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Home My WebLink About09/16/2025 - Work Study - Packet, Revised171. Meeting Location: Contact us: Council Phone (360) portor hard 4407 216 Prospect Street cityhall@portorchardwa.gov Port Orchard, WA 98366 www.portorchardwa.gov REVISED 9/15/2025 City Council Work Study Session Tuesday, September 16, 2025 6:30 PM Pursuant to the Open Public Meetings Act, Chapter 42.30 RCW, the City Council is conducting its public meeting in a hybrid format with options for in -person attendance in the Council Chambers at City Hall or remote viewing and participation via Zoom (link below). The meeting is streamed live on the City's YouTube channel, click here. Remote Access Link: https://us02web. zoom. us/j/87978394172 Zoom Meeting ID: 879 7839 4172 Zoom Call -In: 1 253 215 8782 Guiding Principles Are we raising the bar in all of our actions? Are we honoring the past, but not living in the past? Are we building positive connections with our community and outside partners? Is the decision -making process building a diverse, equitable, and inclusive community? 1. Call to Order A. Pledge of Allegiance 2. Discussion Items A. Schedule for the 2025-2026 Mid -Biennial Review (Crocker) B. General Sewer Plan Presentation (Ryan, Crocker) C. Multifamily Tax Exemption (MFTE) (Bond) Estimated Time: 40 Minutes 3. Good of the Order 4. Adjournment ADA Requirements In compliance with the American with Disabilities Act, if you need accommodations to participate in this meeting, please contact the City Clerk's office at (360) 876-4407. Notification at least 48 hours in advance of meeting will enable the City September 16, 2025 Meeting Agenda to make arrangements to assure accessibility to this meeting. REMINDER: Please silence all electronic devices while City Council is in session. 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September 16, 2025 Meeting Agenda 2 rfl City of Port Orchard ORCHARD 216 Prospect Street, Port Orchard, WA 98366 (360) 876-4407 • FAX (360) 895-9029 Agenda Staff Report Discussion Items: Schedule for the 2025-2026 Mid -Biennial Review (Crocker) Meeting Date: September 16, 2025 Prepared By: Noah Crocker, M.B.A., Finance Director Presenter: Noah Crocker, M.B.A., Finance Director Summary and Background: Discuss the proposed timeline for the 2025-2026 Mid -Biennial Review Process Relationship to Comprenhensive Plan: TBD Recommendation: Discussion Alternatives: TBD Attachments: Mid -Biennial Budget Review Schedule 2025-2026.pdf 3 ORCHARD Mid -Biennial Budget Review Schedule • Departments provided Budget Status Report • Finance Director reviews Budget Status Report with Mayor • Departments are consulted on possible modifications to the budget • Potential Department Director interview on modifications • October 7-10, 2025 Council Finance Committee initial review of Status Report • October 14, 2025 Public Hearing on Revenue Sources leading to setting of 2026 Property Tax Levy Collection • October 21, 2025 Work Study Session Mid -Biennial Review modification recommendations • October 21, 2025 Public Hearing on modifications to the Biennial Budget shall be advertised at least once and shall be held no later than the first Monday in December and may be continued from time to time. • October 28, 2025 Ordinance setting 2026 Property Tax Levy Collection • October 28, 2025 Ordinance Adopting Budget Amendments for 2025-02026 • At such hearing, the Council may consider a proposed Ordinance to carry out any modification, subject to the other provisions on RCW 35.34. NOVEMB DECEMBER • Finance Director records modifications to the Biennial Budget Ong City of Port Orchard ORCHARD 216 Prospect Street, Port Orchard, WA 98366 1.. (360) 876-4407 • FAX (360) 895-9029 Agenda Staff Report Discussion Items: General Sewer Plan Presentation (Ryan, Crocker) Meeting Date: September 16, 2025 Prepared By: Sayre Thompson, PW Procurement Specialist Presenter: Denis Ryan, CPWP-M, CPRP, Public Works Director Summary and Background: The City of Port Orchard recently completed a Sewer Rate Study to guide planning through 2030. The study reviewed how much revenue is needed to operate and maintain the sewer system, and proposed a new rate structure that's simpler and more equitable. To support rising costs and major infrastructure projects —like pump station replacements and basin improvements —the City will need to increase sewer revenue by about 3.5% annually. These upgrades will be funded through a mix of rate revenue, developer fees, grants, and low -interest loans. The proposed changes aim to keep rates fair, transparent, and financially sustainable while ensuring reliable sewer service for the community. Relationship to Comprenhensive Plan: 8 - Utilities Recommendation: Staff recommends that the City Council review the proposed sewer rate structure and consider its adoption, taking into account community input, financial impacts, and long-term utility planning. Alternatives: The City could maintain the current rate structure, but doing so may result in revenue shortfalls and continued inequities in how sewer costs are distributed. Attachments: Port Orchard Sewer Rates Draft Report v8 (with Appendix).pdf 20250610 Port Orchard Sewer Rates v10.pptx COPO General Sewer Plan - DRAFT - 07-02-2025_revised_clean.pdf • j ` _� •: . - f • ♦ ' ";` ovvman company 4 • 3 +� ``� it s� , �`1� O I� W ❖>FCS a Bowman company August 6, 2025 Noah Crocker, Finance Director City of Port Orchard 216 Prospect Street Port Orchard, WA 98366 Re: DRAFT Sewer Utility: Revenue Requirement, Cost -of -Service Analysis, and Rate Design Dear Mr. Crocker: FCS, a Bowman company, is pleased to submit this report summarizing the results of the revenue requirement, cost -of -service, and rate design study for the City's sewer utility. We want to thank you and City staff for your assistance and participation in data collection, analysis review, and discussion of key policy topics. It has been a pleasure to work with you and other City staff on this effort. Please let us know if you have any questions or need additional information. Tage Aaker, the study's project manager, can be reached at (425) 615- 6487 or Tage.Aaker@bowman.com. Sincerely, John Ghilarducci Principal Tage Aaker Senior Project Manager Zech Hazel Assistant Project Manager •:> FCS fcsgroup.com I bowman.com City of Port Orchard Sewer Rate Study Contents August 2025 page ii Exhibits................................................................................................................................................................................................................................ iii 1. Introduction...................................................................................................................................................................................................................1 Background...................................................................................................................................................................................................................1 RevenueRequirement Forecast............................................................................................................................................................................1 Costof Service Analysis............................................................................................................................................................................................2 RateDesign...................................................................................................................................................................................................................2 2. Fiscal Policies.................................................................................................................................................................................................................3 OperatingReserve — Fund 431..............................................................................................................................................................................3 CapitalReserve — Fund 433....................................................................................................................................................................................3 AdoptedCity Fiscal Policies....................................................................................................................................................................................4 StabilizationReserve — Fund 432.........................................................................................................................................................................4 DebtManagement.....................................................................................................................................................................................................4 Summaryof Fiscal Policies......................................................................................................................................................................................6 3. Revenue Requirement...............................................................................................................................................................................................7 FundBalances.............................................................................................................................................................................................................. 7 Economicand Inflation Factors.............................................................................................................................................................................7 Operating Revenues and Expenses.....................................................................................................................................................................8 CapitalImprovement Program(CIP)...................................................................................................................................................................8 OverallRevenue Requirement Forecast..........................................................................................................................................................10 4. Cost -of -Service Analysis.........................................................................................................................................................................................12 Background.................................................................................................................................................................................................................12 FunctionalCost Allocation....................................................................................................................................................................................12 CustomerClass Distinctions.................................................................................................................................................................................13 CostAllocation...........................................................................................................................................................................................................14 5. Rate Design..................................................................................................................................................................................................................15 Background.................................................................................................................................................................................................................15 RateDesign.................................................................................................................................................................................................................15 6. Summary.......................................................................................................................................................................................................................16 UpdatingThis Study's Findings...........................................................................................................................................................................16 RateComparisons....................................................................................................................................................................................................16 AppendixA: Existing Rate Schedule.......................................................................................................................................................................17 •:;>FCS ,,. �,a fcsgroup.com bowman.com 8 City of Port Orchard Sewer Rate Study Exhibits August 2025 page iii Exhibit 1. Revenue Requirement Diagram........................................................................................................................................1 Exhibit 2. Cost -of -Service Analysis Overview...................................................................................................................................2 Exhibit3. Summary of Fiscal Policies..................................................................................................................................................6 Exhibit4. Allocation of Utility Cash......................................................................................................................................................7 Exhibit 5. Economic and Inflation Factors.........................................................................................................................................7 Exhibit 6. Capital Improvement Program (2025-2030)................................................................................................................9 Exhibit 7. Capital Funding (2025-2030)..............................................................................................................................................9 Exhibit 8. Annual Revenue Requirement Forecast (2025-2030).............................................................................................10 Exhibit 9. Fund Balance Forecast (2025-2030)..............................................................................................................................11 Exhibit 10. Functional Allocation (2026).............................................................................................................................................13 Exhibit 11. Customer Statistics by Class (2026)...............................................................................................................................13 Exhibit 12. Cost -of -Service Analysis Results (2026).......................................................................................................................14 Exhibit13. Rate Design (2026)...............................................................................................................................................................15 Exhibit 14. Calculated Bi-Monthly Rates per ERU (2026-2030).................................................................................................15 Exhibit 15. Jurisdictional Survey — Bi-Monthly Single-family Rates (10 CCF of Sewer Flow) .........................................16 •:;>FCS .• - ,Y ksgroup.com I bowman.com 9 1. Introduction Background The City of Port Orchard (City) is located in Kitsap County and provides sewer collection services to most of the residents of Port Orchard, with treatment services provided by the West Sound Utility District (WSUD). The City charges bi-monthly sewer rates to cover both collection and treatment costs. The City along with WSUD jointly own the South Kitsap Water Reclamation Facility (SKWRF), which provides treatment services to customers in both jurisdictions. The Wastewater Facilities Management Interlocal Agreement (the Joint Agreement) describes the operation of the SKWRF and the division of operating and capital costs. Under the Joint Agreement, each jurisdiction splits the operating costs of the SKWRF based on the number of equivalent residential units (ERUs) in each jurisdiction, where one ERU is equal to 180 gpd of sewer flow. As of 2024, the City was allocated about 49 percent of the total ERUs and WSUD was allocated 51 percent. In 2023, the City contracted with FCS, a Bowman Company (FCS), to perform a rate study for its sewer utility. This study includes the elements that are outlined in the sections below and documented in the rest of the report. Section 6 summarizes the rate study results and outlines the City's implementation steps. Revenue Requirement Forecast The first purpose of this rate study is to develop a funding plan ("revenue requirement") for the years 2025 through 2030, a period that aligns with the capital improvement program. The revenue requirement analysis identifies the total revenue needed to fully fund the utility on a standalone basis considering operating and maintenance expenditures, fiscal policy achievement, and the capital project needs of the utility. Exhibit 1 outlines the key inputs in the revenue requirement analysis. Exhibit 1. Revenue Requirement Diagram Fiscal Policies Capital I I I Economic Improvement I Assumptions Program (CIP) Revenue Requirement Capital Funding Operating Costs Section 2 discusses fiscal policies that inform the revenue requirement analysis, and Section 3 describes the revenue requirement analysis. The initial results of the analysis are the recommended percentage rate adjustments (as applied to the current rate structure) needed to meet the obligations of the utility. The cost -of - service and rate design tasks described below will provide an alternative rate structure for the City's consideration that increases the fairness of how rates are charged to customers, while generating sufficient revenue and meeting other City policy objectives. :i'FCS fcsgroup.com I bowman.com 10 City of Port Orchard Sewer Rate Study Cost of Service Analysis August 2025 page 2 The purpose of a cost -of -service analysis (COSA) is to provide a rational basis for distributing the full costs of a utility (i.e., revenue requirement) to each customer class in proportion to the demands they place on the system. Detailed cost allocations, along with appropriate customer -class designations, help to increase the degree of equity that can be achieved in the resulting rate structure. The cost categories documented in this report include the following: Customer Costs — The costs related to providing customer billing and related services. Flow Costs — The costs associated with conveying sewer flow to the SKWRF, which include the costs of boosting sewer flow, maintaining sewer lines, and other such costs. Treatment Costs — The costs of operating the SKWRF to process sewer flow as outlined in the Joint Agreement. Two customer classes were analyzed: Residential and Non -Residential. The Residential class includes all single- family and multi -family housing units, and the Non -Residential class includes every other customer. These classes match those used by the City when determining the number of ERUs in its collection system for the purposes of dividing treatment costs under the Joint Agreement; each Residential dwelling unit is equal to one ERU, and each Non -Residential customer is assigned ERUs based on its winter average flow. Exhibit 2 below outlines the approach taken in this report. Exhibit 2. Cost -of -Service Analysis Overview Revenue Requirement 1 Allocate Costs by Function Customer Flow Treatment Allocate Costs to Customer Classes Residential Non -Residential The results of the COSA are documented in Section 4. Rate Design The primary goal of rate design is to ensure the rate structure generates sufficient revenue aligned with the cost of providing service. While guided by cost -of -service results, the rates also reflect the City's policy objectives. This report focuses on simplifying the rate structure for Non -Residential customers, given the current complexity of customer classes — the City currently has approximately twenty non-residential rate classes. The supporting analysis is provided in Section 5. •:;>FCS .•- tea, fcsgroup.com I bowman.com 11 City of Port Orchard Sewer Rate Study 2. Fiscal Policies August 2025 page 3 The basic framework for evaluating utility revenue needs includes sound fiscal policies. Several policy topics are important to consider further as part of managing the finances of the City, including operating reserves, capital reserves, and debt management. The City makes use of four different reserves: operating, stabilization, capital, and debt service. When evaluating reserve levels and objectives, it is important to recognize that the value of reserves lies in their potential use. A reserve strategy that deliberately avoids any use of reserves negates their purpose. The fluctuation of reserve levels may indicate that the system is working, while the lack of variation over many years strongly suggests that the reserves are, in fact, unnecessary. Operating Reserve — Fund 431 An operating reserve is designed to provide a liquidity cushion; it protects the utility from the risk of short-term variation in the timing of revenue collection or payment of expenses. Industry practice for utility operating reserves typically ranges from 30 days (8 percent) to 120 days (33 percent) of operating expenses, with the lower end more appropriate for utilities with stable revenue streams and the higher end of the range more appropriate for utilities with significant seasonal or consumption -based fluctuations. Recommended Policy: Achieve a year-end balance target of at least 60 days (16 percent) of total annual operating expenditures. This equates to $924,000 for the 2025 budget. Capital Reserve — Fund 433 This reserve provides a source of emergency funding for unexpected asset failures or other unanticipated capital needs. This capital reserve policy is not intended to guard against catastrophic system failure or extreme acts of nature. Minimum balances for capital reserves are often based on a percentage (commonly 1 percent to 2 percent) of the original cost of utility fixed assets or an amount determined sufficient to fund an emergency capital project or equipment failure. Capital reserves larger than these amounts may be prudent if the City is saving for future capital projects that cannot be funded with same -year rate revenues. Recommended Policy: Achieve a year-end target of at least 2 percent of the original cost of fixed assets. In 2025, the City had almost $61 million in sewer assets plus construction in progress, which results in a $1.2 million capital reserve target. Capital reserves larger than this may be prudent if the City is saving in advance for future capital projects. This target is projected to grow over time as the City executes its capital improvement program. •:;>FCS .• - 'Y fcsgroup.com I bowman.com 12 City of Port Orchard Sewer Rate Study Adopted City Fiscal Policies August 2025 page 4 Per Resolution No. 053-20, the City's sewer operating reserve (Fund 431) balance must be sufficient to meet roughly two months of recurring revenue, with a goal to work towards a maximum of three months of revenues. The City does not have an adopted policy regarding its capital reserve (Fund 433). Calculating a reserve based on revenue in the rate forecast model can create a circular type of argument, so it was not modeled that way. As previously noted, operating reserves are typically based on a certain number of days of operating expenditures. The American Water Works Association (AWWA) published a 2018 Cash Reserve Policy Guidelines, and it cites recommended reserve levels from the Water Environment Federation, International City/County Management Association, and the Government Finance Officers Association, all of which reference a certain number of days of operating expenses. Capital reserves are typically based on a percentage of fixed assets or an amount sufficient to respond to an emergency capital project. To make sure the rate plan met the City's adopted policy, FCS tested the combined operating reserve (60 days of operating expenses) plus the capital reserve (2 percent of fixed assets) to ensure that it was equal to or greater than 90 days of revenues. In all years of the study period the modeled reserve targets met or exceeded the City's adopted fiscal policies. Stabilization Reserve — Fund 432 The City maintains stabilization reserves for each of its water, sewer, and stormwater utilities. Per the City's adopted fiscal policies, this reserve "shall be used if all efforts have been exhausted to fund a qualifying event and no reasonable budget adjustments are available to continue to provide essential services to the public." The policy notes qualifying events as follows: • The State of Washington or the Federal government formally declares a disaster or emergency. • A natural or urgent event that jeopardizes public safety, impedes commerce, or threatens additional damage to City infrastructure. • Unforeseen events or situations outside of the scope of contingency planning or planned normal course of government operations. • An act of war, terrorism, or declaration of Martial law. Recommended Policy: Per Resolution No. 053-20, the stabilization reserve should target having 90 days (25 percent) of annual expenditures. Per discussions with City staff, this reserve is fully funded through the end of 2030. The forecast did not assume these funds were available for use, nor did the forecast add any funds to this reserve throughout the study period. Debt Management The City currently has five outstanding sewer utility -related loans. For the management of current as well as potential future debt, some considerations are provided below. Types of Debt Considered as Part of this Forecast For utilities, there are two primary sources of debt financing: State or federal loans and market debt financing. •:;>FCS .• - ,Y fcsgroup.com I bowman.com 13 City of Port Orchard Sewer Rate Study State -Administered Loan Programs August 2025 page 5 State -administered loans (including federal loans administered by the State) are generally preferable to market debt financing. The interest rate is generally lower for State loans, and the loan terms often offer more flexibility in administering the debt. For instance, most State loan programs do not include a requirement that the utility maintain a certain minimum level of debt service coverage. Market Debt Financing General Obligation Bonds General Obligation (G.O.) bonds are voter -approved bonds secured by the full faith and credit of the issuing agency, committing all available tax and revenue resources to debt repayment. With this high level of commitment, G.O. bonds have relatively low interest rates. General Obligation taxing authority can be sought as a backup pledge to reduce the interest rate of utility debt, even if the actual source of repayment is intended to be utility rates. However, the use of G.O. bond financing is limited in relation to assessed valuation, and G.O. bonds must be authorized by 60 percent of the voters. For these reasons, G.O. bonds are not often used for utility capital projects. Limited Tax General Obligation (LTGO) bonds can also be issued up to a statutory ceiling without a vote of the people. In Washington, they are sometimes referred to as "council manic" bonds. Unlike G.O. bonds, LTGO debt does not authorize additional property taxes; instead, it must be repaid within the City's existing taxing authority. Usually there are competing demands for that funding within a City, and for that reason, LTGO debt is not often used for utility capital projects either. Revenue Bonds Revenue bonds are secured by the revenues of the issuing utility; the debt obligation does not extend to the City's other revenue sources. With this limited commitment, revenue bonds usually bear higher interest rates than G.O. bonds. Revenue bonds typically require the achievement of minimum debt service coverage each year. Revenue bonds can be issued in Washington without a public vote. There is no limit, except the practical limit of the utility's ability to generate revenue to repay the debt and meet debt service coverage each year. Forecast Assumption: The forecast assumes that the City will issue revenue bonds when debt is needed. While low-cost state loans are typically preferred, revenue bonds are conservatively assumed as they require the forecast to cover higher interest rates and debt service coverage requirements. If the City secures low-cost state loans, that will be a positive result that will not negatively impact the forecast, while the inverse could have a negative impact on the forecast (relying on state loans but ultimately needing to rely on revenue bonds instead which have higher interest and debt service coverage requirements). Debt Service / Reserve — Fund 434 A debt reserve is most often required as a condition of bond issuance, though some state loan programs also require a reserve. The reserve intends to protect bondholders (or the agency issuing loans) from the risk of the borrower defaulting on their payments and is most often linked to either average annual debt service or maximum annual debt service. •:;>FCS .• - ,Y fcsgroup.com I bowman.com 14 City of Port Orchard August 2025 Sewer Rate Study page 6 Recommended Policy: The policy should be dictated by terms outlined in contracts for debt obligations. Debt Service Coverage Debt service coverage is typically a requirement associated with revenue bonds and some state loans, and it is an important benchmark to measure the riskiness of the sewer utility's capital funding plans. Coverage is most easily understood as a factor applied to annual debt service. In such a case, if it issues revenue bonds, the utility agrees to collect enough revenue to meet operating expenses and not only pay debt service but to collect an additional factor (often 25 percent) above bonded debt service. The extra revenue is a "cushion" that makes bondholders more confident that debt service will be paid on time. Recommended Policy: While a factor of 1.25 is a common legal minimum coverage requirement for revenue bonds, we recommend a more conservative internal policy coverage target of at least 1.50 to 2.00 for revenue bond debt. We are not currently aware of any debt service coverage requirements related to the City's existing sewer utility -related loans. Summary of Fiscal Policies Exhibit 3 provides a summary of the recommended fiscal policies for the City. Exhibit 3. Summary of Fiscal Policies Achieve a year-end minimum balance target of 60 days (16 percent) of total annual Operating Reserve operating expenditures. This target increases as the City's operating costs increase. Capital Reserve Achieve a year-end target of at least 2 percent of the original cost of fixed assets. Compare the combined operating plus capital targets against the City's adopted Operating plus Capital policy of three months of recurring revenues. While a factor of 1.25 is a common legal minimum coverage for revenue bonds, Debt Service Coverage achieve an internal policy coverage target of at least 1.50 to 2.00+ when possible. •:;>FCS .• - ,Y fcsgroup.com I bowman.com 15 City of Port Orchard Sewer Rate Study 3. Revenue Requirement August 2025 page 7 This section summarizes the results of the revenue requirement analysis for 2025 through 2030. As noted previously, the revenue requirement analysis identifies the total revenue needed to fully fund the utility on a standalone basis, considering all current financial obligations. Those financial obligations include fiscal policy achievement, operating costs, debt service costs, and capital costs. Resources to meet those obligations include fund balances, rate revenues, planned debt issuances, and other funding sources. The result of this analysis is a series of recommended annual rate adjustments to satisfy the revenue requirement. Fund Balances A summary of each fund as of the beginning of 2025 is provided in Exhibit 4 below. These balances are projected into future years using the forecasted revenues and expenses. The theory behind the minimum target balances is discussed in more detail in Section 2. Exhibit 4. Allocation of Utility Cash Operating Reserve $8,750,000 60-90 days of budgeted expenses (about $1.1 million) Stabilization Reserve 1,700,000 90 days of budgeted revenues (about $1.6 million) Capital Reserve 10,190,000 2 percent of the original cost of plant assets (about $1.2 million) Debt Reserve 1,530,000 One year of debt service payments (about $923,000) Total Fund Balance $22,180,000 The combined totals from above (about $4.8 million) Economic and Inflation Factors The study makes several assumptions about economic inflation factors, account growth, taxes on utility revenues, and interest returns on the City's fund balances. These are outlined in Exhibit 5 below. Exhibit 5. Economic and Inflation Factors 10 -year average of the Consumer Price Index for Urban Customers (West General Cost Inflation 3.00% Region) Construction Cost 3 .50% 10 -year average of the Engineering News -Record's 20 -City Avg. Construction Inflation Cost Index •:;>FCS .• - ,Y fcsgroup.com I bowman.com 16 City of Port Orchard Sewer Rate Study Labor Cost Inflation 3.00% Discussions with the City Benefit Cost Inflation 5.00% Discussions with the City Account Growth Investment Interest August 2025 page 8 1.25% Kitsap County Countywide Planning Policies The Local Government Investment Pool rate for Washington. Forecasted to 4.45% decrease. Operating Revenues and Expenses Annual operating revenues and expenses are based on the City's 2025 and 2026 budgets. Those amounts are then escalated for future years using the factors described in Exhibit 5 above. The exceptions are sewer rate revenues, which were estimated using the City's customer billing data, as well as treatment costs. As described in Section 1, the Joint Agreement splits sewer treatment costs between each jurisdiction (the City and WSUD) based on their share of the total ERUs in both jurisdictions. So, in addition to modelling an increase in the cost of treatment based on the general cost inflation factor described in Exhibit 5, a forecast of the number of ERUs in each jurisdiction was also completed to determine how cost recovery might shift between the City and WSUD. The City's account growth is described in Exhibit 5. A growth rate of 1.75 percent was used for WSUD, and so it is forecasted that WSUD will slowly begin to take on more of the treatment costs. In 2025 the City is expecting to collect $7.3 million in operating revenues. Of this total, about $6.4 million is expected to come from ongoing utility rates, and the remainder is from miscellaneous fees, interest on the City's fund balances, and capital facilities charges (CFCs) used to pay for the City's existing debt. The City is expecting to spend $5.6 million on operating costs, of which $2.0 million is for sewer treatment costs. The utility has five existing debt obligations — four of which are low interest loans related to sewer utility construction projects, with interest rates ranging from 0.69 percent up to 2.60 percent. It also has one obligation it shares with other utilities for a City Hall remodel. The total debt service for these obligations is about $923,000 in 2025, though it will decrease to $749,000 in 2030 as some of the debt service is retired. Capital Improvement Program (CIP) The City, along with Consor (the engineering firm preparing the City's sewer master plan), prepared a CIP for the planning period (2025-2030). The average annual cost of this plan in 2024 dollars is $9.0 million. Inflation to the year of construction for each project was estimated using the construction cost inflation factor described above. The annual CIP cost by fiscal year is shown in Exhibit 6 below, and totals $60.3 million. •:;>FCS .