LAKE STEVENS—A Snohomish County Superior Court Judge sided with the Lake Stevens Sewer District on Tuesday, June 10, in a lawsuit between the district and the City of Lake Stevens regarding disagreements on when the two entities would merge.
The city and the Sewer District have been involved in a less-than-amicable merger process for the last five years that 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 contract had been in place for 15 years but, despite its agreed upon terms, the Lake Stevens City Council’s ordinance allowed for a district takeover within 90-days. The ordinance, according to the sewer district, was made “without notice, without legal authority,” and without a mutual agreement – one of the terms of the contract.
By June of 2024 legal-related fees accrued by both the City of Lake Stevens and the Lake Stevens Sewer District had reached over $700,000. According to the Sewer District by the end of litigation costs had reached over one million.
“The ruling couldn’t be more clear. Well over a million dollars has been spent to this point and the City has nothing to show for it. It’s unfortunate for the taxpayers of Lake Stevens that it took 5 years and all that money to have a judge say the same thing we’ve been saying all along. We have a contract, and contracts mean something”, said Sewer District Commissioner Kevin Kosche on the court’s decision Tuesday.
Back in April of 2024, Lake Stevens Mayor Brett Gailey authored a letter—sent to thousands of Lake Stevens residents—where he criticized the sewer district’s plan to raise the salaries of its top positions calling the decision a concern of “transparency, fairness, and fiscal responsibility.”
“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 Mayor Gailey. “Such actions undermine the negotiation process and erode trust in the integrity of the merger discussions.”
However, according to the district, its decision to raise salaries was based on survey results comparing district positions with adjustments made to approximately the 75 percentiles, which was done under the guidance of the city’s legal counsel and 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,” Mariah Low, General Manager for the Lake Stevens Sewer District, told the Lynnwood Times.
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.
By state law, utility funds are considered, what’s called, enterprise funds so sewer funds raised by rates have to be used for sewer work. The only way that they could be used elsewhere, by state law, is to take out a loan against the utility and pay it back with interest.
The City of Lake Stevens has looked at imposing a utility tax for all utilities but has ultimately decided on not imposing a sewer utility tax in attempt to complete negotiations with the District.
According to Mayor Gailey the merger would also result in annual taxpayer savings of up to $600,000.
“It’s unfortunate for the citizens of Lake Stevens. We had the opportunity for less government and more cost savings for the city, and that didn’t happen,” Mayor Brett Gailey told the Lynnwood Times following the court’s decision Tuesday.
Mayor Gailey cited an “impartial third-party analysis” as his data source regarding these savings 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.
In a press release, published Wednesday, June 11, the Sewer District wrote it remains committed to following the process outlined in its contract with the city and plans to continue working with them to move forward with its 2033 merger date.
“We’re ready to move forward with our City partners and continue focusing on our mission of protecting the environment and providing quality service to our community,” said Sewer District Commission President Andrea Wright.
In August of 2021, the not-too-distant city of Shoreline took over Ronald Water, and Wastewater District. The city of Shoreline was the last example of a Washington State city taking over a special purpose water-sewer district which the Lake Stevens Sewer District has looked at as a model for its negotiations with the city—assessing what went well, what were the pitfalls, etc.
From 2023 to 2024, sewer rates in the city of Shoreline have jumped from $73.75 a month (which includes Shoreline Wastewater Utility as well as King County treatment) to $81.00 a month—a $7.25 or 9.83% increase.
The City of Shoreline says the increased rates are due to incorporating projects identified in its Wastewater Master Plan, extending the current low-income senior home-owners discount to low-income customers of all ages, utilizing a balance of debt and pay-as-you-go funding for capital projects, resuming the imposition of fees to cover credit card processing costs, and inflation.
Author: Kienan Briscoe
