HomeMy WebLinkAbout2026_06_11 DGinsberg_Water Rate ReviewFrom:David Ginsberg
To:jmauro@cityofpt.us
Cc:ahoward@cityofpt.us; Board of Health
Subject:2026 Olympic Gravity Water System Rate Review — The Legal and Safety Case for a Substantial Rate Increase
Due to Deferred Repairs and Capital
Date:Thursday, June 11, 2026 3:44:51 PM
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David Ginsberg
1240 W Sims Way #102, Port Townsend, WA 98368 davidbginsberg@gmail.com
415-342-7445
June 9, 2026
John Mauro, City Manager
City of Port Townsend
250 Madison Street, Port Townsend, WA 98368
JMauro@cityofpt.us
Dear Mr. Mauro,
I write as a Port Townsend resident and community accountability advocate regarding the
five-year rate review for the Olympic Gravity Water System — the OGWS — that you have
confirmed will be completed by the end of 2026. I appreciate your public candor about the
system's history, including your acknowledgment that neither the city nor the mill 'ever really
paid into the replacement of the line' and that the last substantive contract negotiation was in
1956.
That history is exactly why the 2026 rate review carries such weight — for city ratepayers, for
public safety, and for the city's legal obligations under Washington State law.
I. The Legal Obligation to Set Rates That Cover Actual Costs
Washington State law is direct on this point. Chapter 35.92 of the Revised Code of
Washington — the statute governing municipal utilities — imposes an absolute cost floor: 'No
rate shall be charged that is less than the cost of the water and service to the class of
customers served.' This is not discretionary language. If the city's actual cost of providing
water service exceeds what current rates recover, the city is legally prohibited from
maintaining those rates.
The Water Supply Agreement itself — signed by the city in 2021 — states that an estimated
$161 million in current-value infrastructure will need to be refurbished or replaced within the
next 40 years, and that the near-term 20-year capital program requires $64 million in
investment. That $161 million was calculated in 2021 dollars. Given significant construction
cost inflation since 2021, the actual cost of executing these projects will be substantially
higher. Source: Water Supply Agreement, December 30, 2021, as reported in the Port
Townsend Leader, September 4, 2024; Revised Code of Washington Chapter 35.92.010.
The city's own 2021 white papers projected that bringing the system to a modern standard of
care would cost approximately $818,000 per year in operations and maintenance alone — a
58% increase over the historical combined expenditure of $518,000 per year. The mill
accounts for approximately 90% of total system consumption and must bear approximately
90% of those costs under the cost-of-service model.
The rate must reflect this reality. Source: Olympic Gravity Water System Operations White
Paper, June 7, 2021.
II. The Safety Record Demands Urgency
The Olympic Gravity Water System is the sole water source for every resident and business in
Port Townsend, with no backup.
Recent events make the consequences of deferred investment concrete:
August 14, 2024: A cracked coupling leaked until approximately 40 million gallons had been
drawn from the City Lake reservoir. A mandatory conservation notice followed. You stated
publicly you were most concerned about breaks 'especially in remote areas like the one we just
repaired.' Source: Port Townsend Leader, September 4, 2024.
January 6, 2025: A second break cost $150,000 to repair — more than twice the entire annual
emergency repair budget of $63,672 set for 2025.
The balance was drawn from the Olympic Gravity Water System Sinking Fund (~$9.5 million
at the end of 2024). Source: Port Townsend Leader, February 26, 2025.
August–September 2025: Severe dry conditions forced the Lords Lake reservoir drawdown to
begin on August 11 — several weeks earlier than average. The city issued a voluntary
conservation notice. The Peninsula Daily News confirmed that had Lords Lake emptied, the
mill would have been contractually required to curtail operations or shut down. Source:
Peninsula Daily News, September 12, 2025.
Lords Lake East Dam: The Washington State Department of Ecology's Dam Safety Office
rated the East Dam in poor condition in 2020, finding it does not meet minimum stability
requirements under seismic loading due to liquefaction potential — the embankment could
lose structural integrity in a design earthquake. A $150,000 study confirmed these concerns.
In May 2025, the city authorized Phase II engineering design and bidding at a combined
budget of $650,000. This is an active engineering liability on a high downstream hazard dam
holding 500 million gallons above populated areas. Sources: Port Townsend Leader, April
2023 and November 2025; City Council Agenda Bill AB25-047, May 2025.
