HomeMy WebLinkAbout2026_06_11 DGinsberg_Water Rate Review_Mauro replyFrom:John Mauro
To:David Ginsberg
Cc:Amy Howard; Board of Health; sking@cityofpt.us
Subject:RE: 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 5:53:37 PM
ALERT: BE CAUTIOUS This email originated outside the organization. Do not open
attachments or click on links if you are not expecting them.
Thank you, Mr. Ginsberg, for your extensive communication to me and others on this
topic and I appreciate your interest in the health, wellbeing, and sustainability of our
community and region.
I’ll cut to the four elements of your letter’s request.
1. The 2026 rate review will be conducted with full transparency. This has been
our communicated intention for several months now in open public sessions with
City Council.
2. The rate review will consider the actual (estimated/projected) cost of the 20-
year capital program. This is a fundamental purpose of the 5 year rate model
cycle and you can learn more about this in the white papers.
3. The updated rate will meet RCW 35.92. We understand that our rate authority is
cost-of-service-based, and this is something we have communicated extensively
with the community and City Council, including during the 2023 rate-setting for our
sewer utility.
4. We will have a public meeting on the rate review before a rate is finalized – in
fact, there will be more than one public meeting. This has come most recently to
City Council on March 16, 2026 to authorize the contract with our consultant and
to the Council’s Finance and Budget Committee on May 11, 2026, to provide a
general overview of process. It will likely come to a workshop meeting of City
Council on August 10, 2026, at which time we expect the timeline for further public
engagement and council policy deliberation to be outlined.
Thanks for taking the time to research the issue and provide us your thoughts, as well as
for your care for our community and those who work here. I’m sure Council looks
forward to considering your perspectives as part of the deliberative process.
All best,
John
John Mauro (he/him) | City Manager
City of Port Townsend | www.cityofpt.us
250 Madison Street | Port Townsend, WA 98368
P: 360.379.5043 | M: 360.531.2916
Follow | Learn | Subscribe
From: David Ginsberg <davidbginsberg@gmail.com>
Sent: Thursday, June 11, 2026 3:44 PM
To: John Mauro <JMauro@cityofpt.us>
Cc: Amy Howard <AHoward@cityofpt.us>; boh@co.jefferson.wa.us
Subject: 2026 Olympic Gravity Water System Rate Review — The Legal and Safety Case for a
Substantial Rate Increase Due to Deferred Repairs and Capital
CAUTION: External Email
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