May 25, 2024 4:54 am

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Lake Stevens and Sewer District headed back to court in tense merger

LAKE STEVENS—The City of Lake Stevens has threatened to take the Lake Stevens Sewer District back to Superior Court following, what they call, concerns of “transparency, fairness, and fiscal responsibility” after the District raised salaries for some of its lead positions.

Lake Stevens Sewer District wastewater treatment. SOURCE: Lake Stevens Sewer District.

“Recent actions taken by the Sewer District Commissioners, including substantial salary increases for top managers, raise serious concerns about transparency, fairness, and fiscal responsibility,” wrote Lake Stevens Mayor Gailey in a letter mailed to thousands of residents. “Such actions undermine the negotiation process and erode trust in the integrity of the merger discussions.”

The city and sewer district have been participating in a less-than-amicable merger process for the last few years that has already resulted in a lawsuit filed by the District after the City breached its contract, approving an ordinance in 2020 to use existing statutes to assume the district prior to the contractually agreed upon year of 2033. The City, in turn, filed a countersuit against the district arguing it was within their “legal right to assume the Sewer District according to state law.” The district is currently working with their attorneys to find out whether the City has the “legal right” to assume authority of the sewer district before 2033.

Brett Gailey
Brett Gailey

“Since 2017, we have been diligently working towards integrating the sewer district into city operations. This effort is driven by several key objectives: reducing organizational expenses, enhancing environmental stewardship, and stimulating economic growth,” Gailey stated in his letter to residents. “Over the past 18 months, both the city and the sewer district have engaged in collaborative negotiations to facilitate a smooth transition, with a primary focus on retaining all sewer district employees to ensure continuity of service.”

Both lawsuits have since been put on hold after the city and district collectively decided to return to negotiations to handle the situation diplomatically…until now.

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In Mayor Gailey’s April 15 letter to residents, he stated that “the sewer district has resorted to legal action against the city,” but the district confirmed with the Lynnwood Times that to their knowledge, this refers to its protection order filed in 2021 and that there has been no additional legal action by the district as of late. However, the sewer district did confirm that it received notification last week from the attorneys representing the city of Lake Stevens that the city is proceeding with a second attempt of a summary judgement (legal action) against the sewer district.

Unlike some cities in Snohomish County, who own and operate their sewage utilities, the city of Lake Stevens and the Lake Stevens Sewer District are two separate entities. By merging with the existing Lake Stevens Sewer District they can benefit from the district’s cash revenue flow, can impose a utility tax to move additional funds from the sewer revenue account into the general fund, borrow against things like the sewer capital fund to pay for different projects (increased bond capacity), and potentially increase its bond rating in order to maximize loans.

Additionally, according to a letter authored by Lake Stevens Mayor Brett Gailey on April 15, the merging could result in annual taxpayer savings of up to $600,000. Mayor Gailey cited an “impartial third-party analysis” as his data source however, in that synergy assessment’s preamble (published November 4, 2020) it’s made clear that the company, Moss Adams, is not impartial and is working for the city of Lake Stevens.

The assessment actually states that there may be no savings or potentially $594,000 over the first three years, which breaks down to less than $13 per customer per year. Compared to the district’s annual budget of $21.7 million this isn’t much of a savings according to the district.

The city’s primary argument for threatening litigation, the “substantial salary increases for top managers” within the district, does not hold ground the sewer district claims.

The district used its manager salary survey to compare district positions and adjustments were made to approximately the 75 percentiles, which the district said is an entirely normal process and the city’s legal counsel was advised throughout the entire process who didn’t ping any violations of Open Public Meetings Act (OPMA).

Lake Stevens even participated in a performance review for the District’s General Manager and received copies of the salary survey as well as a list of job descriptions — part of what the two have been working through for the last thirteen months.

“They didn’t understand, I guess, that those salaries would be reviewed, and those increases would be coming,” said Mariah Low, General Manager for the Lake Stevens Sewer District.

Mayor Gailey’s letter also notes that failing sewing and septic systems “pose risks” to the city’s lake’s health, however Snohomish County Department of Health controls anyone on a septic system.

Failing sewer systems, on the other hand, could be a legitimate concern. Low conducted a presentation on Wednesday, April 24, at the Utility Meeting about environmental compliance concerning several spills the district has had in the last four years.

mariah low
Mariah Low

“The district still has had a fairly great track record in its environmental protection and its ability to comply with our NPDS permanence,” Low told the Lynnwood Times.

Mayor Gailey’s April 15 letter continued that the “lack of sewer infrastructure in our industrial area hampers job growth and economic development.” There is currently no sewage in the industrial center as of now. The district is planning to include sewage here in its Comprehensive Plan for 2027 but the cost of installing it will run approximately $27 million in debt service, which will result in a rate increase of every sewage customer of at least $13 per customer per month, which has the district asking if it’s worth it.

“In that area there’s very limited job creation or industry that could come into that area so for $27 million is it worth it for an area that’s not going to grow,” asked Low. “That’s a fundamental difference in our opinions of how sewer rates should be managed and how sewer infrastructure should be managed.”

Going forward the Lake Stevens Sewer District has recommended to the city they hire a third-party professional mediator to facilitate ongoing talks on the merger.

“We need a professional mediator. Over the last thirteen months the talks have been happening, but they haven’t been going well,” said Low. “There’s been a lot of resistance to accepting any recommendations from the district, there’s been a lack of compromise.”

The sewer district added it hasn’t considered pulling out of the merger deal altogether, considering how the city’s approached the process so far, because it wouldn’t serve its customers well to have the city proceed with litigation.

“To settle it amicably is in the best interest of the people. We’ve had three important pillars going forward; protecting the environment, engaging staff, and protecting the ratepayers or the customers,” said Low. “With those three pillars in mind being able to negotiate how the future looks for a city utility department is really important for us. We want to have the confidence that when the city does take it over that those three pillars remain important and remain a focus of that utility.”

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2 Responses

  1. The Lake Stevens Sewer Dist reasons to stay as a separate entity falls on deaf ears to me. Over a couple of years they have raised the rates twice. First was to around $88 then to $99. This is the price to go to the toilet and wash the dishes. They have a low income program the has a limit of $45,000 income. The state property tax has a max income of $75,000. This article states they substantially raised the salary of higher managers so now we pay $99 per month. I don’t trust these crooks.

    1. Those of us who lived in Lake Stevens when the district was required by updated environmental laws to build a new sewer plant 10 to 15 years ago were informed exactly how much rates would go up, and the sewer district has lived up to those promises exactly. The city of Lake Stevens actually ceded control of the parts of the sewer system they controlled back in 2005 to avoid having to build their own treatment plant. That agreement called for the city and sewer district to combine by 2033. But Gailey and the council decided to blow up that agreement without warning, and now lawyers are getting rich with taxpayer dollars. I’d encourage anybody who trusts the city more than the sewer district to dig into the city’s spending and tax increases in recent years. They’re spending much more to renovate the new city hall space than they are on sidewalks, which are still sorely lacking here.

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