• - ,Y fcsgroup.com I bowman.com 17 City of Port Orchard Sewer Rate Study Exhibit 6. Capital Improvement Program (2025-2030) in Escalated Dollars N $25 c g $20 2 $15 $10 $5 $- August 2025 page 9 The City will use several funding sources to cover its capital needs. Between the low-cost loans the City has secured, and the revenue bonds planned in this revenue requirement, the City will fund about 26 percent of its capital plan through debt. As much as 46 percent of the plan will be funded by outside sources, such as agreements with the Washington Department of Transportation (WSDOT), Kitsap Transit (Kitsap), developer agreements, and capital facilities charges (CFCs). The remaining 30 percent of the capital plan will be funded by utility rates and existing fund balances. These capital funding sources are summarized in Exhibit 7 below. CFCs, $5,000,000, 8% Exhibit 7. Capital Funding (2025-2030) Low -Cost Loans, $3,600,000, 6% r r Agreements, $9,800,000, 16% Revenue Bonds, $11,900,000, 20% WSDOT/Kitsap, $12,000,000, 20% Grants, $200,000, 0% •:;>FCS • .".Y fcsgroup.com I bowman.com 18 City of Port Orchard Sewer Rate Study Overall Revenue Requirement Forecast August 2025 page 10 Exhibit 8 illustrates the projected revenue requirements through 2030. The columns depict various utility costs, including operating expenses, debt service, and annual rate revenue allocated for capital projects. The solid black line indicates revenue at current rates, while the dashed line represents revenue with rate increases. • Solid black line: Revenue at existing rates (including rate revenue and non -rate revenues). Rate revenue (at current rates) is expected to be roughly $6.4 million in 2025 and increases with the account growth rate described in Exhibit 5. Non -rate operating revenues are about $852,000, about half of which is capital facility charge revenue used to pay for debt. Dashed black line: Revenues with rate increases. Rate revenue must increase to allow the utility to fund the operating costs and capital projects. These rate increases are forecasted to be 3.50 percent from 2026 through 2030. • [giiii• : Cash operating expenses. Operating expenses begin at $5.6 million based on the 2025 budget. The 2026 budget ($6.1 million) and inflation factors described in Exhibit 5 provide the forecast for future years. • : Debt service. Existing debt service is approximately $923,000 annually from 2025 through 2029 before dropping to $750,000 from there on. New debt service includes revenue bond issuances for capital: $10.0 million in 2028 and $1.9 million in 2030. Annual debt service is expected to start at $822,000 in 2028 and increase to $979,000 in 2030. • � : Rate -funded capital. Rate -funded capital totals $1.4 million from 2025 through 2027. This amount does not include funding from the City's existing fund balances, which are used to fill funding gaps as they arise. • Data labels: Annual system -wide rate increase and the bi-monthly bill for a single-family residence. V, $9 o $8 $7 2 $6 $5 $4 $3 $2 $1 $0 Exhibit 8. Annual Revenue Requirement Forecast (2025-2030) 3.50% 3.50% 3.50% 3.50% 3.50% 4 ! RA ^ $187 05 $193.59 Operating & Maintenance Debt Service Rate Funded Capital Revenue @ 2025 Rates — — Revenue with Increases •:;>FCS .• - ,Y fcsgroup.com I bowman.com 19 City of Port Orchard August 2025 Sewer Rate Study page 11 Fund Balance Forecast As described in Section 1, the combined Operating and Capital Reserves ending fund balance must be greater than 90 days of operating revenues. Exhibit 9 below provides a projection of the combined fund balance based on the revenues and expenses described in the Overall Revenue Requirement Forecast. As shown, the combined fund balance is above the target throughout the planning period. Exhibit 9. Fund Balance Forecast (2025-2030) , $14 $12.53 o $12 $10 $8 $6 $4 $2 $- tih ,LO $12.50 O,LO QrLll OT4> O,LO OHO T T ti T ti Combined Operating and Capital Reserve Ending Balance —Target (90 Days of Revenues) >FCS fcsgroup.com l bowman.com 20 City of Port Orchard Sewer Rate Study 4. Cost -of -Service Analysis Background August 2025 page 12 This section summarizes the results of the cost -of -service analysis. The test year for this analysis was 2026, as that is the first year the City could raise rates under the plan proposed in Section 3. The purpose of a cost -of -service analysis is to provide a rational basis for distributing the full costs of the utility service to each class of customers in proportion to the demands they place on the system. Detailed cost allocations, along with appropriate customer class designations, help to sharpen the degree of proportionality that can be achieved in the resulting rate structure design. The key analytical steps of the cost -of -service analysis are as follows: • Functional Cost Allocation. Establishes a rational relationship between functions (activities) and costs. Each line item of the City's budget is allocated to each function (i.e., customer, flow, and treatment) based on how those expenses serve the system. For example, utility billing costs would be attributed all to the customer function, while the public works director might have some costs allocated across multiple functions. • Customer Class Distinctions. Identify the customer classes that will be evaluated as part of the study and the relevant customer statistics used for cost allocation. It is appropriate to group customers that exhibit similar usage characteristics and service requirements. The rate study used just two classes: Residential and Non -Residential. • Cost Allocation. Allocates the costs from the functional cost allocation to different customer classes based on their unique demands for service as defined through the cost classification process. For example, the cost of billing the utility's customers is based on the number of customer accounts, while the cost of providing collection services is based on contributions to sewer flow. The results identify shifts in cost recovery by customer class from that experienced under the existing rate structure. Functional Cost Allocation The first step in the cost -of -service analysis is to define the functions or activities that are supported by the sewer utility. As described in Section I, the functions of service are customer, flow, and treatment. Test -year (2026) revenue requirements for each accounting line item are assigned to the functions of service. As the City primarily operates as a sewer collection utility, most of the City's line items are related to the Flow function. Some billing -related line items are allocated to the Customer function. As described in previous sections, the payments for the Joint Agreement are entirely related to the treatment of sewer flow, and so all $2.0 million of that cost is allocated to the Treatment function. Using direct assignments to the functions of service for each of the City's accounting line items, the full functional allocation of the utility's costs can be calculated. Exhibit 10 below summarizes the functional allocation. As shown, flow costs are the largest share of the utility's costs at 65.36 percent, followed by treatment costs at 31.79 percent, and finally customer costs at 2.85 percent. •:;>FCS .• - ,Y fcsgroup.com I bowman.com 21 City of Port Orchard Sewer Rate Study Exhibit 10. Functional Allocation (2026) Customer $190,000 2.85% Flow $4,440,000 65.36% Treatment $2,140,000 31.79% Total $6,730,000 100.00% August 2025 page 13 Customer Class Distinctions A class of service is a grouping of utility customers with similar characteristics who are served at similar costs. Classes of service can be defined based on several factors such as sewer flow patterns, service requirements, geography, or other factors. The classes evaluated as part of the sewer rate study include just two: Residential and Non -Residential. These customer statistics are used to allocate costs to each class: • Number of Accounts. Used to allocate Customer costs. • Water usage (in thousands of gallons — kgal). Used to allocate Flow costs. An annualized winter - average usage is used for the Residential class to remove water usage related to irrigation. Total annual usage is used for Non -Residential. • Equivalent residential units (ERUs). Used to allocate Treatment costs, ERUs are the defined metric by which Treatment costs are shared with WSUD under the Joint Agreement. One ERU is equal to 180 gallons per day of water use. Account and water usage statistics are based on customer billing statistics from 2022, with four years of estimated account growth included as described in Exhibit 5. ERU statistics are taken from the 2024 count of ERUs done for the Joint Agreement, with two years of estimated account growth. Exhibit 11 summarizes the forecasted customer stats for each customer class in 2026. Exhibit 11. Customer Statistics by Class (2026) Residential 4,614 93.71% 217,192 72.86% 5,690 83.75% Non -Residential 310 6.29% 80,898 27.14% 1,104 16.25% Total 4,924 100.00% 298,090 100.00% 6,794 100.00% •:;>FCS .• - 'Y fcsgroup.com I bowman.com 22 City of Port Orchard August 2025 Sewer Rate Study page 14 Cost Allocation The last step in the cost -of -service analysis is to assign costs by function (see Exhibit 10) to each class using relevant customer statistics (Exhibit 11). The allocated cost of service can then be compared to the actual revenue collection by class to determine where adjustments need to be made. Exhibit 12 summarizes the results of the cost -of -service analysis for 2026. Results are shown assuming the 3.50 percent rate increase planned for 2026 in Section 3 takes effect. Exhibit 12. Cost -of -Service Analysis Results (2026) Residential $5,535,709 $5,177,543 106.92% Non -Residential 1,195,679 1,553,845 76.95% Total $6,731,388 $6,731,388 100.00% A cost -of -service analysis is a reasonable allocation of the test year revenue requirement to classes of service based on available financial and operational data, expectations of future demands for service, and the allocation methodologies described in the previous sections. Given the need for assumptions and these other factors, FCS recommends a reasonable range for class -specific results to be plus or minus 5 percent. Based on this framework, the cost -of -service results indicate that the revenue generated by the Residential class exceeds its cost of service. This means that the rates charged to the Residential class are over -collecting relative to its cost -of -service. In contrast, the Non -Residential class is below the reasonable target, and therefore the rates charged to that class are generating less than their fair cost share. Strategies to address the cost -of -service differences are discussed in detail in the rate design section. •:;>FCS .• - 'Y fcsgroup.com I bowman.com 23 City of Port Orchard Sewer Rate Study 5. Rate Design Background August 2025 page 15 Rate design is the third and final technical step in utility rate setting. The first two technical steps (identifying the total rate revenue needs and determining the proportional distribution of those revenue needs to the utility's customer classes) provide the revenue targets for rate design. The principal objectives of rate design are to implement rate structures that collect the appropriate level of revenue and that are reasonably aligned with cost - of -service. The City's existing sewer rate structure includes 20 different classes, many with distinct rate classifications contained within those classes. There are a total of 55 different rate codes that could be used when calculating a customer's bill. The City's existing sewer rate structure is shown in Appendix A. The complexity of this existing schedule is one of the primary reasons the City was interested in developing a new rate design schedule. Rate Design The proposed rate structure simplifies the City's scheduling by basing the charge on the City's annual ERU count performed for the Joint Agreement. Using this count ensures that the data is updated at least annually to reflect changes in a customer's flow contributions. It also precludes the City from having to develop a new method of measuring customer statistics or relying on the water usage data, which is not always available to the City. Exhibit 13 summarizes the proposed rate design. As shown, the cost -of -service for each class is divided by the number of ERUs and by six to produce a bi-monthly rate per ERU by class. As shown, the Residential rate per ERU would drop to $151.67 per ERU (from $163), whereas Non -Residential customers would pay $234.56 per ERU. Exhibit 13. Rate Design (2026) Residential $5,177,543 5,690 $151.67 Non -Residential 1,553,845 1,104 $234.56 Total $6,731,388 6,794 $165.13 Exhibit 14 below provides the calculated bi-monthly rates per with annual rate increases of 3.50 percent. Exhibit 14. Calculated Bi-Monthly Rates per ERU (2026-2030) Residential $151.67 $156.97 $162.47 $168.16 $174.04 Non -Residential $234.56 $242.77 $251.26 $260.06 $269.16 •:;>FCS .• - ,Y fcsgroup.com I bowman.com 24 City of Port Orchard Sewer Rate Study 6. Summary August 2025 page 16 Based on the results of the revenue requirement analysis, FCS recommends a 3.50 percent overall rate increase in 2026 to be implemented January 1, 2026. Additional 3.50 percent increases are recommended to be adopted on January 1 of each year until 2030. In addition, should the City wish to recover the cost -of -service for each class and implement a simplified rate structure, FCS recommends that the City uses the proposed rate schedule provided in Exhibit 14, which is based on the number of ERUs for each customer. Updating This Study's Findings It is recommended that the City revisit the study findings during the forecast period to check that the assumptions used are still appropriate and that no significant changes have occurred that would alter the results of the study. The City should use the study findings as a living document, comparing study outcomes to actual revenues and expenses each year. Any significant or unexpected changes may require adjustments to the rate strategy recommended in this report. Absent the results of a recent rate study, we recommend that the City adopt a policy of applying annual Consumer Price Index (CPI) -based adjustments to its sewer rates. This will help ensure that revenues keep pace with inflation and reduce the need for periodic large rate increases. Rate Comparisons As a resource to the City and its customers, a rate survey of regional utilities was performed. Exhibit 15 below shows each jurisdiction's estimated bi-monthly single-family sewer bills, assuming 10 CCF of sewer flow. Note that each jurisdiction has a unique set of geographic traits, customers, and system characteristics that can have a significant impact on rates. Exhibit 15. Jurisdictional Survey - Bi-Monthly Single-family Rates (10 CCF of Sewer Flow) Poulsbo Gig Harbor Kitsap County Bremerton Port Orchard - Existing Port Orchard - Proposed West Sound Utility District $244.04 $209.79 $208.50 _ $193.96 ' $163.00 $151.67 $148.52 $0 $50 $100 $150 $200 $250 $300 •:;>FCS .• - ,Y fcsgroup.com I bowman.com 25 City of Port Orchard Sewer Rate Study Appendix A: Existing Rate Schedule August 2025 page 17 •:;>FCS •�-•� fcsgroup.com I bowman.com 26 13.04.020 Bimonthly sewer rates. Effective January 1, 2016, and January 1st of each subsequent year shown, the sewer rates, as calculated bimonthly, are shown as follows: Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description 1 Single-family For each dwelling $111.00 $124.00 $137.00 $150.00 $163.00 residences and unit mobile home on single parcel 2 Business and For each business $111.00 $124.00 $137.00 $150.00 $163.00 professional with a fixture For each business $22.20 $24.80 $27.40 $30.00 $32.60 with an employee present, without a fixture For each floor of $111.00 $124.00 $137.00 $150.00 $163.00 an office building or retail complex that has a public or community bathroom Plus the following surcharge, based on the store/office interior size: Small, less than $0.00 $0.00 $0.00 $0.00 $0.00 15,000 sf, or Medium, 15,000 to $111.00 $124.00 $137.00 $150.00 $163.00 30,000 sf, or Large, more than $222.00 $248.00 $274.00 $300.00 $326.00 30,000 sf 3 Churches For the church, $111.00 $124.00 $137.00 $150.00 $163.00 plus* 27 Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description For the rectory, $111.00 $124.00 $137.00 $150.00 $163.00 plus* For the annex $111.00 $124.00 $137.00 $150.00 $163.00 *Class 6 for educational parochial schools 4 Hotels and Base fee, plus $111.00 $124.00 $137.00 $150.00 $163.00 motels, rest homes and care centers, and Kitsap County jail Per unit $22.20 $24.80 $27.40 $30.00 $32.60 5 Apartments Per dwelling unit $111.00 $124.00 $137.00 $150.00 $163.00 and mobile home parks 6 Schools For each pupil, $3.30 $3.70 $4.10 $4.50 $4.90 teacher, maintenance and administrative person 7 Kitsap County $4,329.00 $4,836.00 $5,343.00 $5,850.00 $6,357.00 courthouse (main complex) 8 Restaurants Based on the seating capacity as determined by the building official P Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description Espresso Bar Seating not $111.00 $124.00 $137.00 $150.00 $163.00 applicable. Classification includes similar food preparation businesses which do not require the cooking of food or the maintenance of kitchen equipment. Deli No seating $166.50 $186.00 $205.50 $225.00 $244.50 Small Seating for 1 to 50 $333.00 $372.00 $411.00 $450.00 $489.00 Medium Seating for 51 to $499.50 $558.00 $616.50 $675.00 $733.50 150 Large Seating for more $666.00 $744.00 $822.00 $900.00 $978.00 than 150 9 Laundromats Base fee, plus $55.50 $62.00 $68.50 $75.00 $81.50 Per washing $22.20 $24.80 $27.40 $30.00 $32.60 machine Laundromats with less than 4 washing machines are considered Class 2. Dry cleaners without washing machines are Class 2. 10 Taverns $277.50 $310.00 $342.50 $375.00 $407.50 11 Car For sales and $111.00 $124.00 $137.00 $150.00 $163.00 dealerships administrative office, plus 29 Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description For service $111.00 $124.00 $137.00 $150.00 $163.00 department, plus For car washing $111.00 $124.00 $137.00 $150.00 $163.00 when the water is used to determine cost sharing for the sewer treatment plant 12 Post office $388.50 $434.00 $479.50 $525.00 $570.50 13 Grocery stores Basic fee, plus the $55.50 $62.00 $68.50 $75.00 $81.50 following surcharges Basic store $55.50 $62.00 $68.50 $75.00 $81.50 Bakery $55.50 $62.00 $68.50 $75.00 $81.50 Wetted -down $111.00 $124.00 $137.00 $150.00 $163.00 produce Food disposal $111.00 $124.00 $137.00 $150.00 $163.00 Meat cutting area $222.00 $248.00 $274.00 $300.00 $326.00 14 Bowling alley, Base fee, plus $55.50 $62.00 $68.50 $75.00 $81.50 boat marina, health maintenance organizations and work release and juvenile facilities 30 Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description For each $55.50 $62.00 $68.50 $75.00 $81.50 equivalent residential unit (ERU) as determined for the cost -sharing formula for the sewer treatment plant 15 Car washes Base fee, plus $55.50 $62.00 $68.50 $75.00 $81.50 Per car washing $166.50 $186.00 $205.50 $225.00 $244.50 bay 16 Beauty shops $111.00 $124.00 $137.00 $150.00 $163.00 and barber shops 17 Day care Basic fee, plus $111.00 $124.00 $137.00 $150.00 $163.00 For less than or $0.00 $0.00 $0.00 $0.00 $0.00 equal to 6 children For 7 to 25 $222.00 $248.00 $274.00 $300.00 $326.00 children For more than 25 children, use Class 6 rates 18 Gas stations For gasoline retail, $111.00 $124.00 $137.00 $150.00 $163.00 which could include service bay For nonautomotive $111.00 $124.00 $137.00 $150.00 $163.00 retail 19 Assisted living Base fee, plus $111.00 $124.00 $137.00 $150.00 $163.00 units Per unit with $111.00 $124.00 $137.00 $150.00 $163.00 private kitchen 31 Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description Per unit without $22.20 $24.80 $27.40 $30.00 $32.60 private kitchen or studio apartment 20 Bed and Base fee, plus $111.00 $124.00 $137.00 $150.00 $163.00 breakfasts Per rentable $8.90 $9.90 $11.00 $12.00 $13.00 bedroom 21 Public market Basic fee, plus the $222.00 $248.00 $274.00 $300.00 $326.00 following surcharges Nonfood retail $27.80 $31.00 $34.30 $37.50 $40.80 Nonfood service $27.80 $31.00 $34.30 $37.50 $40.80 business Juice/soda/ice $111.00 $124.00 $137.00 $150.00 $163.00 cream/espresso bar Restaurant $222.00 $248.00 $274.00 $300.00 $326.00 (consume and buy on premises) Delicatessen $111.00 $124.00 $137.00 $150.00 $163.00 (counter sales takeout ready -to - eat food products) Retail meat/ $111.00 $124.00 $137.00 $150.00 $163.00 seafood Retail bakery $111.00 $124.00 $137.00 $150.00 $163.00 Special notes: a) Home occupations will not be charged additional sewer fees. b) For a combination of classes in one business, the highest rate will be selected. c) In the event that an established rate class does not accurately reflect the impact on the sewer system, the city engineer may determine the specific monthly rate. 32 Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description d) Water accounts which serve a marina pier and do not have a connection to the sewer shall not be charged a sewer bill. A sewer bill will be charged and based on winter consumption if the water meter serves both the marina pier and any facility or pump station that is connected to the sewer system. For billing purposes, live-aboards will not be considered as a dwelling unit. e) Properties served which are outside the city limits shall have a 50 percent surcharge on the bimonthly rates. (Ord. 038-16 § 2; Ord. 020-15 § 2; Ord. 027-11 § 1; Ord. 016-10 § 2; Ord. 021-09 § 3; Ord. 027-08 § 2; Ord. 010-05 § 3; Ord. 1897 § 3, 2003; Ord. 1799 § 3, 2000). 33 IRCHARD Sewer Orcha Study •FCS Bowman Company 34 ) Agenda Revenue requirement "What revenue adjustments are needed to cover the utility's costs?" Study period: 2025-2030 ,. Cost of service analysis (COSA) "What is the cost to serve each of the City's customer classes?" Varies by class characteristics Rate Design "How should rates be set to collect the costs of service?" Rates can be also be set to meet other City objectives •FCS 'I:' ••.! '. : Slide 2 35 Operations & Capital Maintenance Expenditures Revenue Fiscal Policies Debt Requirement Service Class Functional _____Cost of Service Characteristics I Costs Analysis (COSA) City's Rate Design Objectives •) Rate Increase History Rates have been $163.00 bi-monthly per dwelling unit since 2020 Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description 1 Single-family For each dwelling $111.00 $124.00 $137.00 $150 00 S163 00 residences and unit mobile home on single parcel •FCS Slide 4 37 •;) Bi-monthly Sewer Rates (SFRs) vs. Inflation $250 $200.36 $200 $163.00 $150 $100 $50 •FCS 2020 2021 2022 2023 2024 2025 Bi-Monthly Bill (SFR) -Bill with Inflation (CPI -U West) Slide 5 38 39 •> Financial Policies General Reserve (per Resolution 053-20) Stabilization Reserve (per Resolution 053-20) Debt Service Coverage FCS Accommodate variations in revenue & expenses. Used for emergency costs outside of typical contingency planning. Compliance with existing debt covenants; Maintain credit worthiness Policy Assumptions 60-90 days of annual budgeted revenues 25% (90 days) of annual expenditures Target 1.5 to 2+ Typical legal minimum of 1.25 Slide 7 40 •) Introduction to Ratemaking Rates are set to recover the cost of providing service EXAMPLE Sewer programs incur two primary types of costs Operating costs (regular! ongoing) » Employee salaries and benefits » Routine asset / equipment repair and maintenance » Supplies and materials » Regulatory compliance Bill processing Capital costs Repair and replacement Capital improvement projects •:;>FCS III Year 1 Year 2 Year 3 ■ Operating Year 4 Year 5 Capital irori 41 •�• Operations and Maintenance Cost Increases [ITh Fli Es] ii -.. General Cost 3.00% Based on the Consumer Price Index for Urban Customers (West) Construction Costs 3.50% 10 -year average of the Engineering News -Record's 20 -City Avg. CCI* Labor Cost 3.00% Set to be no less than the General Cost inflation assumption Benefits Cost 5.00% Set 2.00% higher than Labor Cost inflation Account Growth 1.25% Growth estimates per Kitsap County Countywide Planning Policies •:;>FCS Slide 9 42 .) Capital Funding Philosophy (after Outside Funding) Cash (pay-as-you-go) » Higher near -term rates » Existing customers pay 100% of costs Debt �y Lowest near -term rates... but interest cost 4' » Spreads cost between existing / future customers p » Execute projects sooner; reduce effects of inflation Hybrid ai » Cash fund repair and replacement projects » Debt fund large expansion projects •:;>FCS Slide 10 43 •) Capital Improvement Program 6-1 Annual Preservation $ 583,333 $ 583,333 $ 583,333 $ 583,333 $ 583,333 $ 583,333 6-2 Marina Pump Station Construction 8,611,000 - - - - - 6-3 Bay Street Pump Station Replacement 1,000,000 - 3,500,000 3,500,000 - - 6-4 Minor Lift Station Improvements 650,000 650,000 - - - - 6-5 Port Orchard Boulevard Lift Station and Siphon - 1,522,000 - 6,088,000 - - 6-6 Sidney Road SW 2nd Force Main 1,300,000 - - - - - 6-7 McCormick Woods Sewer Lift Station #3 - 1,000,000 - - - - 6-8 Ruby Creek Lift Station - 3,140,000 - - - - 6-9 Sidney Road Gravity Sewer Main Extension - 2,290,000 - - - - 6-10 Bravo Terrace (Sedgwick) Lift Station - - - - 2,500,000 - 6-11 Bravo Terrace (Sedgwick) Force Main - - - - 4,860,000 - 6-12 Sewer Facility Capacity Upgrades (PWO) - - - - - 2,000,000 6-13 McCormick East/Glenwood Sewer Basin Improvements - - - 7,600,000 - - 6-14 2029 General Sewer Plan and Sewer Rate Study - - - 350,000 - - Total $ 12,144,333 $ 9,185,333 $ 4,083,333 $ 18,121,333 $ 7,943,333 $ 2,583,333 •:;>FCS Slide 11 44 •> $20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- •FCS Capital Spending Forecast Capital Costs (2024$) $12,100,000 $9,200,000 $4,100,000 2025 2026 2027 ■ Outside Funding Major projects include: • Marina Pump Station Construction for $19.4 million in 2024-2026 • Bay Street Pump Station for $8.0 million in 2027-2028 • McCormick East/Glenwood Sewer Basin Improvements for $8.7 million 2028 • Pipe replacement of $583,000 per year $18,100,000 2028 ■ City Costs $7,900,000 2029 $2,600,000 2030 Slide 12 45 .) Capital Funding Strategy (2025-2030) $3,600,000 Low -Cost Loans included: Low -Cost Loans 6% Pottery Lift Station Repairs Rate Revenue & $11,900,000 $253,000 Fund Balances Revenue 30% Bonds 0.94% interest 20% Sewer Lift Station $200,000 » $825,000 Grants » 0.94% interest 0% Bay Street Lift Station » $850,000 $5,000,000 » 0.69% interest CFCs $12,000,000 8% WSDOT/Kitsap Marina Pump Station $9,800,000 20% Developer Agreements $13 million (some already drawn) 2.60% interest 16% >FCS Slide 13 46 •;�� Revenue Requirement Summary $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 3.50% 3.50% 3.50% 3.50% $187.05 $193.59 2025 2026 2027 2028 2029 2030 =Operating & Maintenance = Debt Service Rate Funded Capital • —Revenue @ 2025 Rates --Revenue with Increases >FCS Slide 14 47 48 •> •:;>FCS How Will Costs Be Equitably Distributed? Existing Revenue Collection Slide 16 49 •> >FCS Allocating the Costs of Service $180,000 (3%) Customer m (Accounts) 94% of accounts, $169,000 Flow (Thousand gallons) 1 6% of accounts, $11,000 Non - Residential Treatment (ERUs*) Customer Accounts *ERUs = equivalent residential units, as calculated per the City's joint treatment agreement Slide 17 50 •) COSA Results Typical results fall within +1- 5% of the cost -of -service COSA indicates a need for a non-residential rate increase % of Cost of Service 120% 100% 80% 60% 40% 20% 0% •:;>FCS 107% Residentia 76% Non -Residential Slide 18 51 52 •;) Current Rate Schedule The current rate schedule is complex It includes 21 different classes Each class has multiple rates Complex rate schedules have disadvantages Difficult for customers to understand Administratively burdensome Obscure relationship between costs and services provided City staff wants to simplify the rate schedule •FCS Sewer Rates 2016 2017 2018 2019 2020 Class Class Description No. Description 1 Single-Tamily For each dwelling $111.00 $124.00 $137.00 $150.00 $16300 residences and unit mobile home on single parcel 2 Business and For each business $111.00 $124.00 $137.00 $150O0 $16300 professional with a fixture For each business $22.20 $24.80 $27.40 $30.00 $32.60 with an employee present, without a fixture For each floor of $111.00 $124.00 $137.00 $150.00 $163.00 an office building or retail complex that has a public or community bathroom Plus the following surcharge, based on the store/office interior size: Small, less than $0.00 $000 $0.00 $0.00 50 Co 15.000 sf, or Slide 20 53 ••) South Kitsap Water Reclamation Facility (SKWRF) Contract Port Orchard and West Sound Utility District share the SKWRF Agreement began in 1983, last updated in 2014 Equivalent residential units (ERUs) are measured annually for each utility to determine cost sharing How an ERU is defined: 1 per residence Flow / 700 CF (180 gpd) for non-residential •:;>FCS Slide 21 54 •;> ERU Update Customer stats support an ERU of 117 gpd per residence Contract determines how ERUs are counted (180 gpd) Options to accurately collect cost of service: Change agreement with SKWRF Use different ERU definitions for different purposes Use a weighting factor for commercial •FCS Slide 22 55 •,•) Rate Calculation ERUs (counted as per SKWRF) Residential Non-residential Total Cost of Service Residential Non-residential Total Cost of Service Calculated Bi-Monthly Rate per ERU Residential Non-residential •:;>FCS 5,690 1,104 6,794 $ 5,174, 666 1,556,721 $ 6,731,388 $151.58 $234.99 Slide 23 56 Current Units Rate per Bi-Monthly Annual • S Method Unit Bill Total Total Total $151.58 $151.58 •:;>FCS 1 1 $163.00 $163.00 $978.00 Slide 24 57 Current Units Rate per Bi-Month ly Annual • Method Unit Bill Total Billing Units 132 $4.90 $646.80 $3,880.80 Total $646.80 $3,880.80 Total 1 $234.99 $234.99 $1,409.94 •:;>FCS Slide 25 58 •) Sample Bill — Large Restaurant (150 seats or more) � . Bi-monthly rates would increase by $1,606.89 Billing Units 1 $978.00 $978.00 $5,868.00 Total $978.00 $5,868.00 Total 11 $234.99 $2,584.89 $15,509.34 •:;>FCS Slide 26 59 •) Sample Bill - County Jail $163.00 $978.00 Base Charge 1 $163.00 Housing Units 284 $32.60 Total Total 156 $234.99 $36,658.44 $219,950.64 •:;>FCS $9,258.40 $55,550.40 $9,421.40 $56,528.40 • Bi-monthly rates would increase by $27,237.04 The jail makes up 15% of the City's non- residential ERUs, but currently pays just 3.5% of the non-residential costs Slide 27 60 •) Sample Bill — Small Restaurant _______ � . Bi-monthly rates would decrease by only $19.02 Base Charge 1 $489.00 $489.00 $2,934.00 Total $489.00 $2,934.00 Total 2 $234.99 $469.98 $2,189.88 •:;>FCS Slide 28 61 •) ERUs with Proposed Increases Revenue Increases n/a 3.50% 3.50% 3.50% 3.50% 3.50% Rate per ERU $163.00 $168.71 $ 174.61 $ 180.72 $ 187.05 $ 193.59 IL I4 Rate Design 2025 02 2030 Revenue Increases n/a 3.50% 3.50% 3.50% 3.50% 3.50% Residential Rate per $163.00 $151.58 $156.89 $162.38 $168.06 $173.94 ERU Non-residential Rate n/a $234.99 $243.22 $251.73 $260.54 $269.66 per ERU •:;>FCS Slide 29 •;> Rate Survey — Bi-Monthly SFR Bill, 10 CCF $300.00 $250.00 $200.00 $163.00 $150.00 $100.00 $ 50.00 $- $151.58 Poulsbo Gig Harbor Kitsap County Bremerton Port Orchard Port Orchard - West Sound Utility Proposed District >FCS Slide 30 63 •;> Summary Revenue needs increase by 3.5% Rate structure: Continue with existing rate structure Simplified and equitable ERU structure •:;>FCS Slide 31 64 Thank you! Questions? Tage Aaker — Senior Project Manger (425) 615-6487 TageA@fcsgroup.com www.fcsgroup.com •FCS a Bowman company Aj consor City of Port Orchard General Sewer Plan Update September 2025 PREPARED BY: Consor Erika Schuyler, PE 600 University Street, Suite 300 Seattle, WA 98101 p: 206.462.7030 e: erika.schuyler@consoreng.com PREPARED FOR: City of Port Orchard 216 Prospect Street Port Orchard, WA 98366 66 THIS PAGE INTENTIONALLY LEFT BLANK 67 General Sewer Plan Update City of Port Orchard July 2025 DRAFT Consor 600 University Street Suite 300 Seattle, WA 98101 THIS PAGE INTENTIONALLY LEFT BLANK 69 DRAFT Table of Contents General Sewer Plan Updatedate................................................... iii ExecutiveSummary................................................................1 Introduction(Chapter 1)...........................................................................................................................1 Policies and Standards (Chapter 2)...........................................................................................................2 Service Area Characteristics (Chapter 3)...................................................................................................2 Population(Chapter 4).............................................................................................................................. 3 Existing Sewer Facilities (Chapter 5).........................................................................................................3 Wastewater Flows (Chapter 6).................................................................................................................3 Sewer System Analysis (Chapter 7)...........................................................................................................4 Capital Facilities Improvements (Chapter 8).............................................................................................4 FinancialAnalysis (Chapter 9)...................................................................................................................4 Operations and Maintenance (Chapter 10)..............................................................................................5 Reclaimed Water (Chapter 11).................................................................................................................5 Chapter1............................................................................... 1-1 Introduction......................................................................... 1-1 1.1 Introduction.....................................................................................................................................1-1 1.2 Purpose and Scope...........................................................................................................................1-3 1.3 Ownership and Management..........................................................................................................1-3 1.4 Sewer History...................................................................................................................................1-4 Chapter2.............................................................................. 2-1 Policies and Standards......................................................... 2-1 2.1 Introduction............................................................ 2.2 Design Standards .................................................... 2.3 Construction Standards........................................... 2.4 Pretreatment.......................................................... 2.5 Developer Sewer System Extensions and Upgrades 2.6 Grinder Systems...................................................... 2.7 Septic to Sewer Conversion .................................... ..................................................................... 2-1 ..................................................................... 2-1 ..................................................................... 2-1 ..................................................................... 2-2 ..................................................................... 2-2 ..................................................................... 2-2 ..................................................................... 2-2 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page i 70 DRAFT Chapter3.............................................................................. 3-1 Service Area Characteristicstics................................................. 3-1 3.1 Land Use and Zoning........................................................................................................................3-1 3.2 Topography......................................................................................................................................3-1 3.3 Geology............................................................................................................................................3-1 3.4 Streams and Water Bodies...............................................................................................................3-1 3.5 Critical Areas.................................................................................................................................... 3-1 3.6 Endangered Species Habitat............................................................................................................3-1 3.7 Puget Sound Water Quality Management Plan...............................................................................3-2 3.8 Growth Management Act................................................................................................................3-7 3.9 Water Systems.................................................................................................................................3-7 3.9.1 City of Port Orchard..................................................................................................................3-7 3.9.2 Berry Lake Manors....................................................................................................................3-8 3.9.3 West Sound Utility District........................................................................................................3-8 Chapter4......................•••••••••••• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• •• • 4-1 Population............................................................................ 4-1 4.1 General............................................................................................................................................4-1 4.2 Existing Population and Employment..............................................................................................4-1 4.2.1 Population................................................................................................................................. 