3 different utility rates options to the City Council.

The single family residential water rate options include

  1. An across the board increase while maintaining the existing tiered rate structure
  2. Rates based on a new 4 tier structure based of average seasonal usage trends and a fixed price per gallon for commercial and multifamily residential customers
  3. Rates based on 4 usage tiers and multifamily residential and commercial customers will be billed same as with option #1

All options include a base rate for single family residential and commercial customers and a fixed price per gallon for commercial and multifamily residential customers.

The sewer rate options include

  1. An across the board increase while maintaining the existing tiered rate structure
  2. Single family residential customers will pay a fixed base fee only and multifamily residential and commercial customers will pay a fixed base rate and fixed per gallon use charge based on water usage.
  3. Single family residential customers will pay a fixed base fee plus a use fee calculated from their average winter water usage. Multifamily residential and commercial customers will pay a fixed base rate and fixed per gallon use charge based on water usage.

All the options are expected to build up cash balances so that future utility projects can be funded out of the balances instead of by making reactive decisions, like substantial rate increases, later.

Public Works Director Kevin Renz said during the meeting that the utility rates need to include not only the capital project components but also ongoing operations and maintenance. Each rate component (ie water, sewer) needs to cover that specific utility costs. Sewer rates are expected to mostly cover the wastewater treatment plant project while water rates would mostly cover bringing the new deep well online along with the expansion of the water treatment plant and increasing emergency storage and interties with other water systems. While the proposed rate increases will help, Renz said, there is still a possibility the city will have to borrow and employ rate increases again in the future.

Renz also noted the rates increases are expected to be increased in gradual steps over the next few years instead of making 1 much bigger increase the first year.

Going Forward

A public hearing has been scheduled during the November 4th City Council meeting regarding the City’s property tax levy decision for 2020.

Screencap from CityofFerndale.org
Screencap from CityofFerndale.org (October 25, 2019).

The City Council is expected to vote to approve the 2020 budget either late November or early December. They will also need to decide which of the recommended utility rate options to use beginning 2020 by this time as well.


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13 COMMENTS

  1. A BUNCH OF BULL CRAP….Please so NOT elect Jon Mutchler…. all we’re doing is lining the pockets of the of the Mayor!!!!!

  2. Time for a change people! We better listen or we are going to be taxed out of our homes. There needs to be input from the the citizens of Ferndale before these guys Bury us in taxes.

  3. I absolutly agree I have lived here my whole life and the wife and i are considering moving, we are taxed to death in this city and county its just crazy

  4. I’m glad I’m moving out of Ferndale. This town is a joke. There’s no infrastructure to support all the growth. A little rain and one road outta town is closed. Then if a train comes by, there’s only one trickle out of town way. If you want growth, leave the small farm town thinking behind.

    • Yup….similar to what happened in Santa Rosa County Florida between Pensacola and Panama City. over 10 years ago… realtors, developers and all their connecting buds pushed people to move into the area and boy did they. And the infrastructure was overwhelmed just as it is every day in Ferndale. Oh well…tough times, especially financially for Ferndale for at least a good 7 to 10 years now.

  5. Well, you all in Ferndale wanted to live there on the cheap..well guess what folks… 2020 is your year of reckoning. And with the extra property tax increase on a ridiculously bloated new high school project that shouldn’t even cost half of what was approved, yeah…living in Ferndale is about to become very hard..but hey..don’t worry..your southern Bellingham neighbors are about to pay out the nose more next year too!

  6. Another example of why Gov regulations are the #1 reason for increased housing costs. That includes higher property values and rental rates. Landlords have to increase the rates so they can make the same profit like before the tax hike. Etc.

  7. All this new growth needs to pay for its self! If you have been paying property taxes for 20 years you should get a break not an increase.

  8. This article sounds like a good reason to completely change our elected officials. I am retired and on a fixed income. I have faithfully paid my taxes to the city of Ferndale for 35 years. And now I’m told my ever increasing utility bills are going to increase more because of all the new growth. So instead of putting the financial burden for new growth on the developers making money on new residential buildings, the city of Ferndale is going to put it on the citizens who have faithfully paid taxes for many years. This is wrong and unfair.

  9. I do not understand why our city administrator does not do a little research before making the statement that rates on sewer should had been increased in the 90’s. A little research would have showed a 50% increase in rates in 1998. Storm water fees started at $4.00 and now are $30.00. We were told that staying with the PUD was going to be to expensive, so we went with wells. Now we are being told that we need rate increases to pay for wells and take care of the brackish water coming from those wells. Calling the money that was being paid to the Fire District, banked capacity is a slap in the face to the voters of the city. Voters are going are going pay taxes to the Fire District and then again to the city. where it was only to the city before. The utility rate schedule only shows present residents paying for water and sewer expansion, there is no mention of new development paying anything towards the cost of expansion. I see nothing where the city is going to do any budget cutting only go for more money from the residents. The city administrator also failed to mention that the 6 month moratorium on building can be renewed indefinitely.

  10. So developers will get a tax holiday so the rest of us can pick up the tab for water & sewer improvements. How thoughtful of our city council.

  11. Oh boy, I’m really stoked, another big tax hike. I can’t wait. Don’t politicians just love spending OUR money???

Comments are closed.