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Tigard’s Drinking Water Dilemma: Price of Ownership
Tigard and Lake Oswego will join forces to upgrade and expand Lake Oswego’s existing water
facilities to serve customers in both communities. After searching for more than a
decade, Tigard will finally own a share of a drinking water supply. And customers
will save an estimated $2 million per year over other supply options.
But the partnership plan comes at a cost. In order to build the necessary water system
improvements by 2016 (when Tigard’s current supply contract with the City of Portland expires,)
customers in the Tigard Water Service Area (Tigard, King City, Durham, and Tigard Water District)
will see their water rates double over the next three years.
Tigard’s Share of the Project Costs
More than $100 million will be financed through the sale of water revenue bonds to be repaid
over 20 years. However, water rates must rise immediately. Why? Blame it on the topsy-turvy
world of municipal bond markets.
In the early stages of the current economic downturn, bond holders stopped lending to cities
altogether. When credit markets resumed, bond holders were more cautious than ever. That
extra caution means municipal borrowers like us, have higher initial costs than previously
because we are now required to:
- Set aside a reserve equal to one full year of debt service (principal and interest) payments.
- Collect more revenues than needed to pay ongoing costs plus debt service, assuring bond holders of adequate “coverage.”
- Adopt rate increases necessary to repay the debt before bonds are issued.
These requirements mean that any postponement of rate increases will result in delaying
the joint water supply project. Tigard’s contract with Portland, set to expire in 2016,
will need to be renewed—at a premium.
The Silver Lining
While the rate increases may seem painful, there’s a bit of good news. Interest rates on
highly-rated municipal bonds are very favorable. Construction bids are also competitive,
as contractors sharpen their pencils to stay in business. By breaking ground on the
partnership project now, we stand to save some money.
Delivery Cost Remains Less Than a Penny Per Gallon
Tigard’s 2012 water rate for a typical household is $42 per month. We understand current
economic conditions are challenging for local families and business. The city recognizes
that raising rates to this extent in the current economic climate is difficult for our
customers. However, these increases will allow Tigard water customers to own a source
of water, and the Tigard • Lake Oswego Water Partnership will save customers millions
of dollars over other ownership options. We think that this is a good investment.
By 2016, more than 57,000 residents of the Water Service Area will be receiving
high-quality drinking water from the Clackamas River. Tigard will no longer be
reliant on Portland for this essential service.
For more information, visit the Lake Oswego • Tigard Water Partnership web page at
www.lotigardwater.org.
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