4-1 4.2.2 Employment..............................................................................................................................4-1 4.3 Future Population and Employment................................................................................................4-1 4.3.1 Population................................................................................................................................. 4-2 4.3.2 Employment..............................................................................................................................4-2 4.4 Projection Summary.........................................................................................................................4-2 Chapter5.............................................................................. 5-1 Existing Sewer Facilities...................................................... 5-1 5.1 Introduction.....................................................................................................................................5-1 5.2 Existing and Planned Mini-Basins.....................................................................................................5-1 5.3 Existing Sewer Piping.......................................................................................................................5-1 5.4 Existing Lift Stations.........................................................................................................................5-2 5.5 McCormick Woods STEP System......................................................................................................5-7 5.6 West Sound Utility District Facilities................................................................................................5-7 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page ii 71 DRAFT 5.7 Pump Station Condition Assessment...............................................................................................5-7 Chapter6.............................................................................. 6-1 Wastewater Flows................................................................. 6-1 6.1 Introduction.....................................................................................................................................6-1 6.2 Existing Wastewater Flows..............................................................................................................6-1 6.3 Wastewater Unit Flows....................................................................................................................6-1 6.4 Infiltration and Inflow......................................................................................................................6-2 6.5 Peaking Factors................................................................................................................................6-3 6.6 Diurnal Curves..................................................................................................................................6-4 6.7 Industrial Connections.....................................................................................................................6-4 6.8 Projected Wastewater Flows...........................................................................................................6-5 Chapter7.............................................................................. 7-1 Conveyance System Analysis ............................................... 7-1 7.1 Introduction.....................................................................................................................................7-1 7.2 Model Software...............................................................................................................................7-1 7.3 Model Development........................................................................................................................7-1 7.3.1 Gravity Sewers.......................................................................................................................... 7-1 7.3.2 Lift Stations............................................................................................................................... 7-1 7.4 Model Loading.................................................................................................................................7-2 7.4.1 Average Dry Weather Flow.......................................................................................................7-2 7.4.2 Infiltration and Inflow(I/I).........................................................................................................7-2 7.5 Model Calibration............................................................................................................................7-3 7.5.1 Calibration to Recorded Flow Data........................................................................................... 7-3 7.6 Future Sewer System Expansion......................................................................................................7-3 7.7 Modeling Scenarios..........................................................................................................................7-4 7.8 Hydraulic Modeling Analysis............................................................................................................7-4 7.8.1 Design Capacity......................................................................................................................... 7-4 7.8.2 Results....................................................................................................................................... 7-4 7.9 Capital Improvement Plan Model Runs............................................................................................7-6 Chapter8.............................................................................. 8-1 Collection Facilities Improvements .....................................8-1 8-1 8.1 Introduction.....................................................................................................................................8-1 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page iii 72 DRAFT 8.2 Opinions of Probable Project Cost...................................................................................................8-2 8.3 Six -Year Capital Improvement Program...........................................................................................8-2 8.3.1 Project Descriptions..................................................................................................................8-2 8.3.2 Summary................................................................................................................................... 8-4 8.4 20 -Year Capital Improvement Program...........................................................................................8-7 8.4.1 Project Descriptions..................................................................................................................8-7 8.4.2 Summary................................................................................................................................... 8-9 8.5 Sewer Extensions into Undeveloped Basins...................................................................................8-12 8.5.1 Ruby Creek Lift Station............................................................................................................8-12 Chapter9.............................................................................. 9-1 Financial Program................................................................ 9-1 9.1 Introduction.....................................................................................................................................9-1 9.2 Financial Background.......................................................................................................................9-1 9.3 Financial Policies..............................................................................................................................9-1 9.3.1 Sewer Enterprise Fund Accounting............................................................................................9-1 9.3.2 Sewer Reserves.........................................................................................................................9-2 9.4 Historical Financial Performance.....................................................................................................9-3 9.5 Outstanding Debt.............................................................................................................................9-4 9.6 Current Rates and Charges..............................................................................................................9-5 9.6.1 Bi-Monthly Sewer Rates............................................................................................................9-5 9.6.2 Sewer Capital Facility Charges..................................................................................................9-5 9.7 Capital Improvement Funding..........................................................................................................9-6 9.7.1 Funding Assistance Programs...................................................................................................9-6 9.7.2 Local Funding Sources...............................................................................................................9-8 9.7.3 Affordability.............................................................................................................................. 9-8 9.8 Sewer Collection Facilities Improvement Funding...........................................................................9-9 9.8.1 Six -Year Capital Improvement Program....................................................................................9-9 9.8.2 Six -Year Capital Funding Plan..................................................................................................9-11 9.9 Six -Year Financial Plan....................................................................................................................9-12 9.9.1 Sewer Rate Adjustment Strategy............................................................................................9-13 9.9.2 Key Forecast Assumptions.......................................................................................................9-13 9.9.3 Sewer Operating Revenue.......................................................................................................9-13 9.9.4 Sewer Operating Expenses......................................................................................................9-13 9.9.5 Sewer Operating Cash Flow....................................................................................................9-14 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page iv 73 DRAFT 9.9.6 Sewer Enterprise Fund Combined Cash Flow..........................................................................9-14 9.10 Projected Sewer Rates and Customer Bill Impact........................................................................9-15 9.11 Financial Conclusion.....................................................................................................................9-16 Chapter10............................................................................10-1 Operations and Maintenance Program...............................10-1 10.1 Introduction.................................................................................................................................10-1 10.2 City Management and Personnel.................................................................................................10-1 10.3 Operations and Maintenance Activities.......................................................................................10-1 10.3.1 Lift Stations...........................................................................................................................10-1 10.3.2 Force Mains..........................................................................................................................10-1 10.3.3 Gravity Sewers and Manholes...............................................................................................10-1 10.3.4 Summary...............................................................................................................................10-2 10.4 Staffing Needs..............................................................................................................................10-2 10.5 Recommended Operation and Maintenance Improvements......................................................10-3 Chapter11............................................................................11-1 ReclaimedWater.................................................................11-1 11.1 Reclaimed Water..........................................................................................................................11-1 Appendix A SEPA Compliance...........................................11-1 Appendix B Interlocal Agreements.....................................11-2 Appendix C 2019 Public Works Engineering Standards (Chapter 9) ................................... ........ ............. ...................11-3 Appendix D Population Projections...................................11-4 Appendix E Olympic View Sanitary Landfill Discharge Permit..................................................................................11-5 Tables Table E-1 I Comprehensive Sewer Plan Requirements per WAC 173-240-050 ........................................2 Table E-2 I Service Area Population and Employment Estimates.............................................................3 Table E-3 I Unit and Projected Flows........................................................................................................4 Table 1-1 I Comprehensive Sewer Plan Requirements per WAC 173-240-050.....................................1-3 Table 4-1 I Service Area Population and Employment Estimates..........................................................4-2 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page v 74 DRAFT Table5-1 I Gravity Sewers.....................................................................................................................5-1 Table5-2 I Force Mains.........................................................................................................................5-2 Table 5-3 I Existing Pump Stations........................................................................................................5-6 Table 5-4 I Component Group Definitions............................................................................................5-8 Table 5-5 I Component Condition Scores Definitions............................................................................5-8 Table 5-6 I Lift Station Recommendations............................................................................................5-9 Table 6-1 I Wastewater Flow Summary................................................................................................6-1 Table 6-2 I Residential Unit Flow...........................................................................................................6-2 Table 6-3 I Employee Unit Flow.............................................................................................................6-2 Table 6-4 I Infiltration and Inflow..........................................................................................................6-2 Table 6-5 I EPA/Ecology Excessive I/I Criteria........................................................................................6-3 Table6-6 I Peak Day Factor...................................................................................................................6-3 Table6-7 I Peak Hour Factor.................................................................................................................6-3 Table 6-8 1 Projected Wastewater Flows...............................................................................................6-6 Table 7-1 1 Projected Wastewater Flows (mgd)....................................................................................7-4 Table 7-2 I Pipe and Manhole Capacity Criteria....................................................................................7-6 Table 7-3 I Lift Station Capacity and Peak Hour Inflows........................................................................7-6 Table8-1 I Six -Year CIP..........................................................................................................................8-5 Table 8-2 1 Project Funding Sources......................................................................................................8-7 Table8-3 120 -Year CIP........................................................................................................................8-10 Table 9-1 I Sewer System Financial History...........................................................................................9-3 Table 9-2 I Sewer System Cash and Investments..................................................................................9-4 Table 9-3 I Sewer System Outstanding Debt.........................................................................................9-5 Table 9-4 I Sewer System Capital Facility Charges................................................................................9-6 Table 9-5 I Sewer System Affordability Test..........................................................................................9-9 Table 9-6 I Six -Year Sewer Capital Improvement Program..................................................................9-10 Table 9-7 1 Identified Project Specific Capital Funding Sources...........................................................9-10 Table 9-8 I Six -Year Sewer Capital Funding Plan..................................................................................9-11 Table 9-9 I Six -Year Financial Plan.......................................................................................................9-12 Table 9-10 I Total Sewer Enterprise Fund Cash Flow..........................................................................9-14 Table 9-11 I Sewer System Projected Ending Cash and Investments..................................................9-15 Table 9-12 I Sewer System Current and Projected Bi-Monthly Sewer Rates and Customer Bills........9-15 Table 10-1 I Recommended Collection System Maintenance Standards............................................10-2 Table 10-2 I Sewer Utility Staffing Comparison per Total Length of Pipe............................................10-2 Table 10-3 I Sewer Utility Staffing Comparison per Lift Station..........................................................10-3 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page vi 75 DRAFT Figures Figure 1-1 Vicinity Map................................................................ Figure 3-1 Urban Growth Area ..................................................... Figure3-2 Zoning Map................................................................. Figure 3-3 Topography Map......................................................... Figure 3-4 FEMA Floodplain and Wetlands .................................. Figure 3-5 Water System Map...................................................... Figure 5-1 Sewer System.............................................................. Figure 5-2 System Schematic....................................................... Figure 6-1 Diurnal Curves............................................................. Figure 7-1 System Deficiencies..................................................... Figure 8-1 Six -Year CIP.................................................................. Figure 8-2 20 -Year CIP.................................................................. Figure 8-3 Future Sewer Extensions............................................. Figure 11-1 1 Reclaimed Water....................................................... Appendices Appendix A SEPA Compliance Appendix B Interlocal Agreements Appendix C 2019 Public Works Engineering Standards (Chapter 9) Appendix D Population Projections Appendix E Olympic View Sanitary Landfill Discharge Permit ..1-2 ..3-3 ..3-4 ..3-5 ..3-6 ..3-9 ..5-3 ..5-5 .. 6-4 ..7-5 ..8-6 8-11 8-13 11-2 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Page vii 76 77 DRAFT Executive Summary Introduction (Chapter 1) The City of Port Orchard's (City) General Sewer Plan Update (Plan) provides a summary of the City's current sewage capacities, an analysis of the impact of projected growth on the City's sewage collection and conveyance system, and proposes a Capital Improvement Program to mitigate system deficiencies. It also documents the City's policies, operation and maintenance practices, and financial condition. The City is in Kitsap County and is bounded to the north by Sinclair Inlet. The location is shown on Figure 1-1 The surrounding area is a combination of rural and suburban lands in unincorporated Kitsap County and Bremerton. The City was incorporated in 1890 as the Town of Sidney and was renamed in 1903 as the City of Port Orchard. The City is primarily residential with some commercial areas and industrial activity. The current population was estimated by the United States Census Bureau to be 17,089 in 2022. Approximately 13,253 are within the City's sewer service area. Residents outside of the City's service area are served by the West Sound Utility District (WSUD) and individual septic tanks. The City owns, operates, and maintains existing wastewater collection and conveyance facilities that provide sewer service to the City's current service area of approximately 2,100 acres. The collection system consists of gravity sewers, lift stations, force mains, Septic Tank Effluent Pump (STEP) systems in McCormick Woods, and grinder pump systems that convey wastewater to the South Kitsap Water Reclamation Facility (SKWRF). The SKWRF is owned jointly by the City and WSUD and operated and maintained by WSUD. Over the next 20 years the population within the Urban Growth Area (UGA) in the City's sewer service area is expected to grow to over 26,000 people. The City's sewer service area is expected to grow to approximately 3,300 acres. This Plan proposes future facilities to accommodate both existing and future wastewater collection and conveyance needs. This Plan complies with the Washington State Department of Ecology (Ecology) regulations for a general sewer plan (Washington Administrative Code [WAC] 173-240-050) as shown in Table E-1-1. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Executive Summary • 1 78 DRAFT Table E-1-1 I Comprehensive Sewer Plan Requirements per WAC 173-240-050 3a Purpose and need for proposed plan Section 1.2 3b Who owns, operates, and maintains system Section 1.3 3c Existing and proposed service boundaries Chapter 5 Figure 3-3, Figure 3-5, Layout map showing boundaries; existing sewer facilities; Error! R 3d proposed sewers; topography and elevations; streams, lakes; and eference other water bodies; water systems source not found., and 8- 4 3e Population trends Chapter 4 Existing domestic and/or industrial wastewater facilities within 20 3f miles Figure 1-1 g 3g Infiltration and inflow problems Section 6.4 3h Treatment systems and adequacy of such treatment Section 5.7 3i Identify industrial wastewater sources Section 6.7 3j Discussion of water systems Section 3.9 3k Discussion of collection alternatives Chapter 7 31 Define construction cost and O&M costs Chapter 8 3m Compliance with water quality management plan Section 3.7 3n SEPA compliance Appendix A Policies and Standards (Chapter 2) The City manages and operates their sewer system in accordance with state, local, and federal regulations. The policies and standards described in the Plan provide a framework for the planning, design, operation, and management of the system to maintain the desired level of service to sewer utility customers. These policies are limited to the sewer system and its design and operation. The City's policies and criteria summarized in Chapter 2 include the following: ➢ Design standards. ➢ Construction standards. ➢ Pretreatment. ➢ Developer sewer system extensions and upgrades. ➢ Septic to sewer conversion. Service Area Characteristics (Chapter 3) The City is located along the south shore of Sinclair Inlet, which is an arm of Puget Sound. The City provides sewer service within the urban growth area (UGA) which is established in accordance with the State's Growth Management Act. The service area is approximately 2,350 acres and is surrounded by a combination of rural and suburban lands in unincorporated Kitsap County. The City has established zoning within the City limits while zoning within the UGA outside of the City limits is defined by Kitsap County. The City also provides water service for residents. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Executive Summary • 2 79 DRAFT Population (Chapter 4) Current population and population growth are critical factors when considering required sewer system capacity and upgrades. The projected population for the City over the planning horizons of the Plan is presented in Table E-1-2. Population and employment data broken down by mini -basin were provided by the Puget Sound Regional Planning Council (PSRC) based on their VISION 2050 Regional Growth Strategy (V2050 RGS) released in October 2020. The build -out scenario is for modeling purposes only and does not reflect population growth goals. The City's service area is shown as Error! Reference source not found.. Note that the City recently updated population estimates as part of the update the Comprehensive Plan, which was completed subsequent to the analysis presented in this Plan. The overall growth numbers for 2044 presented in the Plan are slightly more conservative than those included in the City's Comprehensive Plan Update. Table E-1-2 I Service Area Population and Employment Estimates 2022 -. �.. 13,253 . . 7,102 2030 22,472 7,725 2034 25,317 8,037 2044 28,481 8,816 Build Out 30,693 10,678 Existing Sewer Facilities (Chapter 5) The City, operates, and maintains approximately 70 miles of sewer pipes ranging from 2 -inch to 30 -inch diameter including approximately 50 miles of gravity sewers, 12 miles of force mains, and 10 miles of Septic Tank Effluent Pump (STEP) mains. There are 22 lift stations within the City's sewer system. 18 mini -basins were defined within the City's sewer service area, shown as Error! Reference source not found.. Development of the collection system began in the 1960's and originally included a treatment plant located by the marina. That plant was decommissioned in the 1980's and replaced with the Marina Pump Station, which sends flow to the SKWRF. Wastewater Flows (Chapter 6) Flow data collected at the SKWRF was used to determine current and projected wastewater flow characteristics. The analysis determined values for residential and employment unit flows, average annual flow, infiltration and inflow (I/I), and peak flows. This information informs system analysis and development of capital improvement projects. The unit and projected flows for the City's collection system are presented as Table E-1-3. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Executive Summary • 3 80 DRAFT Table E-1-3 I Unit and Projected Flows 2016 78 32 1.08 1,046 3.53 6.52 2022 78 32 1.22 1,046 3.92 7.26 2026 78 32 1.32 1,046 4.16 7.68 2036 78 32 1.56 1,046 4.75 8.74 Build Out 78 32 2.14 1,046 6.13 11.18 Notes: 1. Gallons per capita per day 2. Gallons per employee per day Sewer System Analysis (Chapter 7) Analysis of the City's wastewater conveyance system is a critical component in determining the ability of the existing infrastructure to accommodate future growth. The existing wastewater conveyance system was analyzed using a hydraulic and hydrologic (H/H) model representing the system. This model was originally developed for the City's 2016 General Sewer Plan and has been updated to reflect changes to the system since the original development. The model is truncated, meaning it only contains the major sewer mains and lift stations. Model scenarios are created for the existing conditions and future planning horizons incorporating the flow information determined from the SKWRF flow analysis. The H/H model was used to determine existing and future system deficiencies. A deficiency is when the capacity of a given asset is exceeded. The design capacity of the gravity mains is 100 percent depth (1.0 d/D ratio, where d is the flow depth and D is the pipe diameter). The maximum design capacity of STEP mains and force mains are exceeded when flow velocities are greater than 8 feet per second. The firm capacity of a lift station is defined as the capacity of the lift station with the largest pump out of service. When model simulation results indicate that these capacities in piping or in lift stations are exceeded, they are identified as deficient, and system improvements are identified to resolve them. Proposed system improvements are sized to accommodate future flows that account for increased population and employment. Capital Facilities Improvements (Chapter 8) A six -year capital improvement plan was developed. Capital improvement projects are derived primarily from the system analysis and discussions with the City's operations and engineering staff. The projects are categorized by seven drivers — replacement, upgrade, capacity, operations and maintenance, obsolescence, general, and development. An opinion of probable project cost was developed for each project. A long term 20 -year plan was also developed based on projected system needs beyond the six - year planning horizon. Financial Analysis (Chapter 9) The financial analysis presents the financial program to demonstrate the financial capacity of the City to recover the full cost to construct, operate, maintain, and manage the sewage collection and conveyance system on an ongoing basis. The financial chapter presents the financial status of the sewer utility, potential funding sources, and a plan for funding the recommended six -year capital improvement program (CIP). A six -year financial plan is presented that evaluates revenues, expenses, reserve levels, and the impact on N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Executive Summary • 4 81 DRAFT sewer rates. An evaluation of the affordability of the City's sewer rates is summarized. This chapter was prepared by KLJ Financial Consulting. Operations and Maintenance (Chapter 10) The City performs operation and maintenance activities to maintain the performance and reliability of the wastewater collection and conveyance system. At the time of this Plan, the City has 26 full time equivalent (FTE) employees. The City is similarly staffed to other sewer utilities in this region of similar size, however it is recommended that the addition of two (2) FTEs would be beneficial. Operation and maintenance activities cover lift stations, force mains, gravity mains, and manholes, Reclaimed Water (Chapter 11) The SKWRF is not currently permitted for reclaimed water. If water system demands increase to the point that reclaimed water is necessary to adequately address water demands in the area, the reclaimed water distribution system will be placed back into service. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Executive Summary • 5 82 DRAFT THIS PAGE INTENTIONALLY LEFT BLANK N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Executive Summary • 6 83 DRAFT CHAPTER 1 Introduction 1.1 Introduction The City of Port Orchard (City) is in Kitsap County and is bounded to the north by Sinclair Inlet. The location is shown as Figure 1-1. The surrounding area is a combination of rural and suburban lands in unincorporated Kitsap County and Bremerton. The City was incorporated in 1890 as the Town of Sidney and was renamed in 1903 as the City of Port Orchard. The City is primarily residential with some commercial areas and industrial activity. The current population was estimated by the United States Census Bureau to be 17,089 in 2022. Approximately 13,253 are within the City's sewer service area. The remaining residents are served by the West Sound Utility District (WSUD) and individual septic tanks. The City owns, operates, and maintains existing wastewater collection and conveyance facilities that provide sewer service to the City's current service area of approximately 2,350 acres. The collection and conveyance system consists of gravity sewers, pump stations, force mains, septic tank effluent pump (STEP) systems in McCormick Woods, and grinder pump systems that convey wastewater to the South Kitsap Water Reclamation Facility (SKWRF). The SKWRF is owned jointly by the City and WSUD and operated and maintained by WSUD. Over the next twenty years the population within the Urban Growth Area (UGA) in the City's sewer service area is expected to grow to over 26,000 people. The City's sewer service area is expected to grow to approximately 3,300 acres. This Plan evaluates future facilities required to accommodate both existing and future wastewater collection needs. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Introduction • 1-1 84 DRAFT Figure 1-1 1 Vicinity Map CIailam Jefferson "� 1as �I• rr1 oa q" O C t pp P!'J3t — r Lynnwood L Edmonds Mountlake i 0 Terrace Snohomish oreiing Bothell \ / l � Suquamish 451NTP \\ // 44VVTP 99 \\ / oosewallips I State Park /P \ Kirkland 1Silverdale f Bainbridge sland Jefferson 1 Bellev Mason Seattle 1r� S ° Green Mountain State Bremerton 0 1 i VVWTP 1ANJfP YMP 1 'L.)• m°O y t" L t6oEII1 II I Burien! wvvrP enton �, ® khan P Kitsap Pierce ® j DesMoin \ 3oz / Kent ♦ ❑3 i t2Q / o ♦ h ♦♦( m c hig Har yor / ® " Federal Way 0.2 vO) Artondale / O Auburn e`� rri�. N ---_--- Tacoma p CM E 0' 0 5 10 Miles University Place illlxin Isla d ® Wastewater Treatment Plants _1 20 Mile Radius City of Port Orchard County consor General Sewer Plan Urban Growth Area 1 City Boundary ORCHARD Vicinity Map Data Sou roes: City Of Port Orchard. Kitoa p County. Service Layer Cled its: World TapCgraphic Map, County of Kit5op, W A State Parks GIS. Eon. To nTam. Connie. SufcOro ph, coo. tar I I/NASA. USGS, Bueeae Of W Land Management.EPA.NPs, USFWS:World Hilis hade- Esri. NASA, NSA, U505 o Coordl nate.5ystem: NAD10035tatePlane Washington North FIPS4601 Feet ViScla met Consor and the City of Pert Orchard make no representations, express or implied, as tottie accuracy. completeness and timeliness of the information displayed. This map is not suitable for legal.engineering or surveying purposes. Notification of any errors is appreciated. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Introduction • 1-2 85 DRAFT 1.2 Purpose and Scope This General Sewer Plan Update (Plan) is prepared for the City to fulfill the requirements of Chapter 173- 240-050 of the Washington Administrative Code (WAC), Chapter 90.48 of the Revised Code of Washington (RCW), and RCW 36.70A (Growth Management Act). The Plan provides the City with a guide for managing and operating the sewer system and coordinating expansions and upgrades to the infrastructure through a 20 -year planning horizon. The Plan serves as a guide for policy development and decision -making processes for the City. The WAC requirements are outlined in Table 1-1. This Plan is being updated concurrently with the General Water Plan and General Transportation Plan in concurrence with update to the City's Comprehensive Plan. The Plan provides the public and regulatory agencies with information on the City's plans for sewer system extensions to areas designated as urban. Table 1-1 1 Comprehensive Sewer Plan Requirements per WAC 173-240-050 3a Purpose and need for proposed plan Section 1.2 3b Who owns, operates, and maintains system Section 1.3 3c Existing and proposed service boundaries Section 5 Layout map showing boundaries; existing sewer facilities; proposed Figures 3 3, 3-5, 3d sewers; topography and elevations; streams, lakes; and other water bodies; water systems 5 1, and 8 4 3e Population trends Section 4 3f Existing domestic and/or industrial wastewater facilities within 20 Figure 1-1 miles g 3g Infiltration and inflow problems Section 6.4 3h Treatment systems and adequacy of such treatment Section 5.7 3i Identify industrial wastewater sources Section 6.7 3j Discussion of water systems Section 3.9 3k Discussion of collection alternatives Section 7 31 Define construction cost and O&M costs Section 8 3m Compliance with water quality management plan Section 3.7 3n SEPA compliance Appendix A The Plan is based on projections for a six -year period to 2030, a ten-year period to 2034, a twenty-year period to 2044, and a build -out capacity scenario. The existing and future capacities of the sewer system were evaluated based on current and anticipated future wastewater flow rates. Future wastewater flow rates are estimated from existing flow data and population and employment growth projected within the sewer service area by the Puget Sound Regional Council (PSRC). A capital improvement plan is provided that prioritizes improvements and provides opinions of probable project costs. 