When Washougal officials convened last month to discuss ways to reduce a planned increase to the city's water rates, they agreed on a two-part solution.
The city would push back the start date of a construction project at the water department, and it would contribute $500,000 from its general fund toward lowering the rates. The plan was intended to keep people's bills from jumping by about 20 percent in 2013.
But with the state facing a $1 billion deficit heading into budget season, city officials are concerned that legislators will take money from a trust fund used to provide low-interest loans to municipal construction projects and instead direct it toward balancing the budget.
Washougal planned to use a loan from the state's Public Works Trust Fund to pay for upgrades to the water department. But if the fund is tapped to backfill the state budget, City Administrator David Scott said, the city would lose the loan and the ability to drop rates by as much as anticipated.
"It's of great concern to local governments throughout the state," Scott said. "This loan program has been vital in keeping our economic engine going."
The city is entering the third year of a five-year series of rate increases. In late January, city councilors voted to lower Washougal's bimonthly water rates, dropping them from $211 to around $183.
The trust fund's loan rates range from 0.25 percent to 2 percent. The rates are attractive to local governments looking to move forward with capital construction projects because they fall well below what's offered on the bond market.
Washougal had planned to use loans from the trust fund to pay for a number of projects, including $9 million to $10 million worth of state-mandated improvements to the city's wastewater facility. Without the loan, the city would have to take out a bond, with a 4-percent interest rate.
City Councilor Brent Boger said money from the trust fund should stay devoted to public works projects.
"This is money being repaid by cities," he said, "but they want to tap it for the state's general fund, and I have a problem with that."
Scott said he was hopeful legislators would fully fund a statewide list of the trust fund's projects. Some local lawmakers have thrown their support behind keeping the funding in place, including Sen. Ann Rivers, R-La Center, and Rep. Liz Pike, R-Camas.
Meanwhile, the Washington Association of General Contractors has placed protecting the trust fund on its list of legislative priorities.
It's a tempting pot of money for the Legislature to draw from, said AGC spokesman Jerry VanderWood, because of the state's budget deficit and new funding mandates, including a Washington Supreme Court ruling from last year requiring that the state increase education funding.
Scott said the city would know more about the trust fund's future when the Legislature releases its budget later in the spring.