Two pipeline failures in less than six months on a 98-year-old sole-source water system, an
active dam seismic remediation project on a high downstream hazard structure, and an
accelerating drought drawdown pattern are the predictable consequences of infrastructure
whose replacement costs have not been adequately funded for decades. An extended pipeline
failure does not inconvenience residents — it leaves them without water.
III. The Rate Has Never Reflected True System Costs
Before April 2022, the mill paid no per-gallon cash rate for water. The 2021 agreement
established a cash rate for the first time in the system's nearly 100-year history, starting at
$1.07 per 1,000 gallons a historic step forward. But that rate was set before two pipeline
breaks, before the East Dam required active seismic remediation, and before the full scale of
post-2021 construction cost inflation was understood.
For regional context, the current rate can be compared to what other Washington State utilities
charge for wholesale untreated raw water, the same category of product the mill receives.
Seattle Public Utilities charges wholesale customers a weighted average of $2.60 per 1,000
gallons for untreated water (off-peak $2.23; peak $3.34; rates set January 1, 2020, confirmed
unchanged through 2025).
Tacoma Public Utilities charges $2.36 per 1,000 gallons for wholesale water in winter
(effective January 1, 2026).
The two-utility Washington State average is approximately $2.48 per 1,000 gallons. The mill
currently pays approximately $1.24 per 1,000 gallons — roughly half the rate these utilities
charge wholesale untreated water customers.
Sources: Seattle Public Utilities wholesale rates, seattle.gov/utilities (effective January 1,
2020; confirmed unchanged through 2025); Tacoma Public Utilities wholesale water
information, mytpu.org (effective January 1, 2026). Note: Seattle and Tacoma serve different
infrastructure configurations; this is offered as a regional context, not a proposed rate target.
The 2026 rate review is the first opportunity to assess whether the baseline rate adequately
covers the system's actual current cost of service. Based on the documented capital program
and projected operations and maintenance costs, the gap between current rates and actual costs
is likely substantial.
IV. The Economic Impact Argument Cannot Override the Statutory Cost Floor
I am aware that in November 2025, Port Townsend Paper Corporation released an economic
impact study claiming $319 million in annual economic impact, and that mill executives stated
they anticipated the study would 'inform discussions' on the rate model update. I understand
the economic significance of the mill to Jefferson County.
Under Chapter 35.92 of the Revised Code of Washington, the city's rate-setting authority is
cost-of-service-based. The statute does not enumerate economic impact as a permissible
factor. A rate that fails to cover the actual cost of service is not a policy choice — it is a legal
violation.
The mill's economic footprint cannot legally justify a rate below the system's true cost of
service. Source: Revised Code of Washington Chapter 35.92.010; Port Townsend Leader,
November 6, 2025.
V. What This Letter Requests
I am not asking the city to harm the mill or act against the interests of its workforce. I am
asking the city to do what the law requires: set rates that fully cover the actual cost of service,
including the capital investment this system has needed for decades.
• That the 2026 rate review be conducted with full transparency, including public access to the
updated cost-of-service modeling, the Capital Spending Plan, and the Olympic Gravity Water
System Fund financial statements for the preceding five-year period.
• That the rate review accounts for post-2021 construction cost inflation in projecting the
actual cost of the 20-year capital program — not the uninflated 2021 baseline.
• That the updated rate be set at a level that demonstrably meets the statutory cost floor under
Chapter 35.92 of the Revised Code of Washington, and that the city obtain independent legal
confirmation that the resulting rate satisfies this requirement.
• That a public meeting be held on the rate review findings before any rate is finalized,
consistent with the city's commitment to 'thoughtful collaboration based on the best data
possible' stated in its own 2021 white papers.
The residents of Port Townsend depend on this system for everything. Two pipeline breaks in
six months, an active dam seismic remediation project, and an accelerating drought pattern are
not the moment for a rate review that understates what it actually costs to keep the water
flowing safely. I respectfully urge the city to approach this review with the rigor, transparency,
and legal care the public deserves.
Sincerely,
David Ginsberg
1240 W Sims Way #102 Port Townsend, WA 98368 davidbginsberg@gmail.com
415-342-7445
June 9, 2026