1.3 Ownership and Management The wastewater utility is owned by the City and funded through wastewater rates and general facility charges. These revenues must provide for future capital improvements, and pay for current operating N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Introduction • 1-3 86 DRAFT expenses, maintenance of the system, replacement, and/or emergency repairs. Sewer collection in the eastern part of the City is provided by WSUD and is not included in this Plan. Management and administration of the wastewater utility is provided by the Public Works Department. This support includes operation, repair, and maintenance of the collection system, major improvements and development, engineering design and construction, administrative support, accounting and financial services, billing, and collection. The City has an interlocal agreement with WSUD to treat the City's sewage. WSUD operates and maintains the SKWRF, which is owned jointly by the City and WSUD, and provides treatment of all sewage in the City's sewer service area, except for on -site septic systems. A copy of the interlocal agreement between the City and WSUD is included as Appendix B. 1.4 Sewer History Construction of the wastewater collection system began in the early 1960's. This system included a network of gravity pipes along Bay Street and a sewage treatment plant located by the marina. The treatment plant was decommissioned in the early 1980's and replaced with the Marina Pump Station, which pumps the sewage generated in the City's sewer service area to the SKWRF. In 2024 the City commenced a critical infrastructure upgrade to the Marina Pump Station aimed at improving wastewater management and supporting future growth along the waterfront. Scheduled for completion in Fall 2025, the project involves replacing aging equipment with modern, energy -efficient systems to enhance reliability and environmental protection. Once finished, the new lift station will provide safer and more effective sewage transport, benefiting both residents and local businesses. More detailed information about the existing sewer system can be found in Chapter 3. The reclaimed water system is discussed in Chapter 10. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Introduction • 1-4 87 DRAFT CHAPTER 2 Policies and Standards 2.1 Introduction The City owns, operates, and maintains their sewer system in accordance with state, local and federal regulations. The policies and standards described in the Plan provide a framework for the planning, design, operation, and management of the system to maintain the desired level of service to sewer utility customers. These policies are limited to the sewer system and its design and operation. While the City has discretion in setting performance and design criteria and standards for its sewer system, the criteria set must meet or exceed the minimum standards for public sewers as set forth by the Washington State Department of Ecology (Ecology) through Chapters 90.48, 90.52, and 90.54 of the Revised Code of Washington (RCW). The criteria focus on planning, design parameters, and other details that have been developed to establish consistency and to make sure that adequate levels of service are provided throughout the system. The criteria also provide the planning process with measuring tools to identify any areas of the existing system that need to be improved to achieve the desired level of customer service. The City establishes the following goals for sewer service: ➢ Goal 1: Provide safe, reliable, and timely sewer service to its consumers at a fair and reasonable price. ➢ Goal 2: Provide reliable levels of service and adequate capacity within the sewer system by upgrading the system to protect the natural environment, as deemed necessary. ➢ Goal 3: Ensure that sewer system infrastructure expansion provides an adequate level of public service to support new development consistent with the City's policies, criteria, and standards. In addition, sewer system expansion should also be consistent with current land use plans and development regulations of the State of Washington, Kitsap County, and appropriate local planning agencies. 2.2 Design Standards All sewer system improvements are designed in accordance with Ecology's Criteria for Sewage Works Design, Port Orchard Municipal Code Chapter 13.04, and Chapter 9 of the City of Port Orchard 2019 Public Works Engineering Standards (PWES) and meet or exceed the design standards required by WAC 173-240. 2.3 Construction Standards Sewer system improvements are constructed in accordance with Ecology Criteria for Sewage Works Design, Port Orchard Municipal Code Chapters 13.04, Section 7-08 through 7-15 of the Washington State Department of Transportation/American Public Works Association (WSDOT/APWA) Standard Specifications, and Chapter 9 of the PWES (provided as Appendix C) and meet or exceed the construction standards required by WAC 173-240. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Policies and Standards • 2-1 88 DRAFT 2.4 Pretreatment Pretreatment systems may be required by the City to reduce, eliminate, or alter the nature of a pollutant's properties prior to discharging to the public sewer collection system. Pretreatment systems include grease traps, interceptors, oil/water separators and other units to treat metals, solvents, fats, oils, grease, excessive biological oxygen demand (BOD) or total suspended solids (TSS), and other constituents. Pretreatment systems are to be installed in compliance with Chapter 9 of the PWES. 2.5 Developer Sewer System Extensions and Upgrades Sewer system extensions are allowed to provide sewer service within the City's sewer service area and UGA if the development is consistent with adopted development policies and all sewer utility policies and criteria, including those described in 13.04.040 of the City's Municipal Code. Developers are required to pay the City to analyze the impacts of the development on the existing sewer system. If the City determines that the development's impact to the existing sewer system requires upgrades, the upgrades may be made at the cost of the developer in exchange for a credit to the capital facilities charge per 13.04.040 of the City Municipal Code. The developer may also recoup costs using latecomers' agreements. The City may require the developer to oversize new sewer infrastructure to accommodate future growth. The developer may recoup the additional cost for the oversized infrastructure using latecomers' agreements or other mechanisms, including contributions from the City, or discounts to their general facility charges. 2.6 Grinder Systems The use of grinder pumps within the City will be limited to locations where conventional gravity sewer service is not feasible due to site -specific constraints such as topography, depth to sewer main, or distance from the public system. Grinder pump systems will be used to convey wastewater from individual properties into the public sewer system. Grinder pump units, private force mains, and related components located on private property shall be owned, operated, and maintained by the property owner. This includes the grinder pump basin, pump, control panel, check valves, shut-off valves, and all force main piping up to and including the point of connection to the City's sewer main or gravity lateral. The property owner shall be solely responsible for inspection, maintenance, repair, and replacement of the grinder pump system and associated force main on their property. Failure of a grinder pump or force main that results in a sanitary sewer overflow or damage to the public sewer system shall be promptly addressed by the property owner at their expense. The City is responsible for the maintenance and repair of the public sewer mains and appurtenances located within public rights -of -way or public easements. The City does not assume responsibility for the operation, maintenance, or repair of privately owned grinder pump systems, private force mains, or service laterals on private property. 2.7 Septic to Sewer Conversion All homes and businesses within 200 feet of a sewer main that have failing on -site systems and are within the UGA shall connect to that main in compliance with WAC 246-272A-0025. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Policies and Standards • 2-2 89 DRAFT CHAPTER 3 Service Area Characteristics 3.1 Land Use and Zoning The City is in Kitsap County along the south shore of Sinclair Inlet. The surrounding area is a combination of rural and suburban lands in unincorporated Kitsap County. The City Limits and UGA designated by Kitsap County are shown as Figure 3-1. City zoning within the City Limits and County zoning within the UGA are shown as Figure 3-2. 3.2 Topography Much of the area between Bay Street and Sinclair Inlet is built on fill. The City has many streams and ravines that are generally unbuildable. The City generally slopes towards Sinclair Inlet from south to north, with a maximum elevation of approximately 500 feet above sea level in the southwestern portion of the City. The City's topography is shown as Figure 3-3. 3.3 Geology The soils in the City consist primarily of glacial outwash, glacial till, glacial drift, volcanic ash, and glaciomarine soil. 3.4 Streams and Water Bodies Several streams flow north into Sinclair Inlet. The more prominent creeks within the City sewer service area are Blackjack Creek, Ross Creek, and Anderson Creek. Many of the streams flowing through the City are believed capable of supporting fish runs, though stream flows are often small. Several small ponds, marshes, and wetlands also exist within the City sewer service area. 3.5 Critical Areas A majority of the City area lies outside of the 100 -year floodplain. Areas within the 100 -year floodplain include the area immediately adjacent to Blackjack Creek along Arnold Avenue E, and areas near Ruby Creek near Highway 16. Several small ponds and wetlands exist within the City's UGA. Development will need to be limited or carefully planned at these locations. Figure 3-4 shows floodplains and wetlands located within the UGA. 3.6 Endangered Species Habitat Critical Habitat in the City includes the Puget Sound Evolutionary Significant Unit (ESU) Chinook salmon, which are known to inhabit the marine areas of Sinclair Inlet adjacent to the City. The Puget Sound ESU Chinook is a State Candidate for endangered species and considered threatened by the Federal Government. In addition, other species that are State Candidates for endangered species and considered threatened by the Federal Government include bald eagle, marbled murrelet, Steller sea lion, and bull trout. Coho salmon occur in most streams located in City and are considered threatened by the Federal Government. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Service Area Characteristics • 3-1 90 DRAFT 3.7 Puget Sound Water Quality Management Plan The Federal Water Pollution Control Act established the requirement for a Water Quality Management Plan. In response to this requirement, RCW 90.71 established the need for a Puget Sound Water Quality Management Plan. The stated objectives of these regulations are to recover the health of the Puget Sound waters by the year 2020. This General Sewer Plan Update is consistent with the intended goals of the Water Quality Management Plan. There has been no subsequent update to the Puget Sound Water Quality Management Plan. 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' -,1 '::i-Illllrq ►1111 �n= �i�r10� ."■'�a� � ��".1,St ;1161!+1+' �iti'"%�'•�'==; n.,aGlllllfl� II�AIU1=q►/ Illlla� 1i' �'•;,�;•�. ,� .`.� � pu_.Ilnunumlu.-.�� , ualli ,.. ■a�- }(!� Illlu[ ■■�■lrarrii�'`_ `iu�smalnllll�� ....... ��;:. �:='•:ate:.-. =�Ira� !!! DRAFT 3.8 Growth Management Act The State of Washington adopted the Growth Management Act with the intent of concentrating most new development and population gains within the urban areas of the more populous and rapidly growing counties and cities. State and local governments are required to define an urban growth area boundary within which urban services like sewers are provided, and any new parcels created outside that boundary must be at a very low density with sufficient acreage to support on -site sewage disposal systems conforming to State Department of Health regulations. Only two exceptions to the prohibitions of sewers outside the urban growth boundary are recognized under state law: ➢ Public schools outside the urban growth boundary can be served by sewers but are not required to be served. ➢ Areas of existing development outside the urban growth boundary where sufficient on -site sewage disposal systems have failed as to create a "severe public health hazard" can be served by sewers. Sewers provided in either of these cases can be satellite system limited to serving just the qualified and defined parcels, or a sewer extension can be 'tight -lined' to convey wastewater from the qualified and defined parcels into the urban growth area for connection to an existing sewer system. 3.9 Water Systems Three water purveyors provide water service within the City and the sewer service area: the City, the City of Bremerton, and WSUD. 3.9.1 City of Port Orchard The City provides water to customers within the City limits and various adjacent areas as shown on Figure 3-5. The system is supplied by six active wells into a Low Zone with a hydraulic grade line (HGL) of 260 feet, an Intermediate Zone at HGL 336, and a High Zone at HGL 391. Five reservoirs provide 4,200,000 gallons in storage. There is an intertie with the City of Bremerton HGL 256 Zone and a second to the WSUD. Two booster pump stations can move water from the Low Zone through the Intermediate Zone to the High Zone. The pipe system totals over 350,000 feet of pipe ranging from 4- to 18 -inches diameter. The McCormick Woods Water Company is owned and operated by the City and Serves McCormick Woods. The existing system has two pressure zones: the 580 pressure zone and the 660 pressure zone. The 580 pressure zone include a 1.0 MG floating reservoir and a supply well consisting of a well, two ground level reservoirs totaling 0.12 MG, and a booster pump station. The 660 pressure zone is served by a 0.9 MG floating reservoir and a booster pump station supplied from the 580 pressure zone. Pipe sizes range from 6 to 12 -inches in diameter. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Service Area Characteristics • 3-7 96 DRAFT 3.9.2 Berry Lake Manors Berry Lake Manors purchases water from the City and serves a 30 -unit mobile home park. 3.9.3 West Sound Utility District WSUD serves properties east of Blackjack Creek and generally outside the City sewer service area. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Service Area Characteristics • 3-8 97 DRAFT Figure 3-5 1 Water System Map H:\E4I r �■ 1 t LINT ■ - .. .I :, , �.. _..=«•x•11_ ■. . III. �� {{LLr r II\1�11�illlil�l!Illl�i �� ■II II :�- III'I;Iflli' '1'" � ��=ii=l��;} ■■.__�I ■+ ■ �� _ . '1= ■ 1 rte■.■n11�L�';' l:=� ,,� �1iJ i�,unllln-111 nd5cIIP:_.. iildurnnl_L P �'rr`� 3J�■� � � �;iflrlllllll�illl ■ I , • 1 r it �iy III. ■■■■'- a�■� i..■.■.ISM ` �rw GII�!" - .__�_•■_I.I�:_= �r•� •�=___..`._C-111111::- ►�■r 1� -��:---..__ � � � � � . : � - .111 I�:�/I� � ��Illlt ='., • � •-- -milli �� " r � •� � .. -, / � � _,■.+11- � � -- -I� ■ _ � ■I + � , / I 11111• ..::.`,'� Illll,.w:^I.r. I-_ -■�. I.IIII 1 ■Y■■■■ `.■ ■■-'-■��■f�■�■■III♦-1. iL. �L■ •_■>� �� ,,. -_._ILL ■i1.1. �•■111,■illll�l�l� ■L __ �� -..fl.�� _!• .■==:��■• 1 � �=��,,� � _■ � �- � ,-.:�� _,=■11;1.. --+�,I �, 'III11�:,1■�_. II_�=_��!_ !■,�� :.,. �I�f■I��■;�1ri��_11 C� ` � 1111 �/ `��.■. :111 ��m--.■- I_1�= _ :,. _ --.�:� �� - = 1 - ;�� _ - •:, ul,�`rIIIIIIIIII■-C ,11;,_.Irlllrlrlrlrlll.—. - _�_ai�--./i��a■ II!: ►ill �-`:+,.._�ti' "" L II■ ,• ■rte I-■. -■ ,• ^__IIr■li,llllli: .. "ylrFllllirrlllll . ll�lll�� ■II■r` :II[III� 1nai\\ Afil� :� c _ -.- �.: IIIIIILh_�,L=_ ■wrx� ��t ",rp�• :21r \:11..- _RA ° =_== • .■�. ■�■■r■■Illl -■:-_. :31.. ..■■I�illa r ■ • ■ 1 111 - April 2024 22-34046 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Service Area Characteristics • 3-9 98 DRAFT THIS PAGE INTENTIONALLY LEFT BLANK N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Service Area Characteristics • 3-10 99 DRAFT CHAPTER 4 Population 4.1 General Population estimates for the City's service area have been established for each sewer mini -basin for 2022, 2030, 2034, 2044, and build -out. Sewage quantities are projected and analyzed for two categories: population and employment. The methodology used various available resources to establish population estimates and projections for the purpose of sewer modeling and CIP identification. Years 2030 and 2044 are used for 6- and 20- year CIP planning purposes, respectively. The service area consists of 18 sewer mini -basins. Since these mini -basins do not include the portion of the City served by West Sound Utility District (WSUD), the service area population and employment totals do not reflect City-wide population and employment totals. Note that the City recently updated population estimates as part of the update the Comprehensive Plan, which was completed subsequent to the analysis presented in this plan. The overall growth numbers for 2044 presented in the Plan are slightly more conservative than those included in the City's Comprehensive Plan Update. 4.2 Existing Population and Employment Population and employment data broken down by mini -basin were provided the Puget Sound Regional Planning Council (PSRC) based on their VISION 2050 Regional Growth Strategy released (V2050 RGS) in October 2020. 4.2.1 Population The PSRC data was interpolated to 2022 and compared with existing sewer connections assuming 2.4 people per sewer connection. The estimates were similar in most of the basins; however, there were differences in Mini -Basins 2 and 6 due to recent construction resulting in sewer connections to homes without people currently living in them, and in Mini -Basins 8, 9, and 12, with multifamily units with a single sewer connection resulting in an underestimate of population in the basin. Therefore, PSRC data was used as the baseline population. 4.2.2 Employment 2022 served as the baseline year for the employment analysis. The PSRC provided 2022 Covered Employment custom estimates per mini -basin. Covered employment refers to positions covered by the Washington Unemployment Insurance Act, and accounts for approximately 85-90 percent of all employment. Covered employment is used in document to allocate flows in the sewer system. 4.3 Future Population and Employment The target years for the population and employment analyses are 2030 (used for six -year CIP), 2034, 2044 (used for 20 -year CIP), and build out. Assuming a constant growth rate, population and employment N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Population • 4-1 100 DRAFT estimates for target years were interpolated between the baseline and 2050 projected population provided by PSRC. A land capacity analysis was provided by the City to determine projected build out population. 4.3.1 Population Residential population estimates were interpolated for 2030 and 2034 for each mini -basin. These projections were then adjusted using information from the City on proposed developments in Mini -Basins 5, 7, and 7a. For the purposes of this plan, it is assumed these developments will occur by 2029. Additionally, A land capacity analysis was provided by the City to determine projected build out residential population. The population per mini -basin is included as Appendix D. 4.3.2 Employment Employment estimates were interpolated for 2030, 2034, and 2044 for each mini -basin based on data from PSRC. A land capacity analysis was provided by the City to determine projected build out employment. The employment population per mini -basin is included as Appendix D. 4.4 Projection Summary Population estimates are summarized in Table 4-1. Table 4-1 1 Service Area Population and Employment Estimates .. 2022 13,253 . . 7,102 2030 22,472 7,725 2034 25,317 8,037 2044 28,481 8,816 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Population • 4-2 101 DRAFT CHAPTER 5 Existing Sewer Facilities 5.1 Introduction Construction of the wastewater collection system began in the early 1960's and included a network of gravity pipes along Bay Street and a sewage treatment plant located by the marina. The treatment plant was decommissioned in the early 1980's and replaced with the Marina Lift Station that pumps the sewage in the City's sewer service area to the SKWRF. The City has continued to expand the sewer collection system to support growth. The existing City sewer system is shown as Figure 5-lError! Reference source not found., which is assembled from the historic geographic information system (GIS) files maintained by the City and supplemented with data from Kitsap County and as-builts from the City. The City has its own GIS system maintained and updated regularly. 5.2 Existing and Planned Mini -Basins A mini -basin is defined as an area from which the collection system drains to a specified discharge point. Delineations of mini -basins are based on existing sewer service and topography. Mini -basins were delineated with approval from the City and are shown in Figure 5-1 The mini -basins and lift stations are shown schematically in Figure 5-2. 5.3 Existing Sewer Piping The City owns, operates, and maintains approximately 72 miles of sewer pipes ranging from 2 -inches to 30 - inches in diameter. This includes approximately 50 miles of gravity sewers, 12 miles of force mains, and 10 miles of STEP mains. The gravity sewers and force mains are summarized in Table 5-1 and Table 5-2. For additional modeling information, see Chapter 7. The hydraulic model of the system only includes trunk lines. The length of modeled gravity mains is shown in Table 5-1. Table 5-1 1 Gravity Sewers .-1JrnTiT..- 8 -. I 12,400 I 175,700 10 11,200 20,900 12 11,600 12,300 15 20,500 22,700 16 3,300 1,800 18 2,800 3,000 24 1,200 1,900 30 200 200 Total Gravity Sewers 63,200 (^'12 miles) 262,400 (^'50 miles)2 Notes: 1. Only trunk sewers and portions of 8 -inch diameter are included in the model. 2. Total includes pipes less than 8 inches in diameter. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-1 102 DRAFT Table 5-2 I Force Mains �.irnTi 4 I 16,300 6 21,100 8 1,900 10 600 15 2,200 16 3,200 18 7,800 Total Force Mains 116,600 ("22miles)2 Notes: 1. All force mains 4 inches and greater are included in the model. 2. Total includes force mains less than 4 inches in diateter. 5.4 Existing Lift Stations The City's lift stations locations are shown on Figure 5-1 with general information regarding each station listed in Table 5-3. Station firm capacities are defined as the total pump capacity with the largest pumps out of service. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-2 103 L a ■■N —"'�1111U1111 "'� lus.� ��7t■■;`�lif�■■�� !•��ati+Li:StI ..I1� rwir'llFu -n ♦ UIII�h11� :-111117/ _ 1 1�F�1 IIIIIra► 111 1,. 11■� ��_ i +r+yl:��. ��I 11111 rr—�,�•,�� f �I�Ih�l1�' 11'►� ♦ ♦:: 'r.+ 1r. v ■ `■■ 1 , 1 r tr�I li�� rl_��r I...x� +• y11.1� '� ■i�■■ III IIIIIII[l C��it� �� r■�hir�11.�=S1►�I�� +- rr, a*1:.—�* ■■ � 1111 fllll 111 11 ilFi. �� .r��!lll 7.: Ifi;= t•: °:: 1�::_ -•• Is - 11■f- ■■ I. :1uullupl:=- ` tuwllrh 1111 111 2 11111 11=1' Ill l,li•�, m■■■= —rte �., ri■■■ ■r1■. 1R1111��1�`��• ■`1�►— r�°.::- _GIB i■�■ fir: 111111` ■--1. ` �'=s•�^ � lilln Fq leo■■■ DRAFT THIS PAGE INTENTIONALLY LEFT BLANK N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-4 105 DRAFT Figure 5-2 1 System Schematic Wastewater Treatment Plant CDLift Station Basin Gravity Main — — ► Force Main — — STEP Main 2 4 1 Ridge 1 & 2 cCorm i ck T Meadows Ridge 3 McCormick Woods 2 ilcCormic Woods 1 Haven _} partment 7 7a Albertson. WWTP lLIIHL — — 5edgwick 8 Lowe. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-5 106 DRAFT Table 5-3 1 Existing Pump Stations s . . Albertsons 350 SW Sedgwick Road ... l51P• 176 100 30 ... 176 2 . inIUD 6 Bay Street(') 1207 Bay Street 730 22 7.5 730 2 10 Canyon Court 512 Cedar Canyon Court 50 150 7.5 75(2) 3 4(3) Cedar Heights 2220 Pottery Avenue 50 150 7.5 50 2 4 Eagle Crest 1091 Eagle Crest Place 100 35 5 100 2 4(31 Flower Meadows 345 Flower Meadows Street 200 91 7.5 360 3 6 Golden Pond 385 Golden Pond Road 137 78 7.5 137 2 4(31 Harrison Hospital 444 South Kitsap Boulevard 280 110 40 280 2 6/8 Haven Apartments 4943 SW Hovde Road 560 - - 50 - - Library Lowes 150 SW Sedgwick Road 470 - - 470 - - Marina 700 Sidney Parkway 5,200 125 200 10,400 3 18 McCormick Meadows 4151 Lone Bear Lane SW - - - 200 - - McCormick Village 154 77 15 154 2 4 Eldon Trails 4888 Castleton Rd SW - - - 100 - - McCormick Woods #1 1190 Old Clifton Road 2,100 122 75 3,600 2 16 McCormick Woods #2 2200 Old Clifton Road 1,900 60 30 3,200 2 16 Pottery 2014 Pottery Avenue 1,800 75 60 1,800 2 12 Sedgwick 505 Sedgwick Road 180 165 25 180 2 6 Tremont Place 281 Tremont Place 60 23 3 60 2 4 Ridge 1&2 2476 SW Siskin Circle 200 90 15 200 2 6 Ridge 3 4383 Riflebird Place 690 95 30 690 2 4 Notes: 1. Bay Street PS has an overflow into Sinclair Inlet. 2. Firm capacity at Canyon Court is estimated based on two pumps operating in parallel. 3. Record drawings were unavailable, so a 4 -inch force main size was assumed. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-6 107 DRAFT 5.5 McCormick Woods STEP System Sewer service to McCormick Woods is provided with a STEP system. These operate like an on -site septic system by collecting sewage into a septic tank and settling out solids. However, instead of discharging the effluent to a drain field, it is pumped into a force main which discharges to gravity conveyance piping. The septic tanks need periodical cleaning to remove grease and accumulated solids. Under Utility Local Improvement District (ULID) #6, the City agreed to provide sewer service and to assume some maintenance responsibility for the STEP units. McCormick Woods Lift Station #1, McCormick Woods Lift Station #2, and associated piping were built to convey sewage to the City's sewer collection system. 5.6 West Sound Utility District Facilities The WSUD is to the east of the City's service area and extends to the north along Sinclair Inlet. The majority of the WSUD is in the Port Orchard UGA while the portion along Sinclair Inlet is outside of the UGA. WSUD owns a collection system and the SKWRF is jointly owned by the City and WSUD. WSUD operates the facility under National Pollutant Discharge Elimination System (NPDES) Permit WA -002034-6 from the Washington State Department of Ecology. The City and WSUD have an operating agreement that was initiated in 1982 and extended for an additional 25 years in 2014. The City sewer system formerly included a wastewater treatment facility adjacent to the Port Orchard Marina and the trunk sewers conveyed all flow to that location. However, in 1983, the City's treatment facility was replaced with the Marina Lift Station which was built to convey flow to the SKWRF. The SKWRF consists of three interrelated and complementary systems: ➢ Activated sludge secondary treatment system ➢ Membrane bioreactor secondary treatment system production reclaimed water ➢ Ballasted clarifier for advanced primary treatment system for peak storm flows The SKWRF has a current rated maximum month average capacity of 4.2 million gallons per day (mgd) and a peak day capacity of 16 mgd. Flows exceeding 16 mgd may be treated through the ballasted clarifier to achieve a blended effluent meeting the effluent requirements defined in the NPDES permit. The City and WSUD have agreed that this capacity is to be shared equally. The sewer service area boundary has not been defined by formal agreement but has evolved as various properties have developed and needed sewer service based on topography and guidance from the Sewer Advisory Committee, which is a committee comprised of City and WSUD staff. WSUD serves east of Blackjack Creek except for the SR 16 intersection. Eventually, the City expects to annex the entire UGA. 5.7 Pump Station Condition Assessment Consor staff visited thirteen of the City's lift stations and conducted condition assessments. Lift stations that were rebuilt within the past two years, and stations that are currently under design or construction, were not visited. During the site visits, Consor staff performed visual observation of each lift station's current components and systems. Additionally, Consor conducted informal interviews with City staff regarding station conditions and performance. TSI, the electrical engineering subconsultant, documented electrical equipment conditions and potential code violations. An assessment form was filled out for each lift station visited. To better organize the assessment results, the equipment and systems at the lift stations were arranged in several categories presented in Table 5-4. While no two pump stations are identical, they can be N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-7 108 DRAFT characterized by a standardized set of component groupings. Each component grouping was assigned a condition rating shown in Table 5-5 based on the condition assessment site visits. These condition ratings are used to make recommendations for lift station improvements in Table 5-6. Table 5-4 1 Component Group Definitions Component. . Civil . . . .. Site, roadways, sidewalks, fencing Buildings, vaults, wet wells, equipment pads Structural Pumping Systems Pumps Motors Motors associated with pumps Piping Systems Suction piping, discharge headers, drain lines, segments of on -site force main Valve Systems or Assemblies Isolation valves, check valves Support Systems Compressed air systems, potable water, fire suppression, HVAC Instrumentation Level indicators, flow meters, pressure gauges, supervisory control and data acquisition (SCADA) systems, network hardware, panel views Electrical and Power Distribution Electrical systems between MCC and main power disconnect, standby generators, transfer switches, lighting Table 5-5 1 Component Condition Scores Definitions . �- 1 Very good, well maintained, expected to remain reliable for more than 90% of the expected life. 2 Good, some degradation but performance and reliability are not significantly affected. Performance and reliability expected to remain satisfactory for 50-90% of the expected life. 3 Fair, performance and reliability are still acceptable, but some rehabilitation or replacement will be needed in the 50% +/- of the expected life. Poor, performance and/or reliability has significantly decreased, maintenance rehabilitation 4 or replacement needed to restore performance or reliability to acceptable levels. Failure (no longer functions) is likely in 10-50% of the expected life if not rehabilitated or replaced. Very poor, performance and/or reliability has significantly decreased, and failure is probable 5 within 10% of the expected life if rehabilitation or replacement is not performed. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-8 109 DRAFT Table 5-6 I Lift Station Recommendations Ilicc.iiComponent- . .. . Albertsons Assessment Not Performed - Bay Street Assessment Not Performed - ➢ Replace lift station (station under design at the time of this plan). Canyon Court Overall 2 2000 ➢ Ensure regular service logs are established and maintained for the generator. This should include conducting an annual load bank test to verify the reliability of the equipment. ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. ➢ Upgrade to wired/wireless SCADA technologies. Cedar Heights Overall 2 1987 ➢ Replace failing pump rails with 316 stainless steel rails Relocate valves to a valve vault. Eagle Crest Overall 5 - ➢ Install a flow meter if feasible. Flower Meadows Overall 2 ➢ Install a manual transfer switch and pig tail for portable generator set. ➢ Install a vault around the isolation and check valves. ➢ Replace pumps. ➢ Install flow meter. Golden Pond Overall 5 ➢ Study feasibility of pumping to Eagle Crest lift station. ➢ Install light pole. Harrison Hospital Overall 2 1994 ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. ➢ Upgrade to wired/wireless SCADA technologies. ➢ Upgrade generator and ATS. ➢ Install amp reader. Haven Apartments Assessment Not Performed - Lowes Overall 5 2008 ➢ Install flow meter. ➢ Install 2" water service.. ➢ Install site lighting. ➢ Ensure regular service logs are established and maintained for the generator. This should include conducting an annual load bank test to verify the reliability of the equipment. ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. ➢ Upgrade to wired/wireless technologies. Marina Assessment Not Performed - McCormick Meadows Overall 5 2008 ➢ Ensure regular service logs are established and maintained for the generator. This should include conducting an annual load bank test to verify the reliability of the equipment. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-9 110 DRAFT . .. ... ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. ➢ Upgrade to wired/wireless SCADA technologies. ➢ Install permanent diesel bypass pump. McCormick Village Assessment Not Performed - McCormick Woods #1 Assessment Not Performed - McCormick Woods #2 Assessment Not Performed - Pottery Overall 5 2015 ➢ Monitor site settling to determine if improvements are needed for soil stability or stormwater runoff. ➢ Install on -site backup diesel pump and/or increase storage capacity. ➢ Ensure regular service logs are established and maintained for the generator. This should include conducting an annual load bank test to verify the reliability of the equipment. ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. Sedgwick Overall 5 ➢ Install sump pump in valve vault. ➢ Raise light for the alarm and fix buttons. ➢ Install flow meter. ➢ Install explosion proof seal off. ➢ Eventually decommission lift station and install gravity sewer to Golden Pond or Tremont Place Overall 5 Eagle Crest. Ridge 1&2 Overall 5 2007 ➢ Ensure regular service logs are established and maintained for the generator. This should include conducting an annual load bank test to verify the reliability of the equipment. ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. ➢ Upgrade to wired/wireless technologies. Ridge 3 Overall 5 2008 ➢ Ensure regular service logs are established and maintained for the generator. This should include conducting an annual load bank test to verify the reliability of the equipment. ➢ Upgrade existing PLCs and OlTs with manufacture supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. ➢ Upgrade to wired/wireless technologies. Note: 1 CoF = Consequence of Failure from 1 to 5. A higher number indicates the station is more critical to system operation. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Existing Sewer Facilities • 5-10 111 DRAFT CHAPTER 6 Wastewater Flows 6.1 Introduction Wastewater flow data recorded at the SKWRF for the years of 2018 through 2022 were analyzed to determine current wastewater flow characteristics. 6.2 Existing Wastewater Flows Wastewater from the City sewer collection system is pumped through the Marina Lift Station to the SKWRF. Flow at the Marina Lift Station is recorded daily using a low flow meter and a high flow meter. There is a third flow meter at the SKWRF that records data on a one -minute interval basis. The SKWRF flows were used for the purpose of unit sewer flow calculations. Selected flow records are summarized in Table 6-1. Table 6-1 1 Wastewater Flow Summary Average Annual Flow (mgd) 1.076 1.008 1.048 1.081 1.09911) Minimum Day Flow (mgd) 1.042 0.983 1.017 1.042 0.887 Peak Day Flow (mgd) 2.086 3.492 2.417 3.284 3.639 Peak Day Flow Date 11/27/2018 12/21/2019 1/24/2020 1/13/2021 1/7/2022 Peak Day Rainfa11121 (inches) 2.11 3.00 1.38 1.53 2.9 Peak Hour Flow131 (mgd) ----- ----- ----- ----- 5.58 Notes: 1. Data for 2022 is through 3/28/2022. 2. Peak Day Rainfall is recorded for the day before the Peak Day Flow Date 3. Peak hour flow was only available for 2022. 6.3 Wastewater Unit Flows Total residential sewer flow was estimated by taking annual average sewer flows measured at the SKWRF and multiplying by the percentage of residential to total wet weather water demands. This percentage is 85 percent based on historical City water usage. Wet weather water usage does not include irrigation and is used to approximate average annual sewer flows. Total residential sewer flow was then divided by total estimated residential population to determine unit per capita flow rates as summarized in Table 6-2. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Wastewater Flows • 6-1 112 DRAFT Table 6-2 1 Residential Unit Flow • Average Annual Flow (mgd) 1.076 1.008 ILI 1.048 lii 1.081 1.099 Percentage of Residential Water Usage 85% 85% 85% 85% 85% Estimated Residential Sewer Flow (mgd) 0.915 0.857 0.891 0.919 0.934 Population 12,075 12,369 12,664 12,958 13,253 Gallons per Capita per Day (gpcd) 76 69 70 71 70 A residential sewer rate of 70 gpcd is used for planning purposes. This is similar to other communities in the Puget Sound area. The remainder of the average annual flow is estimated to be from commercial, industrial, and governmental sources. Per employee wastewater rates are summarized in Table 6-3. A per employee sewer rate of 22 gallons per employee per day (gped) will be used for planning purposes. Table 6-3 1 Employee Unit Flow 6.4 Infiltration and Inflow Infiltration and inflow (I/I) is the wastewater component consisting of stormwater surface runoff entering the sewer system and infiltration from storm -saturated ground conditions. Inflow is runoff entering the sewer directly, typically from storm sewer connections, basement sump pumps, roof drains and submerged manholes. Infiltration occurs as groundwater leaks into the sewer system through cracked or broken pipes and manholes, or through loose joints and connections. Quantifying I/I is important in determining the peak day and peak hour flows through the system. They can vary significantly due to changes in groundwater tables, intensity of rainfall, duration of rainfall, and when the peak of the rain event occurs during the day. Calculated I/I rates are presented in Table 6-4. A slightly more conservative I/I rate of 1,100 gallons per day per acre (gpd/acre) is used for planning purposes. Table 6-4 I Infiltration and Inflow iriiiri Peak Day Flow (mgd) 2O1: 2.086 3.492 •.4I 2.417 AI 3.284 3.639 Average Annual Flow (mgd) 1.076 1.008 1.048 1.081 1.099 Peak Day Infiltration and Inflow111 (mgd) 1.009 2.484 1.369 2.203 2.540 Sewered Area12 (acres) 2,349 2,349 2,349 2,349 2,349 Infiltration and Inflow (gpd/acre) 430 1,057 583 938 1,081 Notes: 1. Peak day infiltration and inflow was calculated by subtracting the average annual flow from the peak day flow. 2. Sewered area is the area of all parcels and right-of-way adjacent to a sewer line. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Wastewater Flows • 6-2 113 DRAFT The Environmental Protection Agency (EPA) publication 'Infiltration/Inflow — I/I Analysis and Project Certification' dated May 1985 was reissued by the Department of Ecology as Ecology Publication No. 97- 03. This publication established the following thresholds for possibly excessive infiltration and inflow: ➢ If average dry weather flow is less than 120 gpcd, infiltration is non -excessive. ➢ If average wet weather flow is less than 275 gpcd, inflow is non -excessive. The average dry weather and wet weather flows are summarized in Table 6-5. The average dry weather flows indicate that infiltration is non -excessive. The average wet weather flows indicate that inflow is non - excessive. Table 6-5 1 EPA/Ecology Excessive I/I Criteria •1.11: Population 12,075 21W 12,369 1IAI 12,664 AI1 12,958 AI 13,253 Average Dry Weather Flow (mgd) 1.02 0.90 0.96 0.88 0.88 Average Dry Weather Flow (gpcd) 84 73 76 68 66 Average Dry Weather Dates111 3/9-3/12 2/25-3/5 3/31-4/4 11/30-12/3 1/21-1/27 Average Wet Weather Flow121 (mgd) 1.86 2.02 2.07 2.37 2.62 Average Wet Weather Flow (gpcd) 154 164 163 183 197 Notes: 1. Dry weather flows are the average flow on days where no rainfall has occurred during a season of high groundwater. 2. Wet weather flows are the average of the seven highest flow events per year. 6.5 Peaking Factors Comparison of the maximum day events recorded in recent years defines the peak day factors experienced by the City sewer system summarized in Table 6-6. Table 6-6 1 Peak Day Factor Peak hour flows based on flow meter data at the SKWRF are summarized in Table 6-7. Hourly data was only available for 2022. Table 6-7 I Peak Hour Factor N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Wastewater Flows • 6-3 114 DRAFT 6.6 Diurnal Curves Typically, sewer flows are lowest at night and highest during the morning and evening. This distribution of flow throughout the day is described by a diurnal curve. These curves are used by the computer model to simulate flow variations throughout the period being modeled. Two curves are used to vary flow throughout the day: one for the sanitary sewer component, and one for the I/I component. The sanitary sewer diurnal curve was calculated by normalizing hourly flow on a day with a similar flow to the average annual flow. The I/I curve was calculated by taking peak day flow on an hourly basis, subtracting the average annual flow, and normalizing the results. The sanitary and I/I diurnal curves are presented as Figure 6-1. For future model runs, the I/I curve was shifted to align peak sanitary and peak I/I flows to simulate peak flows to the system. The shift increases the peak hour factor to approximately 6.037. This is a conservative approach since a major storm flow may occur at any time of the day. Existing model runs were used for calibration purposes and do not utilize the shifted I/I curve. Figure 6-1 1 Diurnal Curves 2.50 2.00 0 1.50 LL N N E O 1.00 0.50 0.00 OOP OOP OOP OOP OOe� OOe� OO�� OO�� OOP °) Dry Weather Sewer --- Infiltration/Inflow Infiltration/Inflow (Shifted) 6.7 Industrial Connections The former Kitsap County Landfill, located within the South Kitsap Industrial Area (SKIA), has been closed and capped. Leachate from the facility is trucked to the City sewer system and discharged into a manhole N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Wastewater Flows • 6-4 115 DRAFT in Bay Street and SW Wilkins Drive. The State Waste Discharge Permit No. 5T0007271 is included as Appendix E. 6.8 Projected Wastewater Flows Wastewater flows are projected to future conditions based on the land uses established by current zoning for the future service area. Existing unit flows documented in the previous sections are assumed to remain constant throughout the planning horizon. A summary of unit flows and projected flows for the planning horizon are shown as Table 6-8. A breakdown per basin is included as Appendix D. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Wastewater Flows • 6-5 116 DRAFT Table 6-8 1 Projected Wastewater Flows fr I ., 2022 13,253 70 7,102 22 1.08(2) 1,100 2,334 3.65 6.79 2030 22,472 70 7,725 22 1.22 1,100 2,810 4.83 8.79 2034 25,317 70 8,037 22 1.32 1,100 2,991 5.24 9.49 2044 28,481 70 8,816 22 1.56 1,100 3,195 5.70 10.29 Build Out 30,693 70 10,678 22 2.14 1,100 3,282 5.99 10.76 Notes: 1. Peak hour flows were calculated by shifting the I/I curve to maximize peak hour flows as described in Section 6.5. This results in a more conservative peak hour factor than calculated in Table 6-6 2. 2022 Average annual flow in this table is calculated from residential and employment numbers and respective per capita flows. This results in a value that is slightly different than the recorded flows documented in previous tables. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Wastewater Flows • 6-6 117 DRAFT CHAPTER 7 Conveyance System Analysis 7.1 Introduction Analysis of the City's wastewater conveyance system is a critical component in determining the ability of the existing infrastructure to accommodate future growth. This chapter describes the analysis necessary for strategic, long-term infrastructure planning and development of the Capital Improvement Plan (CIP). The system was analyzed for existing conditions (2022), a six -year planning horizon (2030), a 10 -year planning horizon (2034), a 20 -year planning horizon (2044), and the theoretical build -out conditions. 7.2 Model Software InfoSWMM 15.0 by Innovyze was the hydraulic modeling software used to model the City sewer system. InfoSWMM 15.0 is a dynamic hydraulic model that uses the EPA Stormwater Management Model (SWMM) version 5.1 computer program for the hydraulic analysis calculations. The model is designed specifically for modeling urban sanitary and combined sewer systems. The current version operates within an ArcGIS (ArcMap) platform. 7.3 Model Development The original model was developed as part of the 2016 General Sewer Plan update. This model has been updated to reflect changes to the system using GIS data and as -built drawings. The City's conveyance system was analyzed using a truncated model, simulating only trunk and interceptor gravity mains and all pump stations. This allows for an accurate representation of the most critical components of the City's conveyance system, and the simultaneous analysis of both gravity and pressure systems. The following information was used in developing the hydraulic model of the existing sewer collection system. Additional details on the existing sewer system are included in Chapter 5. 7.3.1 Gravity Sewers The original model invert elevations were obtained using light detection and ranging (LIDAR) information for rim elevations and depth to invert provided by the City. Record drawings were used to suplement evaluate pipe invert elevations in areas where abnormal or adverse grades were present. Engineering judgement was used to estimate elevations based on adjacent pipe slopes and depths in the event no other information was available. Additions to the sewer system since 2016 have been added to the model using GIS data and as -built drawings. 7.3.2 Lift Stations In the original model, nodes representing lift station wet wells were added to the model from the information provided by the City. Pump curves were added to simulate pump operation. Wet well N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Conveyance System Analysis • 7-1 118 DRAFT dimensions are modeled based on lift station data sheets maintained by O&M staff. Modeled pumping rates were compared against factory pump curve data when available so that the model outputs were within a range of reasonably expected values. Data for some of the smaller lift stations was unavailable. Engineering judgement was used to estimate depth, wet well size, and pump curves. Because these smaller lift stations represent a fraction of the flows, this does not significantly impact the results of the model. Model scenarios for 2030, 2034, 2044, and build -out are assumed to have a new Marina Lift Station and Sidney South Lift Station constructed. 7.4 Model Loading Wastewater flow is represented in the model by two separate elements: average dry weather flow (DWF) and I/I. All flow is loaded to model nodes which represent manholes in the gravity system. 7.4.1 Average Dry Weather Flow Existing and projected DWF flow rates were developed for each basin on a gpd/acre basis using the following information: ➢ Population and employment data and projections (described in Chapter 4) ➢ Existing measured flow rates (described in Chapter 6) ➢ Unit sewer flows (described in Chapter 6) ➢ Diurnal curves (described in Chapter 6) ➢ Mini -basin areas (described in Chapter 5) The total DWF for each mini -basin is distributed among each node in the mini -basin on a flow per unit area basis for nodes identified in each basin. The contributing area for each node is determined using Thiessen polygons. The size of each polygon is determined by the mini -basin boundary and the distribution of nodes in the mini -basin. 7.4.2 Infiltration and Inflow (I/I) Existing and projected I/I rates were developed on a gallons/acre basis using the following information: ➢ I/I (described in Chapter 6)) ➢ Diurnal curves (described in Chapter 6)) ➢ Mini -basin areas (described in Chapter 6) ➢ Sewered areas (described below Chapter 5) Total I/I for each basin was calculated using the unit I/I rates described in Chapter 6 and approximate area contributing to the sewer system. The existing sewered area was derived from the area of parcels and rights -of -way adjacent to existing sewers and was adjusted based on engineering judgment and knowledge of the sewer system. Build -out sewered area was calculated by taking the existing sewered area and adding the net developable area from the Kitsap County Updated Land Capacity Analysis (ULCA) plus 54 percent for right-of-way and public and quasi -public facilities based on assumptions in the ULCA. Sewered areas for 2030, 2034, and 2044 were interpolated between existing and build -out sewered areas by calculating the change in sewered area divided by the change in population between existing conditions and build -out conditions, which is approximately 3,300 sf per person and includes parcels, right-of-way, and other public facilities. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Conveyance System Analysis • 7-2 119 DRAFT Similar to DWF loading, model I/I loading was assigned to nodes based on a flow per unit area basis for each node using the Thiessen polygon method. Determining how I/I is projected into the future as the collection system expands and ages is a key issue. Based on the King County Regional Infiltration/Inflow Control Program, a widely accepted assumption in Western Washington is to increase the I/I component of sewer flow by 7 percent per decade, up to a maximum of 28 percent. Much of the City's existing sewer collection system was built 40 years ago or more and has reached the maximum I/I rate. Newer infrastructure typically has lower rates of I/I. As the sewer system expands with new construction, it is likely that the I/I rate will remain the same or drop due to improved materials and construction. Therefore, a constant I/I rate was assumed for future I/I projections. For future model runs, the I/I curve is shifted to align with the peak of the DWF diurnal pattern to maximize flows to the system, effectively increasing the peak hour factor (see Figure 6-1). This is a conservative approach since a major storm flow may occur at any time of the day. Existing model runs were used for calibration purposes and do not utilize the shifted I/I curve. 7.5 Model Calibration Model calibration is the process of adjusting model parameters so that simulated flows adequately match observed flow. The model was calibrated using the flow meters at the SKWRF and Marina Lift Station. 7.5.1 Calibration to Recorded Flow Data 7.5.1.1 Average Annual Flow Calibration The first step in calibrating the model was to compare simulated DWF to measured average annual flow data. After the modeled DWF volumes were verified, diurnal flow patterns developed from measured flow data were loaded and adjusted until the variations in simulated flow throughout the day reasonably matched the measured average annual flow conditions. The model was calibrated to within 3 percent of the observed average annual DWF which is within acceptable tolerance for modeling analysis. 7.5.1.2 Peak Day Flow Calibration Peak day I/I was loaded into the model and simulation results were compared with the peak day flow at the Marina Lift Station. The simulated flow volume was compared with the measured flow volume during peak days to assess if model loading reasonably matched the field data. The model was calibrated to within 2 percent of the observed peak day flows which is within acceptable tolerance for modeling analysis. 7.5.1.3 Peak Hour Flow Calibration The peak day flow occurred on January 7, 2022. The model was calibrated to within 4 percent of the daily flow, and 10 percent in the peak hour flow for this event. This is within acceptable tolerance and the model is suitable to use for system analysis. 7.6 Future Sewer System Expansion Future sewer system expansion was modeled by adding flow from future population growth into the existing system model. Future sewer pipes and lift stations, with the exception of the Sidney South lift station, were not modeled, and future flows were loaded to the existing system. It is recommended that the City model future planned infrastructure subsequent to the plan to gain an understanding of sizing requirements. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Conveyance System Analysis • 7-3 120 DRAFT It is anticipated that most of the future infrastructure into unsewered areas will be constructed by developers. Due to the topography, some new developments may require lift stations. These were not modeled, but are shown in Chapter 8. 7.7 Modeling Scenarios Five scenarios were developed to analyze the City's wastewater conveyance system utilizing the population and unit flow projections described in Chapter 4 and Chapter 6 and are summarized in Table 7-1. Table 7-1 1 Projected Wastewater Flows (mgd) Average Annual 1.08 1.74 1.95 2.19 2.37 Peak Day 3.65 4.83 5.24 5.70 5.98 Peak Hour 6.79 8.79 9.49 10.29 10.74 7.8 Hydraulic Modeling Analysis 7.8.1 Design Capacity The design capacity of the gravity mains is 100 percent depth (1.0 d/D ratio, where d is the flow depth and D is the pipe diameter). The maximum design capacity of STEP mains and force mains are exceeded when flow velocities are greater than 8 feet per second (fps). The firm capacity of a lift station is defined as the capacity of the lift station with the largest pump out of service. When model simulation results exceed these design capacities in piping or in lift stations, they are identified as deficient and system improvements are identified to resolve them. 7.8.2 Results The results of the modeling analysis are summarized in this section. Assets that were modeled as failing the criteria for the planning horizons are shown in Figure 7-1. Additionally, the total counts of simulated sanitary sewer overflows (SSOs) and surcharged gravity pipes are included in Table 7-2. The pipe surcharge shown in Table 7-3 and Figure 7-1 flags any gravity pipe whose end node has a water surface elevation greater than the crown of the pipe at that node connection. Force mains are only considered under capacity if they fail the velocity criteria. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Conveyance System Analysis • 7-4 121 ■!t■ I NINE iEIuII ___ ilJj1ui ' *.u!j .1l ii •r11 -II-'�� E■ Ill i►rill uuri-�11 IIIIIIIf■—� _� gE11 III! nle,_ ,I„_E1R flllllflll lli.�� 71111;,11[ �` IIII!■1111111 =Lill■III■nw ��-1��■ 7J11C IIII! IIIN:r11NI DRAFT Table 7-2 1 Pipe and Manhole Capacity Criteria 2022 0 0 0 2030 0 2 0 2034 0 2 0 2044 0 16 0 Build -Out 5 29 1 The model simulated peak hour flow for each lift station is shown in Table 7-3. These results indicate that the Flower Meadows Lift Station exceeds capacity in the 2044 planning horizon. A Capital improvement project is recommended to increase the capacity at this station. Table 7-3 1 Lift Station Capacity and Peak Hour Inflows Albertsons 176 108 10 10 10 10 Bay Street 730 514 531 544 572 607 Canyon Court 105 76 101 98 105 100 Cedar Heights 50 15 16 16 17 22 Eagle Crest 100 27 28 30 34 54 Flower Meadows 360 300 328 340 [370] [383] Golden Pond 137 56 59 60 64 64 Harrison Hospital 280 80 87 90 98 99 Haven Apartments 560 103 121 121 121 117 Lowes 470 181 185 225 231 201 Marina 10,400 4,754 5,300 5,397 6,127 6,533 McCormick Meadows 200 65 67 68 70 70 Eldon Trails 100 40 46 49 57 57 McCormick Woods #1 3,600 2,195 2,602 2,654 2,764 2,766 McCormick Woods #2 3,200 907 1,433 1,760 1,887 1,888 Pottery 1,800 828 1,393 1,342 1,663 1,655 Sedgwick 180 54 71 97 113 114 Tremont Place 70 49 67 69 69 69 Ridge 1&2 200 84 87 88 92 92 Ridge 3 690 75 77 78 81 81 Note: Flows exceeding the firm capacity are bracketed and in bold italics. 7.9 Capital Improvement Plan Model Runs Model runs were performed with improvements to both lift stations and pipe sizes to remove minor flow restrictions and to size improvements. These improvements are described in Chapter 8. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Conveyance System Analysis • 7-6 123 DRAFT CHAPTER 8 Collection Facilities Improvements 8.1 Introduction This chapter provides a compilation of specific projects, improvements, and programs the City should implement to alleviate the deficiencies identified in Chapter 7. These projects are derived primarily from the system analysis and discussions with the City's C&M and engineering staff. Each project is accompanied by a planning level opinion of probable project cost (OPPC) and a schedule identifying when the project is anticipated to begin and end. The City should review the CIP periodically to adjust for significant changes in the priority of each project, its cost, and scope. Collection facilities improvement projects for the City wastewater system are categorized into the following seven categories: ➢ Replacement: Improvements replace existing infrastructure. ➢ Upgrade: Improvements upgrade or add to existing infrastructure but do not replace existing infrastructure. ➢ Capacity: Improvements classified as insufficient in capacity are determined based on whether or not the infrastructure can effectively convey the incoming flow. Gravity sewer pipes are considered to have insufficient capacity when the pipe is full or surcharged. Force mains are considered to have insufficient capacity when the velocities exceed 8 feet per second. Lift stations are considered to have insufficient capacity when inflow exceeds the flow produced by the lift station with the largest pump out of service. As described in Chapter 7, the conveyance system was evaluated using existing flows and flows projected for 2022, 2026, 2036, and build -out conditions. The evaluations determined system deficiencies when subjected to these existing and future flow conditions. Following identification of system deficiencies, the H/H model was used to evaluate and select system improvements to alleviate the system deficiencies. ➢ Operations & Maintenance (O&M): O&M projects will rehabilitate or replace facilities identified by the City O&M staff as having unacceptably high maintenance requirements, both in terms of frequency and magnitude. ➢ Obsolescence: Improvements classified as obsolete are based on the age of the infrastructure. Mechanical and electrical equipment is expected to have a typical usable life of 25 years. Structures are expected to have a typical usable life of 50 years. Pipes are expected to have a typical usable life of 100 years. ➢ General: General improvement projects are those identified by City staff for various reasons that do not fall within any of the remaining four categories. These projects may be needed to simplify system operation, ease O&M efforts and reduce O&M costs, consolidate and/or eliminate N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-1 124 DRAFT redundant facilities, reduce, or eliminate non -critical O&M concerns, or meet ongoing sewer system management needs. ➢ Developer: Projects identified as developer dependent are needed to serve new developments but are not needed to provide continuation of service to existing customers. When possible, system improvement projects should be coordinated with other utilities to minimize disruption and reduce associated costs such as road and surface restoration. 8.2 Opinions of Probable Project Cost Opinions of probable project costs (OPPCs) for the CIP projects have been defined only to a preliminary level of design with approximate dimensions. All projects will require further definition and design refinement as part of the design process. Construction costs were estimated from bid results for similar projects in the Puget Sound area and RS Means cost data for 2023. The OPPC includes construction costs comprised of the costs to build the various components, sales tax, and contingency. The OPPC also includes "soft costs" comprised of costs for planning, surveying, engineering services, permitting, bid advertisement, contract award, and services during construction. No costs are included for financing, easements, right-of-way, or property acquisition (except for the Bay Street Lift Station). Actual costs can and will differ from the OPPC. Volatility in the bidding climate, the number of contractors bidding on a project, and their approach to bidding and completing the work will all impact actual project costs. Additional improvements required as development occurs will be funded by developers under a less definite time frame. Some further sewer extensions from the existing system will also be required to serve specific parcels within the various developments. These extensions are not included in the CIP and cannot be identified until the development plan is defined, which may occur in several phases. 8.3 Six -Year Capital Improvement Program The six -year Capital Improvement Program includes projects specifically identified due to capacity limitations or maintenance considerations. 8.3.1 Project Descriptions 8.3.1.1 CIP 6-1 Annual Preservation Replace aging and deteriorated pipes as needed to maintain integrity of the sewer system. 8.3.1.2 CIP 6-2 Marina Lift Station Construction This project is to replace the Marina Lift Station. It is under construction as of 2024 and is scheduled for completion in fall of 2025. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-2 125 DRAFT 8.3.1.3 CIP 6-3 Bay Street Lift Station Replacement The Bay Street lift station is aging and has frequent maintenance call outs. The City is planning on acquiring property on the south side of Bay Street to construct a new lift station. The existing station will be decommissioned. 8.3.1.4 CIP 6-4 Minor Lift Station Improvements This CIP is for minor improvements required at eight of the other lift stations not covered by the other projects. It is anticipated that this will be performed under Small Works contracts or by City staff. In general, minor improvements include items such as upgrading programmable logic controllers (PLCs) and operator interface terminals (OlTs), upgrading SCADA systems, installing flow meters, etc. 8.3.1.5 CIP 6-5 Port Orchard Boulevard Lift Station and Siphon Install a new siphon and lift station at Port Orchard Boulevard and Bay Street. This project is required by a culvert replacement and estuary project currently under design and development by WSDOT. This project is expected to be funded entirely by WSDOT. 8.3.1.6 CIP 6-6 Sidney Road SW Second Force Main Install 4,500 linear feet (If) of 10 -inch force main in Sidney Road SW to serve the proposed Ruby Creek Lift Station. 8.3.1.7 CIP 6-7 McCormick Woods Sewer Lift Station #3 Construct a new lift station to serve the McCormick Woods development. This project will be built and paid for by a developer. 8.3.1.8 CIP 6-8 Ruby Creek Lift Station Construct a new lift station to serve the area of Basin 7 and 7a south of Ruby Creek. This project will be located on property owned by Kitsap Transit. It is currently in the preliminary design phase and is anticipated to be funded partially by Kitsap Transit. 8.3.1.9 CIP 6-9 Sidney Road Gravity Sewer Main Extension Construct 1,600 If of 15 -inch gravity sewer to convey sewage to the Ruby Creek Lift Station and divert flow from the Albertsons Lift Station. 8.3.1.10 CIP 6-10 Bravo Terrace (Sedgwick) Lift Station Replace the Bravo Terrace lift station to accommodate future flows and replace aging infrastructure. 8.3.1.11 CIP 6-11 Bravo Terrace (Sedgwick) Force Main Replace the Bravo Terrace force main to accommodate future flows and replace aging infrastructure. 8.3.1.12 CIP 6-12 Sewer Facility Capacity Upgrades Pay the sewer utilities portion of commonly owned public works facilities that need to be upgraded due to City growth. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-3 126 DRAFT 8.3.1.13 CIP 6-13 McCormick East/Glenwood Sewer Basin Improvements Construct a new sewer to serve the Glenwood area. Sewers may include both gravity sewer and a lift station and force main. This project is anticipated to be constructed by a developer. 8.3.1.14 CIP 6-14 2029 General Sewer Plan and Sewer Rate Study Update the sewer plan in 2029 to facilitate continued planning for growth and aging infrastructure. 8.3.2 Summary The projects recommended for the six -year Capital Improvement Program (CIP) are described in Table 8-1 and illustrated on Figure 8-1. Funding sources for each CIP are shown in Table 8-2. The City has four potential funding sources: customer rates, capital facilities charges (CFCs), developer funded, and WSDOT. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-4 127 DRAFT Table 8-1 I Six -Year CIP �. 6-1 Annual Preservation I X $4,000,000 > The City has budgeted up to $4,000,000 for the six -year CIP for annual pipe replacement and rehab. 6-2 Marina Lift Station Construction X X X X X $19,400,000 > Replace Marina Pump Station. This project is currently under construction at the time of this plan. > Construct new 730 gpm lift station on new parcel > Install diesel generator with sound attenuating enclosure 6-3 Bay Street Lift Station Replacement X X $8,000,000 > Screw sucker pump ➢ Decommission existing lift station > Property Acquisition > Currently in design at the time of this plan > Tremont Place o Upgrade existing PLCs and OlTs with manufacture supported units ➢ Canyon Court o Upgrade existing PLCs and OlTs with manufacture supported units o Create backup of PLC programs and store spare parts at maintenance shop o Upgrade to wired/wireless SCADA technologies > Cedar Heights o Replace failing fiberglass pump rails with 316 stainless steel rails o Relocate valves to a valve vault > Eagle Crest o Install flow meter > McCormick Meadows o Upgrade existing PLCs and OlTs with manufacture supported units 6-4 Minor Lift Station Improvements X X $1,300,000 o Create backup of PLC programs and store spare parts at maintenance shop o Upgrade to wired/wireless SCADA technologies > Sedgwick o Install sump pump in valve vault o Raise light for the alarm and fix buttons o Install flow meter o Install explosion proof seal off > Ridge 1&2 o Upgrade existing PLCs and OlTs with manufacture supported units o Create backup of PLC programs and store spare parts at maintenance shop o Upgrade to wired/wireless SCADA technologies ➢ Ridge 3 o Upgrade existing PLCs and OlTs with manufacture supported units o Create backup of PLC programs and store spare parts at maintenance shop o Upgrade to wired/wireless SCADA technologies 6-5 Port Orchard Boulevard Lift Station and Siphon X $7,610,000 > Assumes 500 gpm lift station and siphon. WSDOT is assumed to be paying for the project. 6-6 Sidney Road SW Second Force Main X $1,300,000 > 4,500 If of 10 -inch force main for Ruby Creek Lift Station. 6-7 McCormick Woods Sewer Lift Station #3 X $1,000,000 > Construct new lift station. Located on Kitsap Tax Parcel No. 092301-4-005-2006 6-8 Ruby Creek Lift Station X X $3,275,000 > Construct new lift station. Project is entering design phase. 100% CFC funded. 6-9 Sidney Road Gravity Sewer Main Extension X X $2,290,000 > 1,600 If of 15 -inch gravity sewer in Sidney Road 6-10 Bravo Terrace (Sedgwick) Lift Station X X $2,500,000 > Replace lift station 6-11 Bravo Terrace (Sedgwick) Force Main X X $4,860,000 > Replace 8,400 LF of force main. 6-12 Sewer Facility Capacity Upgrades (PWO) X $2,000,000 > Pay for the sewer utility's share to upgrade the Public Works and Utility Billing City facility buildings. 6-13 McCormick East/Glenwood Sewer Basin Improvements X X $7,600,000 > Developer to provide lift station force main and/or gravity sewer to serve Glenwood Sewer Basin, also include pavement restoration. City to determine funding split between developer funded and CFCs. 6-14 2029 General Sewer Plan and Sewer Rate Study $350,000 > Update the sewer plan and rate study. Total $65,485,000 ➢ City portion is estimated at $54,735,000. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-5 128 F ' jJI I Ill!i!I_ILII' 1U1111L j 1111U1■'' ■■ .;... efElll1,1 ::It'- �- 1 X 11■ ■ s ■ ■! 11 ff■flll� ■ i IIII.EII�ff�ri�ftll� _� :111 _-'1.1:: ■■ 1i��1�- 111111'emu• ■«__r� �1�I� wAnm�nt •�. rr1�l,ltlr_:i ff■1� �Illll�i� � rl=+ 11► �..u.+a lilllh 111 r=�� lllllf� fll II IllI11l CC, i�ff■ Ilrfill.4=;i►11i !i t. 111anlrnnully. � � il�lnl,��l• ��. .��EIlis�= II`.'111�1111�I�- ..Ill llli■IE t�..` L ��..... 111 rills: DRAFT Table 8-2 1 Project Funding Sources Annual Preservation Marina Lift Station Construction Bay Street Lift Station Replacement Minor Lift Station Improvements Port Orchard Boulevard Lift Station and Siphon Sindey Road SW 2nd Force Main McCormick Woods Sewer Lift Station #3 Ruby Creek Lift Station Sidney Road Gravity Sewer Main Extension Bravo Terrace (Sedgwick) Lift Station Bravo Terrace (Sedgwick) Force Main Sewer Facility Capacity Upgrades McCormick East/Glenwood Sewer Basin Improvements 2029 General Sewer Plan and Sewer Rate Study 6-1 100% 6-2 35% 65% 6-3 87% 13% 6-4 40% 60% 6-5 100% 6-6 100% 6-7 100% 6-8 4% 6-9 100% 6-10 100% 6-11 100% 6-12 100% 6-13 100% 6-14 100% 8.4 20 -Year Capital Improvement Program 96% The 20 -year CIP includes projects identified to have capacity limitations after the six -year CIPs have been completed, as well as projects anticipated to be needed due to age. 8.4.1 Project Descriptions 8.4.1.1 CIP 20-1 Flower Meadows Lift Station Upgrade The Flow Meadows lift station does not have a connection for a generator. The valves are directly buried and difficult to access. The pumps are aging. The station does not have a flow meter. This project will install a manual transfer switch and pig tail for portable generator set, construct a vault around the isolation and check valves, replace the pumps for a capacity of 400 gpm to accommodate build - out flows, and install a flow meter. 8.4.1.2 CIP 20-2 Harrison Hospital Lift Station Upgrade The Harrison Hospital Lift Station needs some electrical upgrades, including PLCs and operator interface terminal (OIT). Create backup of PLC programs and store spare parts at maintenance shop. Upgrade to wired/wireless SCADA technologies. Upgrade generator and automatic transfer switch (ATS). Install amp reader. This CIP should be planned for early in the 20 -year planning horizon. 8.4.1.3 CIP 20-3 Pottery Lift Station Upgrade The Pottery Lift Station does not have adequate storage in the wet well, resulting in minimal time for operations staff to get to the site in an emergency. Install additional storage and a permanent diesel bypass pump. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-7 130 DRAFT The site also has some soil stability issues that have resulted in some differential settlement. The site should be monitored to determine if a new retaining wall or stormwater management is required to stabilize the site. 8.4.1.4 CIP 20-4 Infiltration and Inflow Study Install 10 flow meters for 6 months to locate high rates of I/I in the collection system. 8.4.1.5 CIP 20-5 Bay Street West Sewer Main Replacement Install 1,200 If of 30 -inch gravity sewer in Bay Street between Frederick Avenue and Kitsap Street 8.4.1.6 CIP 20-6 2034 General Sewer Plan and Sewer Rate Study Update the sewer plan in 2034 to facilitate continued planning for growth and aging infrastructure. 8.4.1.7 CIP 20-7: Port Orchard Boulevard Replacement Replace 5,900 If of 12 -inch gravity sewer with 18 -inch gravity sewer in Port Orchard Boulevard. Replace 500 If of 24 -inch pipe with 30 -inch pipe from Port Orchard Boulevard to Kitsap Street. 8.4.1.8 CIP 20-8 McCormick Woods Drive SW Replacement Replace 1,600 If of 12 -inch pipe with 18 -inch gravity sewer pipe between Marymac Drive SW and SW Old Clifton Road to reduce surcharging during peak hours. 8.4.1.9 CIP 20-9 SW Old Clifton Road Replace 250 If of 12 -inch gravity sewer pipe with 18 -inch gravity sewer pipe between Chanting Circle SW and McCormick Woods Drive SW to reduce surcharging during peak hours. 8.4.1.10 CIP 20-10 Marina Force Main Replace 7,900 If of 18 -inch force main with 24 -inch force main. 8.4.1.11 CIP 20-11 Canyon Court Lift Station Replacement The existing Canyon Court pump station should be replaced as the equipment ages. 8.4.1.12 CIP 20-12 Cedar Heights Lift Station Replacement The existing Cedar Heights pump station should be replaced as the equipment ages. 8.4.1.13 CIP 20-13 Eagle Crest Lift Station Replacement The existing Eagle Crest pump station should be replaced as the equipment ages. 8.4.1.14 CIP 20-14 Harrison Hospital Lift Station Replacement The Harrison Hospital pump station should be replaced as the equipment ages. This CIP should be planned for later in the 20 -year planning horizon. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-8 131 DRAFT 8.4.1.15 CIP 20-15 Lowes Lift Station Replacement The Lowes pump station should be replaced as the equipment ages. 8.4.1.16 CIP 20-16 McCormick Meadows Lift Station Replacement The McCormick Meadows pump station should be replaced as the equipment ages. 8.4.1.17 CIP 20-17 Ridge 1&2 Lift Station Replacement The Ridge 1&2 pump station should be replaced as the equipment ages 8.4.1.18 CIP 20-18 Ridge 3 Lift Station Replacement The Ridge 3 pump station should be replaced as the equipment ages. 8.4.1.19 CIP 20-19 Ravine Line Rehabilitation Replace or rehabilitate the existing gravity sewer located in the ravine between Lippert Drive and Tremont Street. The pipe is aging and is suspected to be a source of high levels of infiltration and inflow. 8.4.1.20 CIP 20-20 Annual Preservation Replace aging and deteriorated pipes as needed to maintain integrity of the sewer system. 8.4.2 Summary The projects recommended for the 20 -year Capital Improvement Program (CIP) are described in Table 8-3 and illustrated on Figure 8-2. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-9 132 DRAFT Table 8-3 1 20 -Year CIP ➢ Install manual transfer switch (MTS) and pig tail for portable generator set 20-1 Flower Meadows Lift Station Upgrade X X X $500,000 ➢ Install valve vault around the isolation and check valves ➢ Replace pumps to accommodate future flows ➢ Install flow meter ➢ Upgrade existing PLCs and OlTs with manufacturer supported units. 20-2 Harrison Hospital Lift Station Upgrade X X $248,000 ➢ Create backup of PLC programs and store spare parts at maintenance shop, ➢ Upgrade generator and ATS ➢ Install storage tank for diesel fuel 20-3 Pottery Lift Station Upgrade X X $496,000 ➢ Upgrade existing PLCs and OlTs with manufacturer supported units. ➢ Create backup of PLC programs and store spare parts at maintenance shop. 20-4 Infiltration and Inflow Study X X $120,000 > Install flow meters to support I/I analysis. Assumes 10 meters for 6 months at $2,000/meter/month 20-5 Bay Street West Sewer Main Replacement X $2,600,000 ➢ Install 1,200 If of 30 -inch pipe in Bay Street between Frederick Avenue and Kitsap Street 20-6 2034 General Sewer Plan and Sewer Rate Study $350,000 > Update the sewer plan and rate study 20-7 Port Orchard Boulevard Replacement X X $10,300,000 > Replace 5,900 LF of 12 -inch pipe with 18 -inch pipe in Port Orchard Boulevard Replace 500 LF of 24 -inch pipe with 30 -inch pipe from Port Orchard Boulevard to Kitsap Street 20-8 McCormick Woods Drive SW Replacement X X $3,500,000 ➢ Replace 1,150 LF of 12 -inch pipe with 18 -inch pipe from manhole 13-7-01 to manhole 15-7-01 Replace 450 LF of 12 -inch pipe with 18 -inch pipe from manhole 14-7-01 to manhole 25-7-01 20-9 SW Old Clifton Road Replacement X X $900,000 ➢ Replace 250 LF of 12 -inch pipe with 18 -inch pipe from manhole 738 to manhole 26-7-01 20-10 Marina Force Main Replacement X X $13,600,000 > Replace 7,900 LF of 18 -inch pipe with 24 -inch pipe from the Marina lift station to WSUD WWTP 20-11 Canyon Court Lift Station Replacement X X $2,200,000 > Replace aging lift station 20-12 Cedar Heights Lift Station Replacement X X $2,000,000 > Replace aging lift station 20-13 Eagle Crest Lift Station Replacement X X $2,000,000 > Replace aging lift station 20-14 Harrison Hospital Lift Station Replacement X X $3,300,000 > Replace aging lift station 20-15 Lowes Lift Station Replacement X X $3,300,000 > Replace aging lift station 20-16 McCormick Meadows Lift Station Replacement X X $3,300,000 > Replace aging lift station 20-17 Ridge 1&2 Lift Station Replacement X X $3,300,000 > Replace aging lift station 20-18 Ridge 3 Lift Station Replacement X X $3,300,000 > Replace aging lift station 20-19 Ravine Line Rehabilitation X X X $3,900,000 > Rehabilitate or replace 2,800 If of pipe 20-20 Annual Pipe Replacement X $11,200,000 > Annual expenditure is assumed to be $800,000. $5,600,000 will be spent over 14 years. Total $ 70,414,000 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-10 133 Fj r 7 r-1��::��lEl�■?= =?IA' ��:a��T�•• �� fir- �a�-��.' I��jlll'■,Ii:II1k�I�::IEII �== `�v_!'l+ 7�1� � 111■ ■ II II II I' I:�II I II'- �. '1'-' �_ `tea i -.'r■ w�'l�: 1 �iI]�I��II'I('i!IIE�I-.-lrll:• I� wii!!' -1t. '�■ i � i ='AI■ate-.liz- `' ■ � til��ll'�1�'�' ,�' I"'1r" f;=r°.I;ISff�.,l_;IHHHHEMEN 111 IIi: I -1 IlllRlll.1�•I ��.niiymu III t rte. ----: llli ■.m.+•.IulII I1_ rim frl IIuIIli■CC - -I•11 i1111 in Ii liz tits I1111N: L1,41 DRAFT 8.5 Sewer Extensions into Undeveloped Basins New sewer extensions will be needed to serve new developments expected in unsewered areas of the City as shown on Figure 8-3. Specific plans for the sewer extensions have not been prepared and will be the responsibility of the developer. Some of the developments shown will require local lift stations. Major land developers will be preparing site -specific plans for street layouts, residential lot distribution, commercial parcels, sensitive area delineations, required setbacks with buffers, and other land use intentions for approval by the permitting authorities. These land use decisions, and the timing of when specific parcels are developed will influence the sewer collection facilities within these basins. The City has decided that no additional STEP units will be allowed. Coordination between the City and the West Sound Utility District will be required as properties are developed along the fringes of their two sewer service areas to establish which agency will serve which properties. These sewer extensions are not expected to require significant financial investment by the City. 8.5.1 Ruby Creek Lift Station The Ruby Creek Lift Station (RCLS) and associated force main will be constructed by a developer to serve Basin 7 and the south part of Basin 7a. Consor is working on the preliminary design under a contract with the City. Flows from these basins will be diverted from the Albertsons Lift Station to the RCLS. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-12 135 III ■� __ _= C11i1�'i'l•=aft --f is • sIi■'_� =h ilI-..i��i i f11111fa•i'1 �" '•1 - a+."!Iii,III��!Rlll'7 II111H11 _ :C:_- „1 1111-_:,c ;,.,Iti�,= ■III■— • r`■■ M� -�__ ■ �:Ifnuun ��1 - -- II'!j1!I!j IMII .. mo_■=-_= X14?,...._��, I>`rr; ■ ■��■ I Rti f:i:..-C�� I 11 11 L.11111j 'II� .1111- � 1.II1� pfri ■,411■II:L IIIII:IIIrut,. iiiiiiiiiUI •• 1�� IIiP r:. �Ir■�' :111 klllliti 1� :=1a ru liunull 1111111111. �-- ■■ • 1i 11111 �- ■!�'. 11■11��sAp rte'■■■■�li � -:ll:. ■.:1r.u,r.. I =ITn=. DRAFT THIS PAGE INTENTIONALLY LEFT BLANK N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Collection Facilities Improvements • 8-14 137 DRAFT CHAPTER 9 Financial Program 9.1 Introduction This chapter presents the financial program to demonstrate the financial capacity of the City to fund the full cost to construct, operate, maintain, and manage the sewage collection and conveyance system on an ongoing basis. The following sections present the financial status of the sewer utility, potential funding sources and a plan for funding the recommended six -year capital improvement program (CIP). A six -year financial plan is presented that evaluates revenues, expenses, reserve levels, and the impact on sewer rates. An evaluation of the affordability of the City's sewer rates is summarized. This chapter was prepared by KLJ Financial Consulting. 9.2 Financial Background The City owns, operates, and maintains existing wastewater collection and conveyance facilities that serve residential and commercial customers within its current sewer service area. Residents outside of the City's service area are served by the West Sound Utility District (WSUD) or by individual septic tanks. Wastewater treatment is provided by the South Kitsap Water Reclamation Facility (SKWRF) owned jointly by the City and WSUD and operated and maintained by WSUD. The 7 -Member elected City Council governs the City and sets the utility rates, fees, and charges. The Mayor administers policy and day-to-day operations with the support of Department Management and staff. The City strives to provide high quality, reliable wastewater services at fair and reasonable rates to meet the current and future needs of its ratepayers. To establish adequate sewer rates, it is essential that the City define its benchmarks for financial performance. Per Resolution No. 053-20, the City adopted financial policies to provide the foundation and framework for sound financial management. These policies promote financial integrity and stability for the City and provide guidance and consistency for decision -making over time. Key excerpts from the City's financial policies are included to provide context in reviewing the City's historical financial performance and the Financial Program presented herein. 9.3 Financial Policies Financial policies and goals considered in the development of the Financial Program are summarized below. 9.3.1 Sewer Enterprise Fund Accounting The sewer utility is a self-supporting enterprise fund. Charges for sewer service are to be sufficient to finance all operating, capital, and debt service expenses of the sewer enterprise fund, including maintaining prudent cash reserves. The City maintains four separate funds to account for the financial activities of the N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-1 138 DRAFT sewer utility. Each fund has its own purpose and monies are deposited, transferred, or used according to the purpose: ➢ Sewer Operating Fund (431): Serves as the utility's primary operating account for depositing rate revenue and other operating revenues and for paying ongoing operating and maintenance expenses (salaries, benefits, supplies, and services), and routine capital outlay. Maintains working capital for day-to-day operating cash flow needs. ➢ Sewer Stabilization Fund (432): Serves as a cash reserve to fund a qualifying event when no reasonable budget adjustments are available to continue to provide essential services. Funding may come from one-time sewer revenues, monthly budgeted amounts from operation reserves, and transfers from ending operating fund balances as authorized by Council. Authorization for use of this reserve requires a simple majority vote of Council. ➢ Sewer Capital Fund (433): Used to pay for capital purchases and fund capital replacement and improvement projects. Monies are transferred from the operating fund on an annual basis to support funding of capital replacement projects. The City's general facility fees (GFFs) collected from new or upsized sewer connections are directly deposited into this fund. The City pursues grants and other outside funding sources, and issues debt as needed to fund the remaining project needs. ➢ Sewer Debt Service Fund (434): Serves as a holding account to collect monies throughout the year to make semi-annual or annual debt service payments and holds a restricted reserve when required by debt covenant for final payment. 9.3.2 Sewer Reserves Reserves are a necessary component of the overall financial management strategy for the City. These cash balances are maintained to 1) ensure adequate resources for cash flow, 2) mitigate short-term effects of revenue shortages, 3) leverage beneficial opportunities, and 4) address unforeseen emergencies or changes in condition. The City has established a two -tiered reserve structure for the sewer utility that includes a Working Capital Reserve and Stabilization Reserve. Additional financial policies and cash reserves recommended in this Financial Program are provided below: ➢ Working Capital (Fund 431): (per City policy) The City's goal is to maintain a minimum unreserved ending sewer operating fund balance of at least 60 days of annual budgeted operating revenues with the intent to move toward an ending fund balance target of 90 days as funding allows. Ending fund balance is considered the working capital of the operating fund and may be used to cover operating cash flow needs. The working capital target should be as of January 1 of each year, with the balance expected to vary during the year. The working capital target is established for this Financial Program to range between 60 and 90 days of annual operating and maintenance (O&M) expense, consistent with the City's comprehensive sewer rate study. Any excess funds at year end in the operating fund are planned to be transferred to the capital fund. ➢ Stabilization Reserve (432): (per City policy) A sewer stabilization reserve of 90 days (25%) of annual budgeted sewer expenditures may be maintained annually as resources allow. The reserve target is established for this Financial Program at 90 days of annual (O&M) expense. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-2 139 DRAFT ➢ Capital Reserve (433): (Recommended) In addition to protecting against variations in operating costs and revenues, it is prudent to maintain a capital reserve to manage the variability of annual capital spending needs and protect against emergency repairs. A capital reserve is a method of attempting to level out the capital funding requirements, thereby eliminating peaks and valleys in the overall revenue requirement. This reserve can vary from year to year depending upon projects anticipated and funding sources. The target for the capital reserve incorporated for this Financial Program is assumed at 2.0% of the original cost of sewer infrastructure assets. 9.4 Historical Financial Performance The sewer system's recent financial performance, as documented by the City's financial reports, is presented as a reference point for future years projections. Table 9-1 summarizes the financial history for the roll up of the four separate funds accounted for within the Sewer Enterprise Fund for the years 2021 through 2024. Table 9-1 1 Sewer System Financial History -.LI LIP AI� Beginning Cash & Investments I $5,855,242 $8,940,871 $13,696,580 $17,597,919 Revenues Rate Revenues $5,652,602 $5,860,221 $6,184,861 $6,584,744 Other Operating Revenue $137,564 $170,543 $108,377 $148,383 Investment Interest $14,617 $162,219 $655,417 $831,596 Subtotal Operating Revenues $5,804,783 $6,192,983 $6,948,655 $7,564,723 General Facility Fees (GFFs) $2,201,092 $2,753,245 $2,562,187 $3,315,443 Intergovernmental Revenue $- $- $592,630 $71,787 Intergovernmental / Other Loan Proceeds $- $253,153 $- $10,604,468 Total Revenues and Other Resources $8,005,875 $9,199,381 $10,103,472 $21,556,422 Expenditures and Other Uses Operating & Maintenance Expense $4,263,592 $3,763,666 $4,402,500 $5,112,782 Debt Service (Principal + Interest) $- $342 $17,346 $83,485 Capital Outlay /Expenditures $656,654 $679,664 $1,782,287 $11,778,539 Total Expenditures and Other Uses $4,920,246 $4,443,672 $6,202,133 $16,974,806 Net Sources: Annual Addition to/(use) of Reserves $3,085,629 $4,755,709 $3,901,339 $4,581,616 Ending Cash & Investments $8,940,871 $13,696,580 $17,597,919 $22,179,535 The sewer utility has been in balance for each of the four years with positive annual net revenues (revenues minus expenditures) ranging from $3.1 million to $4.8 million a year. The net sources translate into annual additions to reserves or (use) of reserves to meet expenditures. When revenues are greater than expenditures, the reserves are increased. When revenues are less than expenditures, reserves are used to balance the budget for the given year. Annual revenues from rates, other operating revenues, and interest earnings have been sufficient to recover operating and maintenance (O&M) expenses, meet debt service payments, fund operating reserves, and provide funding toward capital expenditures. General facilities fees and loan proceeds were used to fund the remaining capital expenditures. Sewer service charges are the primary source of ongoing revenue for the sewer utility. Sewer rates were last increased in 2020; however, rate revenues have increased from $5.7 million to $6.6 million (an average N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-3 140 DRAFT of 5.2%) over the past four years due to new customer connections. Other operating revenues include miscellaneous fees and charges, penalties, miscellaneous revenues, and interest income. Due to the variable nature of these revenues, these sources should not be overly relied on to pay ongoing O&M costs and debt service obligations. GFF collections from new connections ranged from $2.2 million to $3.3 million per year. GFF revenues vary from year to year depending on development activity. Total operating revenues increased from $5.8 million to $7.6 million over the 4 -year period, about a 9.2% average annual increase. Total O&M expenses increased at an average annual rate of 6.2%, ranging from $3.8 million to $5.1 million. New debt service began in 2022 based on loan draws and ranged from $342 to $83,485. Capital spending ranged from $656,654 in 2021 to $11.8 million in 2024, primarily for the Marina Lift Station project. Average annual capital spending over the past 4 years was $3.7 million. The City has kept reserves in line with best practice and established financial policies to manage emergencies and unforeseen changes in revenues and expenditures without affecting system sustainability or customer rates. Table 9-2 presents the sewer system cash balances as of December 31 for each of the past 4 years compared to cash reserve policies. The surplus shown at year end represents cash resources available to fund capital projects and/or build reserves for future capital spending. Table 9-2 1 Sewer System Cash and Investments Ending Cash & Investments Sewer Operating (431) $3,971,754 $5,908,675 $7,766,166 $8,744,083 Sewer Stabilization (432) $987,534 $1,446,270 $1,521,909 $1,703,655 Sewer Capital (433) $3,706,582 $5,782,756 $7,446,696 $10,204,969 Sewer Debt Service (434) $275,001 $558,878 $863,148 $1,526,829 Total Ending Cash & Investments $8,940,871 $13,696,580 $17,597,919 $22,179,535 Target Minimum Cash Balance Sewer Operating Reserves (90 days of O&M) $1,051,297 $928,027 $1,085,548 $1,260,686 Sewer Stabilization Reserve (90 days of O&M) $1,051,297 $928,027 $1,085,548 $1,260,686 Sewer Capital Reserves (Stated $ Amount) $500,000 $500,000 $500,000 $967,622 Total Target Minimum Cash Balance $2,602,593 $2,356,055 $2,671,096 $3,488,994 Surplus (Deficiency) Compared to Target $6,338,278 $11,340,525 $14,926,824 $18,690,541 9.5 Outstanding Debt The sewer utility has three approved Public Works Board (PWB) loans and one Department of Ecology (DOE) loan. Covenants for these loans do not require a separate restricted reserve to be held for final payment. The sewer utility has a Debt Service Fund (434) that holds deposits from the operating and capital funds for payment of annual principal and interest amounts. Table 9-3 summarizes the existing debt issues and current outstanding debt. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-4 141 DRAFT Table 9-3 1 Sewer System Outstanding Debt Loan Debt Public Works Board - Pottery Lift Station Repairs (085-21) $253,153 0.94% 20 yrs Public Works Board - Sewer Lift Station (090-21) $825,000 0.94% 20 yrs Public Works Board - Bay Street Lift Station Preconstruction $850,000 0.69% 5 yrs Department of Ecology - Marina Pump Station (068-21) $13,000,000 2.60% 30 yrs Total Loans $14,928,153 General Obligation (GO) Bonds Sewer Share of City Hall Remodel (7%) $750,050 5.00% 20 yrs Total GO Bonds $750,050 Total Debt Issues $15,678,203 Outstanding Debt Principal Drawn Proceeds $12,272,088 Debt Principal Paid $(56,571) Outstanding Balance on Drawn Proceeds $12,215,517 Outstanding Balance on Total Debt Issues $15,621,632 By year-end 2024, $15.7 million in new debt was approved, with $12.3 million drawn. The outstanding balance on drawn funds is $12.2 million, and the outstanding debt for all issues is $15.6 million. 9.6 Current Rates and Charges 9.6.1 Bi-Monthly Sewer Rates The City bills customers every two months (bi-monthly) for sewer service. The treatment services costs are included as a line item within the sewer operating expenses budget and included in the City's sewer rates to customers. The wastewater treatment costs are based on an equivalent residential unit (ERU). The City's sewer rate schedule includes 21 classes of customers with definitions and charges based on ERUs or portions thereof. Sewer rates were last adjusted on January 1, 2020. The bi-monthly sewer rate and customer bill for single-family residential customers is $163.00 every two months. A comprehensive sewer rate study is underway that includes an evaluation of the existing sewer rate structure to determine if modifications to the structure are warranted based on current customer demographics and usage characteristics. 9.6.2 Sewer Capital Facility Charges The sewer capital facility charges (CFC) are designed to mitigate the impact of new demands on the existing sewer system and to require new users to pay their fair share of the cost of the sewer collection and conveyance system and wastewater treatment facility. The charge applies to new construction, changes in use, and building modifications that increase the total number of ERUs. An ERU is defined as 180 gallons per day for nonresidential connections. An ERU for residential connections is one single-family residential unit, whether detached or attached and configured as an apartment unit, condominium unit, townhouse unit or any other configuration. The ERU consumption is based upon metered winter period water consumption. The sewer CFCs include two components: N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-5 142 DRAFT ➢ Sewer General Facility Fee (GFF): A charge per ERU intended to recover the cost of the City - owned collection and conveyance facilities. This fee is established and collected by the City for deposit into the capital fund. ➢ Wastewater Treatment Facility Fee (WTFF): A charge per ERU intended to recover the cost of the wastewater treatment facilities Jointly owned by the City and West Sound Utility District (WSUD). This fee is established jointly by the City and WSUD and collected by the City as a pass through to the WSUD. Table 9-4 presents the current schedule of capital facilities fees. Table 9-4 1 Sewer System Capital Facility Charges In addition to the GFF, inspection and other connection -related fees are assessed as required by the City code. City Ordinance No. 027-20 relating to water and sewer capital facility charges includes a provision for updating the charges to reflect annual changes within the All -Urban Consumers Price Index (CPI) for the Seattle -Tacoma -Bremerton area, provided that the charges have not been adjusted by the City Council during the previous six-month period. This provision applies to the sewer GFF and not the WTFF. A study of the sewer GFF is underway to review the methodology used to derive the current fee and to incorporate the recommended collection system capital improvement projects identified in this Plan. 9.7 Capital Improvement Funding The City has used a variety of capital funding sources over the years including Utility Local Improvement Districts (ULIDs), Public Works Board and Department of Ecology loans, rates, charges, and reserves. The following programs and sources are described for potential funding of sewer collection system improvements identified in this Plan. 9.7.1 Funding Assistance Programs With the Coronavirus Covid-19 pandemic, there have been several federal aid programs with funding available to support sewer infrastructure, such as the coronavirus state recovery fund, American Rescue Plan Act (ARPA)and Bipartisan Infrastructure Law (BIL). This federal aid is a 5 -year infrastructure spending plan (2022-26) targeted to existing funding programs, such as the Clean Water State Revolving Fund managed by the Department of Ecology. The Association of Washington Cities (AWC) is tracking opportunities for cities with the BIL. See www.wacities.org for more information. The primary capital funding source for sewer systems includes grants and mostly loans from the Washington State Department of Ecology (Ecology) Water Quality Combined Program. This program is an integrated funding program for projects that improve and protect water quality throughout the state. Projects include wastewater, stormwater, nonpoint source activities, and on -site sewage systems. There is an annual single -application process to award funding from multiple sources all at once, through a N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-6 143 DRAFT competitive ranking system. The amount of funding available varies based on the state budget ranging from $100 million to $200 million per year. Award limits vary depending on the funding source and project type. Types of funding that make up the program include: ➢ Clean Water Section 319 Grants ➢ Centennial Clean Water Program Grants ➢ Clean Water State Revolving Fund (CWSRF) ➢ Bipartisan Infrastructure Law (BIL), including Emerging Contaminants ➢ Sewer Overflow and Stormwater Reuse Municipal Grants (OSG) ➢ Stormwater Financial Assistance Program Grants (SFAP) ➢ Stormwater Community -Based Public -Private Partnerships (CBP3) ➢ Stormwater Grants of State Significance (GROSS) State fiscal year 2027 funding applications will open earlier than usual, on July 22, 2025, and close on September 3, 2025. Final funding offers will be made July 2026. Due to the change in application timing, DOE will allow prerequisite documents to be submitted until October 10, 2025, but encourage submission of documents with the application. To find current program details, see www.ecology.wa.gov and search grants and loans for Water Quality Combined Funding Program. The Public Works Board Traditional (PWB) Program offers competitive pre -construction, construction, and emergency loans with low interest rates. This Program is available for funding drinking water, sanitary sewer, and stormwater capital projects. The 2025-2027 biennium begins July 1, 2025 and ends on June 30, 2027. The maximum amount of funding for any jurisdiction is $10 million per biennium across all three funding programs. Jurisdictions who experience emergencies during the biennium may receive up to $2 million in emergency construction funding beyond the $10 million cap. Current availability, application dates, amounts and terms should be verified prior to seeking funding. For additional programs details, interest rates, and affordability criteria see www.pwb.wa.gov. PWB pre -construction activities include, but are not limited to, capital facilities planning, design engineering, bid -document preparation, environmental studies, and right-of-way acquisition. The pre - construction funding program has approximately $7.5 million available for FY26 and $7.5 million for FY27. Pre -construction applications are open continuously, and pooled and awarded quarterly until all funds are expended. Funding cycles for Summer 2025 include review of application received May 9, 2025 to August 8, 2025, with award anticipated in October 2025. Pre -construction loans have a maximum of $1 million per jurisdiction per biennium. The PWB construction funding program focuses on projects that repair, replace, or construct a facility. A construction project may comprise any combination of pre -construction and construction elements. The construction funding program has about $100 million available for FY26. The funding cycle for FY 26 is open from May 9, 2025 to August 8, 2025. Construction loans have a maximum of $10 million per jurisdiction per biennium. The PWB emergency funding program focuses on the projects that repair, replace, and/or reconstruct a facility that will restore essential services and are made available by a natural disaster, or an immediate and emergent threat to the public health and safety due to unforeseen or unavoidable circumstances. Funding may include low -interest or free loans or grants to emergency public works projects. The emergency funding program has approximately $7.5 million available for FY26 and $7.5 million for FY27. Applications are open continuously until all funds are expended on a first -come, first -serve basis. Emergency loans have a maximum of $1 million per jurisdiction per biennium, except in catastrophic conditions. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-7 144 DRAFT Other funding sources include the Washington State Department of Commerce energy efficiency grants, and the Community Economic Revitalization Board (CERB) program geared to infrastructure improvements for job creation. On the federal assistance side, there is the United States Department of Agriculture -Rural Development Program (USDA -RD) that provides low -interest loans with potential grant subsidy for sewer systems in communities up to 25,000. There is also a United States Economic Development Administration (USEDA) with a Public Works grant and loan program available. Community Development Block Grant (CDBG) is another federal program, managed at the State Department of Commerce, with limited grants for improvements that benefit low to moderate income customers. There is an infrastructure funding program database provided by the Infrastructure Assistance Coordinating Council (IACC). This can be accessed on the web directly at www.infrafunding.wa.gov. This database is helpful in determining which funding assistance programs may be available at the time the City is considering a project and how to contact the agencies. 9.7.2 Local Funding Sources Sewer rates may provide an ongoing level of funds for planned capital repairs, rehabilitation, and replacements. The use of rate revenue is appropriate for repair and replacement (R&R) of the sewer system to serve existing customers. GFFs from new connections may be used to fund capital R&R, upgrades, and expansions to the sewer system. The City can borrow from the above -mentioned financial assistance programs and/or issue revenue bonds. The resulting debt service would be paid by rates, and in some cases, by the GFF. The City's practice has been to assign a percentage of the debt service to be funded by the GFFs for the growth -related portion of certain projects funded by debt. The City has the option to complete area -specific capital projects with reimbursement as new development occurs in that area through a special connection charge. The City also has the option to establish a ULID where the properties specially benefiting from an infrastructure investment pay their share through an assessment. Certain capital projects might be the responsibility of developers to connect their property to the sewer system. When developers complete approved infrastructure projects the infrastructure is deeded to the City. The developer can negotiate a latecomer agreement with the City for reimbursement by new development making use of the facilities constructed by the developer for a specified period allowed by state law. In certain instances, on a case -by -case basis, such as when additional capacity is provided by a developer -funded project, the City may opt to participate in a cost sharing mechanism. Other outside funding sources may be available for specific projects such as funding from the Washington State Department of Transportation (WSDOT) or Kitsap Transit for projects completed in conjunction with these agencies. 9.7.3 Affordability The affordability measure for sewer systems in Washington State is based on the ratio of monthly sewer cost compared to the median household income (MHI) for the area served. The Ecology water quality programs and the Public Works Board (PWB) Traditional Program are the primary funding assistance agencies for sewer. Both agencies define the sewer affordability index as 2.0% of MHI. These programs are typically targeted toward residential customers. If the cost of sewer service is higher than the 2.0% threshold, the community would be considered in hardship and could be eligible for financial assistance in the offer, resulting in a grant (subsidy), a lower interest rate loan, or a combination of the two. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-8 145 DRAFT Ecology includes an appendix each year in the Combined Water Quality Funding Assistance Program Guidelines with the median household income (MHI), population, and hardship eligibility (Appendix M for State Fiscal Year 2026, published August 2024). The estimated MHI for the City of Port Orchard is $82,650. The threshold for hardship at 2.0% of monthly MHI would be sewer rates of $137.75 per month ($275.50 per 2 -month period). As illustrated in Table 9-5, the City's current single-family residential bi-monthly sewer bills are well within the range of affordability and would not be considered in hardship. Note that the hardship calculation for any future loan would include the anticipated new debt payments and the sewer rates in effect at the time of application. Table 9-5 1 Sewer System Affordability Test Affordability Test Criteria Annual Medium Household Income (MHI) $82,650 Bi-Monthly MHI $13,775 Bi-Monthly Sewer Bill Hardship Threshold at 2.00% $275.50 Affordability Test Results Single Family Residential Bi-Monthly Sewer Bill $163.00 Percentage of Bi-Monthly MHI 1.18% Affordability Hardship Designation Non -Hardship Ecology provides a separate determination of hardship for pre -construction activities. This is pre- determined by Ecology based on population and MHI and published in the same Appendix M. The August 2024 funding guidelines show the City of Port Orchard as "ineligible" for pre -construction hardship funding. 9.8 Sewer Collection Facilities Improvement Funding Chapter 8 of this Plan identifies the recommended capital improvement projects for the sewer collection system for the six -year CIP (2025-2030) and the 20 -year CIP. The Financial Program addresses the six- year CIP together with the projected capital funding plan and sewer rate outlook. 9.8.1 Six -Year Capital Improvement Program Table 9-6 displays the $54.1 million (2024$) in capital projects identified to be funded over the six -year period. The individual project cost estimates are escalated from 2024 dollars at 3.5% per year to the scheduled year of construction as shown at the bottom of the table. The total estimated planning level costs over the planned period is $60.3 million including construction cost escalation. The average annual cost is $10.1 million. During the development of this Plan, specific funding sources were identified for several of the projects listed in Table 9-6. Table 9-7 summarizes the specific sources and identifies the remaining CIP costs assumed to be funded by a combination of rates, GFFs, cash reserves, and new revenue bond issues. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-9 146 DRAFT Table 9-6 1 Six -Year Sewer Capital Improvement Program 6-1 Annual Preservation Marina Pump Station Construction $4,000,000 $500,000 $583,333 $583,333 $583,333 $583,333 $583,333 si $583,333 ' ' $3,500,000 6-2 $19,400,000 $10,789,000 $8,611,000 $- $- $- $- $- $8,611,000 6-3 Bay Street Pump Station Replacement $8,000,000 $1,000,000 $- $3,500,000 $3,500,000 $- $- $8,000,000 6-4 Minor Lift Station Improvements $1,300,000 $650,000 $650,000 $- $- $- $- $1,300,000 6-5 Port Orchard Boulevard Lift Station and Siphon $7,610,000 $- $1,522,000 $- $6,088,000 $- $- $7,610,000 6-6 Sidney Road SW 2nd Force Main $1,300,000 $1,300,000 $- $- $- $- $- $1,300,000 6-7 McCormick Woods Sewer Lift Station #3 $1,000,000 $- $1,000,000 $- $- $- $- $1,000,000 6-8 Ruby Creek Lift Station $3,275,000 $135,000 $- $3,140,000 $- $- $- $- $3,140,000 6-9 Sidney Road Gravity Sewer Main Extension $2,290,000 $- $2,290,000 $- $- $- $- $2,290,000 6-10 Bravo Terrace (Sedgwick) Lift Station $2,500,000 $- $- $- $- $2,500,000 $- $2,500,000 6-11 Bravo Terrace (Sedgwick) Force Main $4,860,000 $- $- $- $- $4,860,000 $- $4,860,000 6-12 Sewer Facility Capacity Upgrades (PWO) $2,000,000 $- $- $- $- $- $2,000,000 $2,000,000 6-13 McCormick East/Glenwood Sewer Basin Improvements $7,600,000 $- $- $- $7,600,000 $- $- $7,600,000 6-14 2029 General Sewer Plan and Sewer Rate Study $350,000 $- $- $- $350,000 $- $- $350,000 Total (2024$) $65,485,000 $11,424,000 $12,144,333 $9,185,333 $4,083,333 $18,121,333 $7,943,333 $2,583,333 $54,061,000 Total Escalated $ $12,569,385 $9,839,559 $4,527,265 $20,794,647 $9,434,188 $3,175,576 $60,340,620 Table 9-7 1 Identified Project Specific Capital Funding Sources 6-2 Marina Pump Station Construction DOE Loan $13,000,000 $150,000 $850,000 $11,064,327 $1,935,673 $412,500 PuP I I $1,935,673 $150,000 $850,000 $825,000 6-3 Bay Street Pump Station Replacement DOE Grant $150,000 6-3 Bay Street Pump Station Replacement PWB Loan $850,000 $412,500 6-4 Minor Lift Station Improvements PWB Loan $825,000 6-5 Port Orchard Boulevard Lift Station and Siphon WSDOT/Kitsap $7,610,000 $1,522,000 $6,088,000 $7,610,000 6-7 McCormick Woods Sewer Lift Station #3 Developer $1,000,000 $1,000,000 $1,000,000 6-8 Ruby Creek Lift Station WSDOT/Kitsap $3,140,000 $3,140,000 $3,140,000 6-13 McCormick East/Glenwood Sewer Basin Improvements Developer $7,600,000 $7,600,000 $7,600,000 Total (2024$) Identified $34,175,000 $11,064,327 $3,348,173 $6,074,500 $- $13,688,000 $- $- $23,110,673 All Other Funding (2024$) Total Funding (2024$) Utility/New Debt Total $31,310,000 $65,485,000 $359,673 $11,424,000 $8,796,160 $12,144,333 $3,110,833 $9,185,333 $4,083,333 $4,083,333 $4,433,333 $18,121,333 $7,943,333 $2,583,333 $2,583,333 $30,950,327 $54,061,000 $7,943,333 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-10 147 DRAFT 9.8.2 Six -Year Capital Funding Plan The capital funding plan develops the strategy to fund the annual project costs identified for the six -year CIP. The total funding need, including cost escalation, is $60.3 million. Project costs funded in prior years for certain CIP projects are not included in the six -year Capital Funding Plan. The costs and funding sources for those projects are included in the summary tables shown in Section 9.4, Historical Financial Performance. Table 9-8 summarizes the capital funding plan anticipated to support the execution of the CIP. Table 9-8 1 Six -Year Sewer Capital Funding Plan 11t Es] I .. l. D. Beginning Cash & $10,194,669 $11,206,303 $9,021,055 $5,760,099 $11,460,449 $2,826,248 Investments Cash Resources Grants / Other Outside $150,000 $6,065,276 $- $15,707,295 $- Funding Approved Loan Proceeds $3,198,173 $412,500 $- $- $- $- Projected Revenue Bond $_ $- $_ $10,000,000 $- $1,900,000 Proceeds Investment Interest $453,663 $336,189 $180,421 $115,202 $114,604 $28,262 General Facility Fees (GFFs) $1,978,500 $1,005,304 $1,017,871 $1,030,594 $1,043,477 $1,056,520 Transfer In from Operating $8,158,777 $193,136 $426,111 $- $- $- Fund(431) Total Cash Resources $13,939,112 $8,012,405 $1,624,403 $26,853,091 $1,158,081 $2,984,782 Cash Uses Capital Expenditures $12,569,385 $9,839,559 $4,527,265 $20,794,647 $9,434,188 $3,175,576 GFF Share of Debt Service $358,094 $358,094 $358,094 $358,094 $358,094 $314,710 Total Cash Uses $12,927,479 $10,197,653 $4,885,359 $21,152,741 $9,792,282 $3,490,286 Net Revenue: Annual Additions to / (Use) of $1,011,633 $(2,185,247) $(3,260,956) $5,700,350 $(8,634,201) $(505,504) Reserves Ending Cash & Investments $11,206,303 $9,021,055 $5,760,099 $11,460,449 $2,826,248 $2,320,744 Minimum Capital Reserve $1,219,009 $1,415,800 $1,506,346 $1,922,239 $2,110,922 $2,174,434 Target Surplus (Deficiency) $9,987,293 $7,605,255 $4,253,753 $9,538,211 $715,326 $146,310 Compared to Target Consistent with the City's comprehensive sewer rate Study, the Financial Program includes an estimate for customer growth of 1.25% per year and conservative GFF collections averaging about $1.2 million per year. These assumptions may vary from actual performance depending on development activity. As a point of reference, GFF collections have averaged $2.7 million over the past four years. Other sources of capital revenue include interest earnings on capital fund cash balances and transfers of surplus operating reserves. GFF revenues are planned to pay a share of the debt service for the growth -related portion of the PWB loan for the Bay Street Lift Station Preconstruction project (25%) and the DOE loan for the Marina Lift Station project (50%). The total share of debt service to be paid by GFFs is $358,100 per year (2025-2029) reducing to $314,700 in 2030 after the PWB loan matures. The capital funding plan assumes N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-11 148 DRAFT implementation of the recommended annual sewer rate increases as presented in Section 9.9, Six -Year Financial Plan. 9.9 Six -Year Financial Plan Key objectives of the financial plan are to ensure that rates are sufficient to sustain ongoing O&M, pay existing debt service obligations, fund the six -year CIP recommended in this Plan, and maintain stable cash reserves. The financial plan evaluates the sufficiency of current utility revenues in meeting the forecasted operating and capital -related expenses and designs a sewer rate adjustment strategy to close any revenue shortfall over the planned period. Table 9-9 summarizes the six -year financial plan. Table 9-9 I Six -Year Financial Plan •. iiit [.11 0 •• Projected Rate Increases I 0.00% I 3.50% I 3.50% I 3.50% I 3.50% I 3.50% Beginning Cash & Investments $8,754,383 $1,386,530 $1,489,838 $1,522,952 $1,301,585 $1,206,362 Cash Resources Rate Revenues $6,423,463 $6,731,388 $7,054,074 $7,392,228 $7,746,593 $8,117,946 Other Operating Revenue $97,813 $99,917 $102,098 $104,357 $106,697 $109,123 Investment Interest (431 and 434) $457,514 $87,401 $60,333 $60,996 $36,507 $35,555 Transfer from Capital Fund (433) $358,094 $358,094 $358,094 $358,094 $358,094 $314,710 for Share of Debt Service Total Cash Resources $7,336,884 $7,276,800 $7,574,599 $7,915,675 $8,247,892 $8,577,333 Cash Uses Operating & Maintenance (O&M) $5,623,148 $6,057,552 $6,192,780 $6,392,088 $6,598,144 $6,811,949 Expense Capital Outlay $- $- $- $- $- $- Existing Debt Service $922,812 $922,804 $922,594 $922,681 $922,699 $749,111 Projected Debt Service $- $- $- $822,272 $822,272 $978,504 Transfer to Stabilization Fund $ $ $ $ $ $- (432) Transfer to Capital (433) $ $ $ $ $ $ Total Cash Uses $6,545,960 $6,980,356 $7,115,374 $8,137,042 $8,343,115 $8,539,564 Net Revenue: Annual Additions to $790,924 $296,444 $459,225 $(221,367) $(95,223) $37,769 / (Use) of Reserves Ending Cash & Investments $9,545,306 $1,682,974 $1,949,063 $1,301,585 $1,206,362 $1,244,130 Minimum Operating Balance $1,386,530 $1,489,838 $1,522,952 $1,571,855 $1,622,409 $1,674,862 Target Surplus (Deficiency) Compared to $8,158,777 $193,136 $426,111 $(270,270) $(416,048) $(430,731) Target Transfer of Surplus Reserves to $(8,158,777) $(193,136) $(426,111) $- $- $- Capital Fund Net Ending Cash & Investments $1,386,530 $1,489,838 $1,522,952 $1,301,585 $1,206,362 $1,244,130 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-12 149 DRAFT 9.9.1 Sewer Rate Adjustment Strategy The annual additions to /(use) of reserves shown in the table demonstrate that the projected revenues and expenditures can be balanced with the use of cash reserves in the years 2028 and 2029 and annual rate increases of 3.50 percent for the years 2026-2030. 9.9.2 Key Forecast Assumptions The operating forecast relies on the City's adopted 2025-2026 budgeted revenues and expenditures and estimated cost escalation for future years. Key economic assumptions are in line with the City's comprehensive sewer rate study based on discussion with City staff: ➢ Customer growth of 1.25% per year ➢ Interest earnings rate on cash balances assumed to decline over time at 4.5% (2025); 3.0% (2026); 2.0% (2027-2028); and 1.0% (2029-2030) ➢ Other operating revenues for 2026 stay at budgeted amounts, except for the FOG Program. Its revenues match estimated expenses, which increase by about 3.5% annually due to labor, benefits, and general cost escalation ➢ General cost escalated at 3.0% per year ➢ Treatment cost escalated at 1.63% (2027) and 2.74% thereafter ➢ Labor costs escalated at 3.0% per year ➢ Benefits cost escalated at 5.0% per year 9.9.3 Sewer Operating Revenue Rate revenues are the primary source to fund operating activities. The 2025 revenues were based on the customer data analysis performed for the comprehensive sewer rate study and projected for future years at the assumed 1.25% annual growth rate. These revenues are projected to increase from $6.4 million to $8.1 million over the six -year period. Other operating revenues include miscellaneous fees and charges, and FOG Program revenues. Interest earnings are projected based on annual cash balances and the assumed annual interest earning rate. The annual transfer from the capital fund to the operating fund is based on the share of debt service for certain growth -related projects to be paid from GFF collections. For purposes of the Financial Program, total debt service costs are modeled in the operating fund (rather than the debt service fund) to ensure adequate rate -setting to meet these obligations. Total cash resources are projected to increase from $7.3 million to $8.6 million over the six -year period. 9.9.4 Sewer Operating Expenses Operating and maintenance (O&M) costs are projected to increase from $5.6 million to $6.8 million over the six -year period. Existing debt service for the approved debt issues is estimated at about $923,000 per year (2025-2029) reducing to $749,100 in 2030. The actual amortization schedules may vary depending on actual project completion and the timing of loan draws. Projected new revenue bond debt service is estimated at $823,000 beginning in 2028 and increasing to $978,500 in 2030. Total cash uses are projected to increase from $6.5 million to $8.5 million over the six -year period. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-13 150 DRAFT 9.9.5 Sewer Operating Cash Flow The net revenue line shown in Table 9-9 represents the annual additions to / (use) of operating reserves to balance annual revenues and expenditures. The transfer of surplus operating reserves to the capital fund represents available reserves above the minimum operating balance target (90 days of O&M). These surplus operating revenues may be used to fund near -term capital projects and/or build reserves for future capital spending. 9.9.6 Sewer Enterprise Fund Combined Cash Flow Table 9-10 combines the revenues and expenditures of the operating fund, rate stabilization fund, debt service fund, and capital fund and summarizes the total annual cash flows and ending cash balances over the six -year period. Table 9-10 1 Total Sewer Enterprise Fund Cash Flow •. Beginning Cash & $22,179,535 $15,823,315 $13,741,376 $10,513,535 $16,814,790 $8,085,365 Investments Cash Resources Rate Revenues $6,423,463 $6,731,388 $7,054,074 $7,392,228 $7,746,593 $8,117,946 Other Operating Revenue $97,813 $99,917 $102,098 $104,357 $106,697 $109,123 Investment Interest $911,177 $423,590 $240,754 $176,198 $151,111 $63,817 General Facility Fees (GFFs) $1,978,500 $1,005,304 $1,017,871 $1,030,594 $1,043,477 $1,056,520 Intergovernmental / Other $3,198,173 $412,500 $ $ $ $ Loan Proceeds Grant Proceeds / Other $150,000 $6,065,276 $ $15,707,295 $ $ Outside Funding New Revenue Bond $_ $_ $_ $10,000,000 $- $1,900,000 Proceeds Reserve Funding for $- $_ $- $822,272 $- $156,232 Revenue Bonds Total Cash Resources $12,759,125 $14,737,975 $8,414,797 $35,232,944 $9,047,879 $11,403,637 Cash Uses Operating & Maintenance $5,623,148 $6,057,552 $6,192,780 $6,392,088 $6,598,144 $6,811,949 Expense Debt Service (Principal + $922,812 $922,804 $922,594 $1,744,954 $1,744,971 $1,727,615 Interest) Capital Outlay /Expenditures $12,569,385 $9,839,559 $4,527,265 $20,794,647 $9,434,188 $3,175,576 Total Cash Uses $19,115,345 $16,819,914 $11,642,639 $28,931,689 $17,777,303 $11,715,141 Net Revenue: Annual Additions to / (Use) of $(6,356,220) $(2,081,939) $(3,227,842) $6,301,255 $(8,729,424) $(311,504) Reserves Ending Cash & Investments $15,823,315 $13,741,376 $10,513,535 $16,814,790 $8,085,365 $7,773,862 Table 9-11 summarizes the ending cash balances compared to targets over the six -year period. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-14 151 DRAFT Table 9-11 1 Sewer System Projected Ending Cash and Investments 0 • 11 Ending Cash & Investments Sewer Operating (431) $1,386,530 $1,489,838 $1,522,952 $1,301,585 $1,206,362 $1,244,130 Sewer Stabilization (432) $1,703,655 $1,703,655 $1,703,655 $1,703,655 $1,703,655 $1,703,655 Sewer Capital (433) $11,206,303 $9,021,055 $5,760,099 $11,460,449 $2,826,248 $2,320,744 Sewer Debt Service (434) $1,526,829 $1,526,829 $1,526,829 $2,349,101 $2,349,101 $2,505,333 Total Ending Cash & $15,823,315 $13,741,376 $10,513,535 $16,814,790 $8,085,365 $7,773,862 Investments Target Minimum Cash Balance $1,571,855 Sewer Operating Reserves (90 $1,386,530 $1,489,838 $1,522,952 $1,622,409 $1,674,862 days of O&M) Sewer Stabilization Reserves (90 $1,386,530 $1,489,838 $1,522,952 $1,571,855 $1,622,409 $1,674,862 days of O&M Expense) Sewer Capital Reserves (2.0% of $1,219,009 $1,415,800 $1,506,346 $1,922,239 $2,110,922 $2,174,434 Fixed Assets) Sewer Debt Fund Reserves (1 Year Revenue Bond Debt $- $- $- $822,272 $822,272 $978,504 Service) Total Target Minimum Cash $3,992,068 $4,395,476 $4,552,250 $5,888,221 $6,178,013 $6,502,662 Balance Surplus (Deficiency) Compared $11,831,247 $9,345,900 $5,961,285 $10,926,569 $1,907,352 $1,271,200 to Target 9.10 Projected Sewer Rates and Customer Bill Impact Table 9-12 shows the current and projected sewer rates and bill impact for single-family residential customers, assuming a 3.5% annual increase from 2026 to 2030. Rates for all other customer class categories would be applied at the same level of increases. Table 9-12 1 Sewer System Current and Projected Bi-Monthly Sewer Rates and Customer Bills The single-family residential bill is currently $163.00 per two -month cycle, and it is expected to rise to $193.59 by 2030. This represents an increase of $30.59 (or ($15.30 per month) over the six -year period. This is an average annual increase of $6.12 per two -month bill (or $3.06 per month). Based on the affordability index described previously, the projected sewer rates continue to be affordable under the 2.0% of median household income metric. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-15 152 DRAFT 9.11 Financial Conclusion The Financial Program demonstrates how the sewer operations and recommended six -year capital improvements are planned to be funded and the impact on bi-monthly sewer rates. The City prepares annual budgets and conducts periodic rate studies to plan for the next six years to ensure financial viability in the delivery of reliable sewer service at affordable rates. This plan was developed with reasonable and conservative assumptions based on current knowledge and cost estimates. As with all projections, actual performance will likely vary. The City will monitor the plan through the annual budget process and update as necessary to achieve balance between operations and maintenance, executing the necessary capital improvements, and maintaining affordable rates. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Financial Program • 9-16 153 DRAFT CHAPTER 10 Operations and Maintenance Program 10.1 Introduction The operation and maintenance activities performed by the City to maintain performance and reliability of the wastewater collection system are summarized in this chapter. City personnel maintain approximately 50 miles of gravity sewers, 22 miles of force mains, 22 lift stations, and a Supervisory Control and Data Acquisition (SCADA) telemetry system. 10.2 City Management and Personnel The City's Public Works Operations and Maintenance Department is composed of 24 full-time employees (FTE) that comprise a combined crew for road, water, sewer, stormwater, parks, facility and fleet maintenance. Of these, 4.5 are dedicated to sewer operations and maintenance. The City is governed by a City Council and Mayor, and the Public Works Director oversees the Public Works Department. This department is responsible for the operation and maintenance of the City's road, water, sewer, stormwater, parks, facility and fleet assets maintenace. 10.3 Operations and Maintenance Activities 10.3.1 Lift Stations City staff currently visits and inspects each lift station daily and should continue maintenance at this level until all lift stations are connected to the City's SCADA system. Once all lift stations are on SCADA, inspections may be reduced to twice a week. The wet wells should be pumped out and cleaned on a bi- annual basis or as needed. The pumps should be cleaned out as needed to continue operating at or near their design point. The City implemented an asset management program in 2024 to plan, schedule, and track maintenance activities. 10.3.2 Force Mains City staff should exercise all force main valves on an annual basis. Force mains should be inspected on an annual basis and should be flushed when pressure increases. 10.3.3 Gravity Sewers and Manholes Preventive maintenance for gravity sewer lines includes programs for inspection and cleaning. Inspections should include visual observation of manholes and a program of closed-circuit television (CCTV) inspection of sewer pipes. Gravity lines will be cleaned by flushing or jetting when the inspection identifies an asset needs maintenance. The cleaning and inspection programs should identify most problems so that they may N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Operations and Maintenance Program • 10-1 154 DRAFT be repaired in the maintenance or capital improvement programs, instead of resulting in a failure or overflow. 10.3.4 Summary A summary of the sewer collection system recommended maintenance standards is provided as Table 10-1. Table 10-1 1 Recommended Collection System Maintenance Standards Pump Station Inspections 20 Gravity Sewer CCTV 253,455LF Inspections Gravity Sewer Cleaning 253,455 LF Force Main Flushing 115,658LF 0.1 FTE per station per year(�1 85,000 LF per year 50,000 LF per year Annual inspection; flushing if force main pressure increases121 Notes: 1. FTE is full time equivalent and is equal to 1,768 hours per year (85 percent of a full year). 2. Recommendation based on EPA 832-F-00-071, Wastewater Technology Fact Sheet, Sewers, Force Main, September 2000. 10.4 Staffing Needs The City employs 24 field operation FTE's. There are 4.5 staff members in the maintenance and operations division who work solely on the sewer system. One metric to compare staffing rates among sewer utilities is employees per 100,000 LF of pipe. While this does not account for utility system variations, e.g. the number of pump stations and customers served, it is a useful way to compare approximate staffing efficiency with similar utilities. A summary of the sewer utility staffing for some utilities in the Puget Sound region and the City is presented as Table 10-2. Note that the information in this table was last updated in 2024. Table 10-2 1 Sewer Utility Staffing Comparison per Total Length of Pipe City of Port Orchard 4.5 19 369,000 1.05 City of Bellevue 25 2,745,600 0.91 City of Enumclaw 4 749,760 0.53 City of Kent 13 1,114,080 1.17 City of Kirkland 24 649,440 3.70 City of Lacey 14 1,246,080 1.12 Silver Lake Water and Sewer District 33 1,092,960 3.02 West Sound Utility District 15 237,600 6.31 Alderwood Water and Wastewater District 11 2,323,200 0.47 Average Employee per 100,000 LF of Pipe 2.11 Median Employee per 100,000 LF of Pipe 1.17 N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Operations and Maintenance Program • 10-2 155 DRAFT Table 10-3 1 Sewer Utility Staffing Comparison per Lift Station City of Port Orchard 4.5 City of Bellevue 25 22 .20 0.69 0.24 36 7 City of Enumclaw 4 City of Kent 13 7 1.86 City of Kirkland 24 6 4.00 City of Lacey 14 48 0.29 Silver Lake Water and Sewer District 33 22 1.50 West Sound Utility District 15 12 1.25 Alderwood Water and Wastewater District 11 12 0.92 Average Employee per Pump Station 1.23 Median Employee per Pump Station 0.92 Based on the results of the poll, the City is below the average and the median in the number of employees per 100,000 linear feet of pipe, and below the average and the median in number of employees per lift station. 10.5 Recommended Operation and Maintenance Improvements The City has been proactive in taking steps to solve the most critical maintenance issues. The City has been responsive to these improvements and has incorporated them into the CIP. Two additional FTE would enable more efficient and effective operations and maintenance of the sewer collection system. THIS PAGE INTENTIONALLY LEFT BLANK N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Operations and Maintenance Program • 10-3 156 157 DRAFT CHAPTER 11 Reclaimed Water 11.1 Reclaimed Water In 2006, WSUD received a grant to assist in the planning, permitting, and engineering design of a reclaimed water distribution system. The intent of such a system was to aid in optimizing wastewater management and environmental stewardship by reducing the South Kitsap Water Reclamation Facilities marine discharge and beneficially reusing a precious water resource and reducing potable water demand. In 2011, approximately one mile of reclaimed water distribution piping was constructed by the City and the WSUD. The distribution system piping is shown as Figure 11-1. In 2013, a hydrogeologic study was performed for WSUD which is part of Water Resource Inventory Area 15 (WRIA 15). This study determined that the existing aquifer and recharge have sufficient capacity to meet demand for the next 20 to 50 years. Per capita water demand has also been decreasing due to lower flow water fixtures and conservation. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Reclaimed Water • 11-1 158 DRAFT Figure 11-1 1 Reclaimed Water 11th St BREMERTON Puget Sound 2d� W Werner Rd Naval Shipyard �e NAVY I YARD CfTY _ r I I — I P ! OR( m m = GORST I r—� F 1 Eton Rd - I McCormick I Woods i !I Golf r Course nH17 — L — �Squate Lake I' T. (ter Creek 'toga Par' State Park 0 Camp rn Ceivinwood Trophy Lake Golf N And Casting E club WILDW00D 0 2,000 4,000 Feet s I 1 ® South Kitsap Water Reuse Facility Water Reuse Mains Urban Growth Area L1 City Boundary fol SE I Nllenix Rd SE Mullerlix Rd consor OCHARD Collins Ru: Mile Hill r City of Port Orchard General Sewer Plan Reclaimed Water s m Q U data Sources: City of Port Orchard. Kitsap County. Service Layer Credits: world tfavigation Map: CeuntyefKitsap, WA State ParksGIS. Esri. Ton -Corn, Garmin, SafeGraph.GeoTechnologies. Inc.METIINn5rt. USGS. Bureau of land Management. EPA, MPS, USDA. USFWS O Coord_ to Svstem: NAD 1983 StatePlene Washington North FIPS 4601 Feet thaslaimcr. Censor and theCity of Port Orchard make no representations.anpress orimplied, as to the accuracy. completeness and timeliness of the information dinplayed.This map is not suitable for legal, engineering, or surveying purposes. Notification or any errors IONppreciated. N223406WA.00 • July 2025 • General Sewer Plan Update • City of Port Orchard, WA Reclaimed Water • 11-2 159 APPENDIX A consor SEPA COMPLIANCE 160 DRAFT APPENDIX B consor INTERLOCAL AGREEMENTS 161 APPENDIX C 2019 PUBLIC WORKS ENGINEERING COIISOY STANDARDS (CHAPTER 9) 162 DRAFT APPENDIX D consor POPULATION PROJECTIONS 163 APPENDIX E OLYMPIC VIEW SANITARY LANDFILL COIISOY DISCHARGE PERMIT 164 DRAFT consor APPENDIX F 165 Ong City of Port Orchard ORCHARD 216 Prospect Street, Port Orchard, WA 98366 1.. (360) 876-4407 • FAX (360) 895-9029 Agenda Staff Report Discussion Items: Multifamily Tax Exemption (MFTE) (Bond) Estimated Time: 40 Minutes Meeting Date: September 16, 2025 Prepared By: Nick Bond, AICP, Community Development Director Presenter: Nick Bond, AICP, Community Development Director Summary and Background: Discussion In 2024, the City Council requested that a discussion of the Multi -Family Tax Exemption (MFTE) program be placed on a future agenda for discussion. This discussion was on hold pending completion of the City's Comprehensive Plan Update and Middle Housing ordinance. After completing work on the Comprehensive Plan in June, staff prepared a discussion item on MFTE at the July 2025 work study meeting. Based on the direction at that meeting and at subsequent Land Use Committee and Economic Development Tourism Committee meetings, staff has prepared a new MFTE ordinance and target area map for discussion. The new ordinance is based on the ordinance that was repealed in 2023. The ordinance is revised in several ways. Most notably, the old ordinance had three different maps that corresponded to different MFTE approval criteria while the new ordinance has a single map. Now, to qualify for MFTE, a project would have to meet one of four criteria listed in section 3.48.060 (6). For the 12 -year affordable housing MFTE, the project would have to meet one of these four criteria and provide affordable housing at lower rents than required in the 2023 ordinance. The four criteria listed in proposed section Port Orchard Municipal Code (POMC) 3.48.060 (6) are as follows: (a) The multi -family housing project must be in a mixed -use shopfront building containing commercial ground floor uses measuring at least 4,000 square feet or 40% of the building's footprint, whichever is less; or (b) The multi -family housing project must be in a building containing at least 4 stories of residential units and achieving at least 40 units per net acre (gross acreage, less critical areas and associated buffers). All portions of buildings must contain 4 -stories of multi -family units. Where buildings step down following topography, each portion of the building must contain 4 -stories of multi -family units; 166 (c) The multi -family project must provide middle housing and be on a parcel/lot measuring less than 15,000 square feet with between 4-12 multi -family units; or (d) Projects that will provide 100% of any on -site parking below grade. The affordability criteria for a 12 -year MFTE project as proposed in POMC 3.48.060 (7) changed the required rent for affordable units from 10% below HUD fair market rent to 25% below HUD fair market rent. Background The State of Washington has authorized cities to adopt Multi -Family Tax Exemption (MFTE) programs since 1995, pursuant to RCW 84.14. These programs are intended to support the development of multifamily housing and, in some cases, affordable housing in urban areas experiencing growth pressures. Port Orchard adopted its MFTE program in 2016 to incentivize the construction of new multifamily housing, including affordable units, by providing a limited property tax exemption on the value of residential improvements for a period of eight or twelve years. Since 2016, the City entered seven MFTE agreements supporting the construction of 442 apartment units, with two projects (totaling 97 units) reserving 20% of units as affordable housing in exchange for a 12 -year exemption. Several other multi -family projects have been constructed since 2016 without participating in the MFTE program. Under the repealed framework, there were two types of 8 -year exemptions and a 12 -year exemption. The 8 -year exemptions targeted redevelopment and encouraging projects with structured parking. The 12 -year exemption required that 20% of units be rented at 10% below HUD fair market rent for the duration of the MFTE approval. Increasing housing supply has been shown to be effective in combatting rent increases. As many new apartments became available in 2021 and 2022, data shows that vacancy rates climbed above 5% and rents in Port Orchard stopped increasing at the rates seen between 2014 and 2021 when vacancy rates were below 5%. MFTE does not significantly impact the property tax revenues received by the City or junior taxing districts. Instead, the savings that go to developers is shifted to other properties in Port Orchard resulting in very small property tax increases for the duration of the MFTE approval. (See the attached "What is Tax Shift" document produced by Commerce.) At the same time, the City receives numerous one-time revenues such as impact fees, connection charges, permit fees, and a boost in Sales Tax and REET revenue related to the construction and sale of new housing units. In October 2023, the City Council repealed POMC Chapter 3.48, eliminating the City's previously adopted MFTE program. This decision followed extensive policy review and deliberation, including ongoing discussions at the Land Use Committee and during the City's Housing Action Plan (HAP) development. In June 2023, the City adopted its Housing Action Plan, which included recommendations for expanding the MFTE program tailored to local housing, affordability goals and allowing middle housing 167 projects to qualify for MFTE. The City's 2024 Comprehensive Plan, adopted after the repeal of Chapter 3.48, reaffirms support for MFTE as a policy tool to address housing needs, directing staff to evaluate options for reimplementation. For additional MFTE resources, please visit the following Department of Commerce website: https://www.commerce.wa.gov/growth-management/housing-planning/mfte/ Relationship to Comprenhensive Plan: Use of the MFTE tool is supported in the Comprehensive Plan and Housing Action Plan. Recommendation: Discuss the draft ordinance and residential target area maps and provide staff with direction for next steps. Alternatives: The City Council may wish to continue revising the ordinance and map or may wish to schedule a public hearing on the proposed ordinance. Attachments: MFTE Ordinance Draft 081225 with underline and comments.docx Draft MFTE Map Committee Recommendations 20250909.pdf Draft MFTE Map Committee Recommendations w Zoning 20250909.pdf Factsheet - What is MFTE.pdf Commerce MFTE - FACTSHEET What is Tax Shift - 2023 0126.pdf MFTE Sept Presentation.pdf 168 ORDINANCE NO. _ -25 AN ORDINANCE OF THE CITY OF PORT ORCHARD, WASHINGTON, ADOPTING A NEW CHAPTER 3.48 (MULTIFAMILY PROPERTY TAX EXEMPTION) OF THE PORT ORCHARD MUNICIPAL CODE; PROVIDING FOR SEVERABILITY AND CORRECTIONS; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, the city previously offered a Multifamily Tax Exemption (MFTE) program as codified in POMC 3.48 but repealed the program in 2023 by passing ordinance 026-23; WHEREAS, after studying the options for providing tax incentives to encourage the development of multi -family housing, the City Council wishes to adopt a new and revised MFTE code; and WHEREAS, the City Council wishes to encourage increased residential opportunities, within those areas of the city designated as residential targeted areas in Figure 1 of the proposed POMC 3.48; and WHEREAS, the City Council wishes to further the City's goals of redevelopment and additional, affordable residential units within the City's downtown area, which is likely to have higher costs for development and redevelopment due to the nature of building below -grade parking and building on shoreline fill; and WHEREAS, the City Council wishes to stimulate rehabilitation and redevelopment of existing vacant and underutilized buildings and properties for multifamily housing in designated residential targeted areas and centers, to increase and improve housing opportunities, including affordable housing; and WHEREAS, the City Council wishes to encourage the development of higher value residential projects than those currently being constructed by providing incentives with the aim of increasing long term property tax revenues; and WHEREAS, the City Council wishes to adopt requirements for 12 -year tax exemptions to establish standards to be met and to obtain a greater percentage of housing that is more affordable than previously required, in order to maximize public benefit; and WHEREAS, the City Council wishes to adopt requirements for 8 -year tax exemptions to establish certain performance and project value standards, in order to maximize public benefit; and 11092614.2 - 366922 - 0021 169 Ordinance No. _-25 Page 2 of 15 WHEREAS, on July 6, 2020, the City Council's Land Use Committee reviewed the amendments to Chapter POMC 3.48, and recommended that they be forwarded to the full City Council for review and approval; and WHEREAS, on July 8, 2020, the City submitted the proposed amendments to POMC Chapter 3.48 to the Department of Commerce along with a 60 -day request for review; and WHEREAS, on July 17, 2020, the City's SEPA official issued a determination of non - significance for the proposed amendments to POMC Chapter 3.48, and there have been no appeals; and WHEREAS, on September 15, 2020, the City Council reviewed the amendments at its work-study meeting, and directed staff to bring the amendments forward for Council adoption with certain changes; and WHEREAS, the City Council, after careful consideration of all public comment and of the Ordinance, finds that this Ordinance is consistent with the City's Comprehensive Plan and development regulations, the Growth Management Act, Chapter 36.70A RCW, and that the amendments herein are in the best interests of the residents of the City; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PORT ORCHARD, WASHINGTON, DO ORDAIN AS 111119 ►YiTE� SECTION 1. Findings and Recitals. The recitals set forth above are hereby adopted and incorporated as findings in support of this Ordinance. SECTION 2. A new Chapter 3.48 of the Port Orchard Municipal Code is hereby adopted to read as follows: Sections: 3.48.010 Purpose. 3.48.020 Definitions. 3.48.030 Residential targeted areas — Criteria — Designation. 3.48.040 Residential targeted areas — Types 1 through 3 3.48.040 Terms of the tax exemption. 3.48.050 Project eligibility. 3.48.060 Application procedure. 3.48.070 Application review — Issuance of conditional certificate — Denial — Appeal. 11092614.2 - 366922 - 0021 170 Ordinance No. _-25 Page 3 of 15 3.48.080 Extension of conditional certificate. 3.48.090 Application for final certificate. 3.48.100 Issuance of final certificate. 3.48.110 Annual compliance review — Reporting. 3.48.120 Cancellation of tax exemption. 3.48.130 Conflict of provisions. 3.48.010 Purpose. As provided for in Chapter 84.14 RCW, the purpose of this chapter is to provide limited exemptions from ad valorem property taxation for multifamily housing in designated residential targeted areas to: (1) Encourage increased housing opportunities in residential and mixed -use projects, including affordable housing units, middle housing, infill housing, mixed -use shopfront buildings containing housing, and apartments [reference density and or height], within areas of the city designated by the city council as residential targeted areas; and/or (2) Stimulate new construction or rehabilitation of existing vacant and underutilized buildings for multifamily housing in designated residential targeted areas to increase and improve housing opportunities, including affordable housing; and/or (3) Accomplish the planning goals required under the Growth Management Act, Chapter 36.70A RCW, as implemented by the city's comprehensive plan. 3.48.020 Definitions. When used in this chapter, the following terms shall have the following meanings, unless the context indicates otherwise: (1) "Affordable housing" means the definition provided for in RCW 84.14.010. (2) "Department" means the city department of community development. (3) "Director" means the director of the department of community development, or designee. (4) "Fair market rent" means the federal department of housing and urban development's estimate of what a household seeking a modest rental home in a short amount of time can expect to pay for rent and utilities in the current market, as updated annually. (5) "Household" means the definition provided for in RCW 84.14.010. (6) "Median family income" means the median family income for the Bremerton -Silverdale Metropolitan Statistical Area, as calculated by the federal department of housing and urban 11092614.2 - 366922 - 0021 171 Ordinance No. _-25 Page 4 of 15 development and updated annually. (7) "Middle Housing" means the definition provided for in POMC 20.12 for buildings consisting of at least four (4) dwelling units. (8) "Mixed -use shopfront building" means the definition provided in POMC 20.32. (9) "Multifamily housing" (for the purposes of this chapter) means a building having 4 or more dwelling units not designed or used as transient accommodations and not including hotels and motels. Multifamily units may result from new construction or rehabilitated or conversion of vacant, underutilized, or substandard buildings to multifamily housing. (10) "Owner" means the definition provided for in RCW 84.14.010. (11) "Permanent residential occupancy" means the definition provided for in RCW 84.14.010. (12) "Rehabilitation improvements" means the definition provided for in RCW 84.14.010. (13) "Residential targeted area" means the definition provided for in RCW 84.14.010 and the area(s) that have been so designated by the city council pursuant to this chapter. (14) "Substantial compliance" means the definition provided for in RCW 84.14.010. (15) "Urban center" means the definition provided for in RCW 84.14.010. 3.48.030 Residential targeted areas — Criteria — Designation. (1) Following notice and public hearing as prescribed in RCW 84.14.040 of the city council's intention of designating a residential targeted area, the city council may, in its sole discretion, designate one or more residential targeted areas. Each residential targeted area must meet the following criteria, as determined by the city council: (a) The area is within an urban center; and (b) The area lacks sufficient available, desirable, and convenient residential housing, including affordable housing, to meet the needs of the public who would be likely to live in the urban center if affordable, desirable, attractive, and livable residences were available; and (c) Providing additional housing opportunities in the area will assist in achieving one or more of the purposes of this chapter. (2) In designating a residential targeted area, the city council may also consider other factors including, but not limited to: 11092614.2 - 366922 - 0021 172 Ordinance No. -25 Page 5 of 15 (a) Additional housing in the residential targeted area will attract and maintain an increase in the number of permanent residents; (b) An increased permanent residential population in the residential targeted area will help to achieve the planning goals mandated by the Growth Management Act under Chapter 36.70A RCW, as implemented through the city's current and future comprehensive plans; (c) Encouraging additional housing in the residential targeted area is consistent with public transportation plans; or (d) Additional housing may contribute to revitalization of a distressed neighborhood or area within the city. (3) At any time the city council may, by ordinance, and in its sole discretion, amend or rescind the designation of a residential targeted area pursuant to the same procedural requirements as set forth in this chapter for original designation. 3.48.040 Designated residential targeted areas. In accordance with section 3.48.030, the City Council has designated a residential targeted area, as provided below and as shown on Figure 1. Figure 1 is provided for planning purposes only, and all development that is proposed to qualify for tax exemption within these areas must meet the criteria of this chapter, as well as all other relevant City standards, including but not limited to: the comprehensive plan, Unified Development Code, building code, public works standards, critical areas regulations and the shoreline master program. The project must also comply with any other standards and guidelines adopted by the city council, including but not limited to those listed in POMC 3.48.060. Inclusion within the residential targeted areas does not guarantee the ability to obtain approval under this chapter. Property within the residential targeted areas that does not have the zoning or comprehensive plan designation that allows a project to satisfy the minimum reauirements of this chanter. orthat does not otherwise meet the reauirements of this chapter, may not utilize this program. Figure 1. Residential Target Areas. [Insert new map once finalized] 3.48.050 Terms of the tax exemption. (1) Duration of Exemption. The value of new housing construction, conversion, and rehabilitation improvements qualifying under this chapter is exempt from ad valorem property taxation, as 11092614.2 - 366922 - 0021 173 Ordinance No. _-25 Page 6 of 15 follows: (a) For both 8 -year and 12 -year exemptions, the exemption begins on January 1st of the year immediately following the calendar year of issuance of the tax exemption certificate. (b) For 12 -year exemptions, the number of residential units identified to meet the requirements for an affordable housing component per 3.48.040(1)(c) shall continue to be made available for the length of the exemption period. (iii) The mix and configuration of housing units (e.g., studio, one -bedroom, two - bedroom) used to meet the requirement for affordable units shall be substantially proportional to the mix and configuration of the total housing units in the project. (iv) When a project includes more than one building with multifamily housing units, all of the affordable housing units required in this subsection must not be located in the same building. (2) Limits on Exemption. The exemption does not apply: (a) To the value of land or to the value of non -housing -related improvements not qualifying under this chapter. (b) In the case of rehabilitation of existing buildings, to the value of improvements constructed prior to submission of the completed application required under this chapter. (c) To increases in assessed valuation made by the Kitsap County Assessor on nonqualifying portions of building or other improvements and value of land nor to increases made by lawful order of a county board of equalization, the Department of Revenue, or Kitsap County, to a class of property throughout the county or specific area of the county to achieve the uniformity of assessment or appraisal required by law. (3) Conclusion of Exemption. At the conclusion of the exemption period, the new or rehabilitated housing cost shall be considered as new construction for the purposes of Chapter 84.55 RCW. 3.48.060 Project eligibility. A proposed multifamily housing project must meet all of the following requirements for consideration for a property tax exemption: (1) Location. The project must be located within a residential targeted area as provided in POMC 3.48.040. (2) Tenant Displacement Prohibited. The project must not displace existing residential tenants of 11092614.2 - 366922 - 0021 174 Ordinance No. -25 Page 7 of 15 structures that are proposed for redevelopment. If the property proposed to be rehabilitated is not vacant, an applicant shall provide each existing tenant housing of comparable size, quality, and price and a reasonable opportunity to relocate. (3) Noncompliance with Building Codes. Existing dwelling units proposed for rehabilitation must fail to comply with one or more standards of the applicable state or city building codes. (4) Size of Project. The new, converted, or rehabilitated multiple -unit housing must provide for a minimum of 50 percent of the space (excluding structured parking) for permanent residential occupancy. The project, whether new, converted, or rehabilitated multiple -unit housing, must include at least 10 units of multifamily housing within a residential structure or as part of an urban development, with an exception for middle housing located on lots of less than 15,000 square feet consistent with subsection 6(c) below. In the case of existing multifamily housing that is occupied or which has not been vacant for 12 months or more, the multifamily housing project must also provide for a minimum of four additional multifamily units for a total project of at least 10 units including the four additional units. Existing multifamily housing that has been vacant for 12 months or more does not have to provide additional units. (5) Proposed Completion Date. New construction of multifamily housing and rehabilitation improvements must be completed within three years from the date of approval of the application. "Completed" for this purpose means that a certificate of occupancy has been issued for all of the improvements prior to the expiration of the three-year period or prior to expiration of any extension period granted in accordance with POMC 3.48.090. (6) Project performance standards and form. To qualify for a limited exemption from ad valorem property taxation pursuant to this chapter, the proposed project must meet one of the following performance standards and forms in addition to meeting all other reauirements of this chaster. (a) The multi -family housing project must be in a mixed -use shopfront building containing commercial ground floor uses measuring at least 4,000 square feet or 40% of the building's footprint, whichever is less; or (b) The multi -family housing project must be in a building containing at least 4 stories of residential units and achieving at least 40 units per net acre (gross acreage, less critical areas and associated buffers). All portions of buildings must contain 4 -stories of multi -family units. Where buildings step down following topography, each portion of the building must contain 4 -stories of multi -family units; or (c) The multi -family project must provide middle housing and be on a parcel/lot measuring less than 15,000 square feet with between 4-12 multi -family units; or 11092614.2 - 366922 - 0021 175 Ordinance No. _-25 Page 8 of 15 d) Projects that will provide 100% of any on -site parking below grade. (7) Additional performance standards for 12 -year tax exemption. To qualify for a 12 -year limited exemption from ad valorem property taxation, and affordable housing component is required: (a) A minimum of 20 percent of all residential units in the development shall be rented for at least 25 percent below fair market rent for 12 years. to tenants whose household annual I.Tg.,.:T L • At or below 40% of median family income, for housing units in con residences or small efficiency dwelling units; • At or below 65% of median family income for one -bedroom units; • At or below 75% of median family income for two -bedroom units: and • At or below 80% of median family income for three -bedroom and larger units. (b) If calculations for the minimum 20 percent of the residential units required under subsection 1 of this section result in a fraction, then the minimum number of residential units required to meet the affordable housing requirement shall be rounded up to the next whole number. (c) For the purpose of administering this chapter, the Department of Community Development shall publish annual rent limits and a utility allowance which may be subtracted from the rent limits required by this chapter. This annual allowance shall be published by July 1 annually, provided that all relevant data is made available by the Department of Housing and Urban Development (HUD). If publication of HUD data is delayed, the prior year's limits shall remain in effect until new data is released. Project owners may choose to include utilities (other than telephone) in the rent charged or may deduct the annually released utility allowance from the maximum allowed rent. 3.48.070 Application procedure. A property owner who wishes to propose a project for a tax exemption shall complete the following procedures: (1) The exemption application provided by the city shall be completed and filed with the department prior to issuance of a building permit for the project. The completed application shall 11092614.2 - 366922 - 0021 176 Ordinance No. -25 Page 9 of 15 be accompanied by the application fee as authorized by RCW 84.14.080 and as set forth in the city's current fee resolution. (2) The exemption application shall contain and require such information as deemed necessary by the director, including: (a) A brief written description of the project, including timing and construction schedule, setting forth the grounds for the exemption. (b) Floor and site plans of the proposed project, which may be revised by the owner, provided such revisions are made and presented to the director prior to the city's final action on the exemption application. (c) For rehabilitation projects, the applicant shall provide a report prepared by a registered architect identifying property noncompliance with current building codes. This report shall identify specific code violations and must include supporting data that satisfactorily explains and proves the presence of a violation. Supporting data must include a narrative and such graphic materials as needed to support this application. Graphic materials may include, but are not limited to, building plans, building details, and photographs. (d) If applying for a 12 -year exemption, it shall include information describing how the applicant will comply with the affordability requirements set forth in POMC 3.48.040(1)(c). (e) A statement from the owner acknowledging the potential tax liability when the project ceases to be eligible under this chapter. (f) An affidavit signed by the owner stating the occupancy record of the property for a period of 12 months prior to filing the application. (g) Verification of the correctness of the information submitted by the owner's signature and affirmation made under penalty of perjury under the laws of the state of Washington. 3.48.080 Application review — Issuance of conditional certificate — Denial — Appeal. (1) Director's Decision. The director may certify as eligible an application which is determined to comply with all applicable requirements of this chapter. A decision to approve or deny an application shall be made within 90 calendar days of receipt of a complete application. (2) Approval of Application — Contract Required. If an application is approved, the applicant shall enter into a contract with the city, regarding the terms and conditions of implementation of the project, and pursuant to the following: (a) The contract shall be subject to approval by the city council, in the form of a resolution, 11092614.2 - 366922 - 0021 177 Ordinance No. _-25 Page 10 of 15 regarding the terms and conditions of the project and eligibility for exemption under this chapter. This contract shall be recorded against the property and will constitute a covenant running with the land and shall be binding on the assigns, heirs, and successors of the applicant. (b) For any development project including owner -occupied units, the contract with the city shall also require that an owners' association organized under RCW 64.34.300 be formed for all owner -occupied units within the development, for at least the length of the exemption period granted, to assume the responsibility for collecting from all individual unit owners the information and documents required to complete the annual reporting requirements and for filing the required annual report with the city for each of the individual homeowners pursuant to POMC 3.48.120. (c) Amendment of Contract. Within three years of the date from the city council's approval of the contract, an owner may request an amendment(s) to the contract by submitting a request in writing to the director. The fee for an amendment is as set forth in the city's current fee resolution. The director shall have authority to approve minor changes to the contract that are reasonably within the scope and intent of the contract approved by the city council, as solely determined by the director. Amendments that are not reasonably within the scope and intent of the approved contract, as solely determined by the director, shall be submitted to the city council for review and approval. The date for expiration of the conditional certificate shall not be extended by contract amendment unless all the conditions for extension set forth in POMC 3.48.090 are met. (3) Issuance of Conditional Certificate. Upon city council approval of the contract required under subsection (2) of this section, the director shall issue a conditional certificate of acceptance of tax exemption. The conditional certificate shall expire three years from the date of city council approval unless an extension is granted as provided in this chapter. (4) Denial of Application. If an application is denied, the director shall state in writing the reasons for denial and shall send notice to the applicant at the applicant's last known address within 10 calendar days of issuance of the denial. (5) Appeal. Per RCW 84.14.070, an applicant may appeal a denial to the city council within 30 calendar days of receipt of the denial by filing a complete appeal application and fee, as set forth in the city's current fee resolution, with the director. The appeal before the city council will be based on the record made before the director. The director's decision shall be upheld unless the applicant can show that there is no substantial evidence on the record to support the director's decision. The city council's decision on appeal will be final. 11092614.2 - 366922 - 0021 178 Ordinance No. _-25 Page 11 of 15 3.48.090 Extension of conditional certificate. (1) Extension. The conditional certificate and time for completion of the project may be extended by the director for a period not to exceed a total of 24 consecutive months. To obtain an extension, the applicant must submit a written request with a fee, as set forth in the city's current fee resolution, stating the grounds for the extension. An extension may be granted if the director determines that: (a) The anticipated failure to complete construction or rehabilitation within the required time period is due to circumstances beyond the control of the owner; provided, that financial hardship, regardless of the cause or reason, shall not be considered by the director as a circumstance beyond the control of the owner in order to grant an extension; (b) The owner has been acting and could reasonably be expected to continue to act in good faith and with due diligence; and (c) All the conditions of the original contract (and as amended) between the applicant and the city will be satisfied upon completion of the project. (2) Denial of Extension. If an extension is denied, the director shall state in writing the reason for denial and shall send notice to the applicant's last known address within 10 calendar days of issuance of the denial. (3) Appeal. An applicant may appeal the denial of an extension to the hearing examiner within 14 calendar days of receipt of the denial by filing a complete appeal application and appeal fee with the director. The appeal before the hearing examiner shall be processed as a closed record hearing. No appeal to the city council is provided from the hearing examiner's decision. 3.48.100 Application for final certificate. Upon completion of the improvements agreed upon in the contract between the applicant and the city and upon issuance of a temporary or permanent certificate of occupancy, the applicant may request a final certificate of tax exemption by filing with the director such information as the director may deem necessary or useful to evaluate the eligibility for the final certificate, including the following: (1) A statement of expenditures made with respect to each multifamily housing unit and the total expenditures made with respect to the entire property; (2) A description of the completed work and a statement of qualification for the exemption; (3) The total monthly rent or total sale amount of each multifamily housing unit rented or sold to date; 11092614.2 - 366922 - 0021 179 Ordinance No. _-25 Page 12 of 15 (4) A statement that the work was completed within the required three-year period or any authorized extension; (5) If a 12 -year exemption, information on the applicant's compliance with the affordability requirements of this chapter; and (6) Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW. 3.48.110 Issuance of final certificate. (1) Director's Decision. Within 30 calendar days of receipt of all materials required for a final certificate, the director shall determine whether the specific improvements satisfy the requirements of the contract, application, and this chapter. (2) Granting of Final Certificate. If the director determines that the project has been completed in accordance with this chapter and the contract between the applicant and the city, and has been completed within the authorized time period, the city shall, within 10 calendar days of the expiration of the 30 -day review period above, file a final certificate of tax exemption with the Kitsap County assessor. The director is authorized to cause to be recorded, at the owner's expense, in the real property records of the Kitsap County department of records, the contract with the city, as amended if applicable, and such other document(s) as will identify such terms and conditions of eligibility for exemption under this chapter as the director deems appropriate for recording, including requirements under this chapter relating to affordability of units. (3) Denial of Final Certificate. The director shall notify the applicant in writing that a final certificate will not be filed if the director determines that: (a) The improvements were not completed within the authorized time period; (b) The improvements were not completed in accordance with the contract between the applicant and the city; or (c) The owner's property is otherwise not qualified under this chapter. (4) Appeal. An applicant may appeal a denial of a final certificate to the hearing examiner within 14 calendar days of issuance of the denial of a final certificate by filing a complete appeal application and appeal fee with the director. The appeal before the hearing examiner shall be processed as a closed record hearing. No appeal to the city council is provided from the hearing examiner's decision. 11092614.2 - 366922 - 0021 180 Ordinance No. _-25 Page 13 of 15 3.48.120 Annual compliance review — Reporting. (1) Within 30 calendar days after the first anniversary of the date of filing the final certificate of tax exemption and each year for the tax exemption period, the property owner shall be required to file a notarized declaration with the director indicating the following: (a) A statement of occupancy and vacancy of the multifamily units during the previous 12 months; (b) A certification by the owner that the property has not changed use and continues to be in compliance with the contract with the city and the applicable requirements of this chapter; (c) A description of changes or improvements to the property made after the city's issuance of the final certificate of tax exemption; (d) The total monthly rent of each multifamily housing unit rented or the total sale amount of each unit sold during the 12 months ending with the anniversary date; (e) A breakdown of the number, type, and specific multifamily housing units rented or sold during the 12 months ending with the anniversary date; (f) If granted a 12 -year exemption, information demonstrating the owner's compliance with the affordability requirements of this chapter, including, but not limited to, the income of each renter household at the time of initial occupancy or the income of each purchaser of owner -occupied units at the time of purchase; (g) The value of the tax exemption for the project; and (h) Any additional information requested by the city pursuant to meeting any reporting requirements under Chapter 84.14 RCW. (2) City staff may also conduct on -site verification of the declaration and reporting required under this section. Failure to submit the annual declaration and report may result in cancellation of the tax exemption pursuant to this chapter and shall result in a review of the exemption per RCW 84.14.110. (3) If the city issues final tax exemption certificates pursuant to this chapter, the director shall submit the report required by RCW 84.14.100 to the state Department of Commerce by December 31st of each year. 3.48.130 Cancellation of tax exemption. (1) The director may cancel a tax exemption on a property if he/she determines any of the following: 11092614.2 - 366922 - 0021 181 Ordinance No. _-25 Page 14 of 15 (a) The owner is not complying with the terms of the contract or this chapter; (b) The use of the property is changed or will be changed to a use that is other than residential; (c) The project violates applicable zoning requirements, land use regulations, building, or fire code requirements; or (d) The owner fails to submit the annual declaration and report specified in POMC 3.48.120. (2) If the owner intends to convert the multifamily housing to another use, the owner shall notify the director and the Kitsap County assessor in writing within 60 calendar days of the change in use. (3) Cancellation may occur in conjunction with the annual review or at any such time noncompliance has been determined. (4) Upon cancellation of the tax exemption, additional taxes, interest, and penalties shall be imposed on the property, and a priority lien may be placed on the land, pursuant to state law. (5) Notice of Cancellation. Upon determining that a tax exemption is to be canceled, pursuant to RCW 84.14.110(2), the director shall notify the owner by mail, return receipt requested. (6) Appeal of Cancellation. The owner may appeal the determination of cancellation to the hearing examiner by filing a notice of appeal and appeal fee with the city clerk within 30 calendar days of the date of the notice of cancellation, specifying the factual and legal basis for the appeal. The appeal shall be heard by the hearing examiner as a closed record hearing. No appeal to the city council is provided from the hearing examiner's decision. 3.48.140 Conflict of provisions. If any provision of this chapter is in legal conflict with the provisions of Chapter 84.14 RCW, as currently adopted or hereafter amended, the provisions of Chapter 84.14 RCW shall apply as if set forth in this chapter. SECTION 3. Corrections. Upon the approval of the city attorney, the city clerk and/or code publisher is authorized to make any necessary technical corrections to this ordinance, including but not limited to the correction of scrivener's/clerical errors, references, ordinance numbering, section/subsection numbers, and any reference thereto. SECTION 4. Severability. If any section, subsection, paragraph, sentence, clause, or phrase of this ordinance is declared unconstitutional or invalid for any reason, such decision shall 11092614.2 - 366922 - 0021 182 Ordinance No. _-25 Page 15 of 15 not affect the validity of the remaining parts of this ordinance. SECTION 5. Effective Date. This ordinance shall be published in the official newspaper of the city and shall take full force and effect five (5) days after the date of publication. A summary of this ordinance in the form of the ordinance title may be published in lieu of publishing the ordinance in its entirety. PASSED by the City Council of the City of Port Orchard, APPROVED by the Mayor and attested by the City Clerk in authentication of such passage this day of 202 Robert Putaansuu, Mayor 1119X.119 Brandy Wallace, MMC, City Clerk APPROVED AS TO FORM: Sponsored by: Charlotte A. Archer, City Attorney PUBLISHED: EFFECTIVE DATE: 11092614.2 - 366922 - 0021 Scott Diener, Council Member 183 LII h j muIHH lull I1:' Q= IIII!i!iI:.IIii:=!m �a w ,♦v- ' unnnnnnl�� ,O�,,`�I�IIo -- �IIII >• a- , Q�O ��IP.1111111� ��jID 1111111 .• �I�Ij ��, ' �p1111111P �IIIII 11� 111111►� �� annnnm `; 'F III��I -� IMIlU 1111111 ■ `■:■ IIIIIIUI1- rI��w�IQ�� p'�■111 �� `� ` '�� ■111111: ' ► I�: •�.�� ,r ■111 �■1��: ____ I'll! ra■■■■� :i iiii •♦i 'till ■' --w mm lii B HARD City of Port Orchard Draft Multi -Family Tax Exemption Residential Targeted Areas Map Land Use Recommendation EDT Recommendation MFTE Original _____ MFTE Original Effective Date of Ordinance XXX-24 N 0 0.10.2 0.4 0.6 0.8 Miles 184 LII h j muIHH lull I1:' Q= II II !i I I:.I Iii:=!m �a w ,♦��- ' unnnnnnl�� ',�Ij�•� ��,�,�OIIIIIIIII�� iiii��i��i?�� ,�OQ��`,��I�IIo =_ .1111 : >•��a , ��IQ,�� ► Q�i1�ID 1111111 ,Mp1111111P X1111/ �iumlunp� annnnm o. 111 n 11 'i1iij111w N A P (1! - ILE n� ■■1JiWLUN_ fit. U= =-_== pr I■��-IIwi1 •- =_� •== ■.•� INN �1111111 iIiiiiI •� �•� � `� ` '�� ■111111: •- J . ` ;� ■111 ii ra■■■■� "Iii :i iiii 'till k ■' --w mm liiu B 0 CHARD City of Port Orchard Draft Multi -Family Tax Exemption Residential Targeted Areas Map Land Use Recommendation EDT Recommendation 2024 ZONE BPMU CC CH CI CMU i4 DMU GB i4 GMU IF LI NMU PF PR R1 R2 R3 R4 Effective Date of Ordinance XXX-24 a 00.126.25 0.5 0.75 1 Mi 0 1851 GROWTH MANAGEMENT SERVICES SHORT GUIDE FOR COUNCILS AND STAKEHOLDERS What is MFTE? METE (Multifamily Housing Tax Exemption) programs are property tax waiver programs enacted by cities and counties to support local housing goals. Under Chapter 84.14 RCW, local governments can give exemptions for new construction, conversion, and rehabilitation of multifamily residential improvements with at least four units. Under these exemptions, a property owner does not have to pay property taxes on the residential improvements for a given number of years. The property owner still pays tax on the land and on non-residential improvements like the commercial portion of a mixed -use building. For the annual property taxes collected on a development... Commercial Residential Land Improvements Improvements 1 7' ... an exemption under MFTE removes the residential portion of property value from taxation for an eight- to 20 year period. Advantages o Cities and counties can give financial incentives to meet housing goals without the need for direct funding. This can support affordable housing but can also incentivize market -rate housing in a way that complies with state constitutional requirements. o Requirements in state law can be flexible and let cities and counties tailor programs to meet policies. Some programs consider on -site improvements, building requirements, or mandates for services. o MFTEs are commonly used by developers across Washington, who are often familiar with how they operate and how to use them with projects. .1►' Washington State Deartment of !i j Commercep V3.0 Types of MFTE MFTE programs are usually divided according to the For an 8 -year MFTE... tax exemptions are provided as length of the program: a general incentive for new residential investment. For an 8 -year MFTE program, there are no requirements for affordable housing, although some ❑ ❑ ❑ ❑ ❑ ❑ ❑ cities provide their own requirements. Many o ❑ o a ❑ o ❑ communities use this to promote market -rate housing construction in neighborhoods where new New multifamily development (rental or homeownership) housing investment is needed. Tax exemption for 8 years A 12 -year MFTE program must set aside at least 20% of housing units for low- and moderate -income households. Under the statute, household income is For a 12 -year MFTE... tax exemptions are provided in based on Area Median Income (AMI), with households exchange for at least 20% of units being set aside as with incomes at 80% of AMI or less considered "low affordable for 12 years (rentals or units for sale). income", and households at 115% of AMI or lower "moderate income". This MFTE is used for providing affordable rental housing options, including choices in market -rate private housing projects. A 20 -year MFTE program requires that 25% of units be sold as permanent affordable housing for households at 80% AMI or below, with a nonprofit or government agency sponsoring the sale and restrictions in place for resale to ensure long-term affordability. This is a new option implemented in 2021 and is intended to be used to encourage affordable housing homeownership. There is an option for permanent affordable rentals (20% of units for 99 years at 80% AMI or less) but a deadline for passing this program restricts new programs. Note that communities can also choose to impose higher affordability requirements and include other requirements for MFTE projects as well. Considerations O MFTEs can result in either a loss of tax revenue to the community, or a tax shift where other property owners will pay more in taxes. O MFTE programs require staff time to conduct regular monitoring, oversight, and reporting. O Regular updates can be necessary to make sure the program provides a sufficient incentive to maximize public benefits. WHAT IS MFTE? Tax exemption for 20 years Affordable rents for 12 years (20% of units, tow -/moderate -income) Affordable units for sale (20% of units, short-term restrictions) For a 20 -year MFTE... tax exemptions are provided in exchange for permanently affordable rental housing homeownership. Affordable rents for 99 years (20% of units for low-income HH) OR rc❑❑❑❑ ❑ ❑ o ❑ o Affordable units for sale (25% of units, permanently affordable) 2 187 GROWTH MANAGEMENT SERVICES SHORT GUIDE FOR COUNCILS AND STAKEHOLDERS What is Tax Shift? MFTE (Multifamily Housing Tax Exemption) programs can be an effective way of incentivizing market -rate and affordable housing options. To understand how it works stakeholders often ask, "Where does the money come from to pay for the exemption?" This question can be hard to answer because of how property taxes work in Washington State. When making decisions about an MFTE program, it is important to consider possible tax and revenue impacts. Generally, these impacts can be distributed in two ways: o Foregone tax revenues that are not collected, which reduce total revenues for a city and other taxing districts (e.g., the port, county, school district, state, etc.). O A shift of tax obligations to all other payers of property taxes in these districts, where there is an increase in taxes collected to offset the losses from the exemption. How these costs are distributed depends on two things: O Levy limits provided under RCW 84.55.010 mean that property tax levies are restricted to no more than a 1% increase in revenue from the assessed value from the previous year. This restricts how much cities and other districts can raise property taxes on these properties to make up this difference and can mean that deferred taxes will be foregone revenue for these jurisdictions. O However, projects that receive MFTEs could still increase that total levy. Under WAC 458-12-342, county assessors must assess building value during construction and add it to these levy limits, which may not be removed from the total levy amount before the final certificate for exemption is received and the exemption begins. The amount of tax shift versus deferred revenue depends in part on the practices of the county assessor. However, there are currently no requirements for assessors to consider MFTE in these levy limits. If cities do not consider these effects, an MFTE can shift most or even all of the exempted tax obligations to other properties. Washington State Department of !j Commerce Tax Shift Considerations If an MFTE is supported through tax shifts, there are some important policy considerations: O Communities may be less likely to support incentives for market -rate development that use property tax increases, especially for high -end projects that do not seem to provide public benefits. O Shifted tax obligations are not usually calculated, meaning that the full impacts of this program may not be transparent, especially to affected property owners. O Depending on the popularity of the program, the total increases in property taxes could be equivalent in magnitude to affordable housing levies that would require voter approval and have tighter requirements (ROW 84.55.150). Foregone Revenue Considerations On the other hand, if a city foregoes tax revenue to support MFTEs, there may be other policy concerns: O Communities will have reduced long-term tax revenues from the MFTE program, especially if they will be foregoing most or all of the exempted tax revenue. This can have a significant fiscal impact on local budgets. O Other taxing districts may be impacted by tax exemptions but are not in a position under the statute to object to a community's MFTE program This can have some significant effects on special districts that cannot make up for this lost revenue in other ways. O The total budget impacts may be more unpredictable, especially without limitations on the number of exemptions issued by the community. However, placing limits on the number and value of exemptions could affect the ability of the MFTE program to meet housing goals. Under typical situations, total property tax levies will increase by 1 % over the previous year (plus new development): New construction is added to the total tax base by the assessor... Total Tax Levy Amount El Encreaseiyea r 2 a ...increasing the value o f of the tax base. a as°oB oo°o°uoo ` g°og°og°ooa Year If new construction value is added to the levy limit but exempted from property taxes through the MFTE, property tax obligations will be shifted to the rest of the tax base: Tax exempted properties add to the property tax levy limit... 2 ...but these tax obligations will be covered by non-exempt properties. IoIoIIoI Year However, if exempted value is taken out of the levy limit in some way, the tax levy amount will decrease. This will reduce tax revenue, but note that this is not usually done by assessors in practice. Tax exempted properties that do not contribute to the levy lid... X Q ... would not shift tax obligations o but will result in foregone revenue. Q o 0 0 0 0 0 0 Year 189 ■ City Council Work Study September 16, 2025 190 Case Study 017-03 001.00 00� " 027-00 024-00 oo7-on 1123-00 ! 022-00 . 1 011-00 - z. 2-008 is h.015 -00, Overlook Apartments (The Charleston) vs. Peyseno Apartments 191 2025 WEB TAX STATEMENT 2025 WEB TAX STATEMENT Peter J Boissonneau w, Peter J Boissonneau Ritsap County Treasurer Kitsap County Treasurer PO Box 169 Printed: 0 710 1120 25 PO Box 169 Printed0710112025 Port Orchard, 35A90366 Port Orchard, WA 90366 ccount Number 312402-2-022-2009 tecount Number 302402-3-062-2009 First Half $0.00 First Half Dun April 30th Due April 30th $0.00 PAYSENO LANE II LLC Second Half $63,374.34 FAC PORT ORCHARD LLC Second Half 7533 CLOVER VALLEY RD SE Due October 31st 2302 N 77TH ST Duo October 31st $1,000.54 PORT ORCHARD, WA 90367 Total Due 2025 SEATTLE, WA98103 RrindludN�,rdu..maR1a $63,374.34 Totai Due 2025 $1,444.54 roll Past Due Amounts $0.00 Past Due Amou nts $0.00 hoperty Desrnplion: REsuLTANraARrxxnor uoJsr RvurF nnursrernr RE➢cv➢muuDERwmoos PILE IS Land Value5426,500 0211 D1000et, AND AO DEPICTED CN 511 RVEY RECORDED UNnFR AIMOR'S FlFM1 Xfi1101tl0a2, IN—UNIF R60F dy Eescnpfon: RESNLTAM PARCEL IOF RONNOMYLINEasJLrsn rrr REWRomllrl EliAlloRIXi5 FILE NO. Land Val us: 5329,2t 005055, PAGES 104 ThNOLGHIO&INCLLPSIVE, PECLFOS OF NLrsw COUNrl', WA4K Budding Value: $14,105,846 Fu TILI. 9FlP1 LIOl O, E0 1810270137. BEING A PpirION OF LOTGO AND D OFTIE GIY OP PORT ORCHM➢3Ni PLATN0. PQ7dR-l(S10LdR-2t ccm atiAdshss: Multiple addresses utiie Personal Properly Value: so Ec ORDEDUNRERwTSARcoUNrrAUDnoas—No. mmdeTrma,REINGu1,wEND1ENrxmll�so�Rr Euilding Va.: $8,341,500 ahon Address: Multiple addresses m He Personal Properly Value: 50 Distribution of Your 2025 Taxes Current Year (2025) Details 0.5% PUD $645.80 Taxable Value $14,532,340 Distribution of Your 2025 Taxes Current Year (2025) Details 2.2% PORT $283800 Tax Code Area 0810 0.5% PUD $10.20 Taxable Value $229,200 3.1% REGIONAL LIBRARY $3987 s0 Levy Rate 0721692 22% PORT 54450 Tax Code Area 0810 General Property Tax $97,392.07 Levy Rate 0.721692 7.4% COUNTY $9,409.30 VoterApproved Rate 23.16% 39% REGIONAL LIBRARY General Property Tax $1,536.05 12.9% CITY $16,292.10 VoterApprovedTax $29,354.51 7.4% COUNTY 5148.40 VoterApprovedRate 23.16% 22.3% FIRE $2824520 Noxious Weed $2.10 129% CITY 6257.00 VoterApprovedTax $46297 232% LOCAL SCHOOL $26,34560 Total 2025 Charges $126,748.68 22.3% FIRE 5445$0 Noxious Weed $2.06 20.4% STATE GENERAL $35,952.90 Past Due Unpaid Amounts P 23.2% LOCAL SCHOOL 546290. Total 2025 Charges $2,001.08 Year I Principal Int/PenlFees ITatal 20.4% STATE GENERAL 5567.50 Past Due Unpaid Amounts 2024 130.00 100.00 10000 Year I Principal Int/Pen/Fees Total 2023 $0.00 $0A0 $0.00 2024 $0.00 50.00 $0.00 To view details of each levy change, go to 2022+ Prior $0.00 $0.00 $0.00 2023 I $0.00 50.00 100.00 wow. kitsap.govftreasurer To view details of each levy change, go to 2022 -1 Prior $0.00 $0.00 $0.00 192 • Overlook Apartments (12 -year MFTE): • Total Units: 39 • Affordable Units: 8 Units with reduced rent • Annual property tax bill: $2,001.08 • Estimated annual tax savings is $84,722. (prorated based on Payseno tax bill per unit) • Estimated 12 -year tax savings to developer/operator is $1,016,665. • Estimated annual value of rent relief to qualified tenants based on 10% below HUD fair market rent is $19,747 ($2,468.40 per unit). • Estimated annual value of rent relief to qualified tenants based on proposed 25% below HUD fair market rent is $49,368 ($6,171 per unit). • Estimated 12 -year value of rent relief to qualified tenants based on 10% below HUD fair market rent is $236,996 ($29,620.80 per unit). • Estimated 12 -year value of rent relief to qualified tenants based on 25% below HUD fair market rent is $592,416 ($74,052 per unit). • Payseno Apartments (no MFTE): • Total Units: 57 • Annual property tax bill: $126,748.68 193 • Pre -application meeting for a 3 -story 24 -unit Garden Apartment • Zoning currently allows 4 -stories, developer choosing to build 3 -stories due to increased cost of taller building. • A new MFTE program, assuming that the developer opts for a 4 -story building to receive MFTE, would result in 32 units instead of 24 and would result in an increased building valuation. • Total 2025 assessed value if constructed: • 3 Stories 24 -units: $6,118,880 • 4 Stories 32 -units: $8,158,500 • Total Annual Tax Paid 24 -units: $53,367.87 • Total Annual Tax Paid 32 -units (shifted for 8-12 years): $71,157.15 194 Cumulative Property Tax Revenue $35,000,000.00 $30,000,000.00 $25,000,000.00 $20,000,000.00 $15,000,000.00 $10,000,000.00 $5,000,000.00 $0.00 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 -Without MFTE 3 -Stories (Cumulative) -With MFTE Tax Shift 4 -Stories (cumulative) • Port Orchard Gains $7,886,857 Over 90 Years with MFTE and 4 -Story Project • Cost of tax shaft for average property value is $10.36 per year for 8-12 years.