In late 2022, the City of Auburn City Council adopted a utility tax on water and sewer revenues that will apply to revenues the District collects from customers residing within the Auburn boundaries. The tax, which commenced on January 1, 2023, is set at the rate of 11.5%. Currently, the City of Federal Way collects a utility tax of 7.75% and the City of Edgewood a 6% utility tax.
Because the District uses a “cost of service” model for rates, the tax is included in water and sewer rates the District charges within Auburn beginning this year. While the tax rate is the same, there is a difference in the impact of the tax on water and sewer rates. Beginning this year, the District is collecting a charge from Auburn for the cost of providing hydrants for fire suppression service within Auburn. The revenues from the hydrant charge will partially offset the tax, resulting in a net tax increase in water rates of slightly over 5%. With the additional state taxes owing on revenues collected to pay the Auburn tax, sewer rates increased by 11.7% due to the tax. The general increases to water and sewer rates for 2023 adopted by the Board (see accompanying article) will also apply to rates for Auburn customers. In addition to rates, the tax applies to other fees and charges for service, including the Capital Facilities Charges and frontage charges for new connections, penalties and interest on delinquent accounts, and meter installations charges.
The current District Newsletter includes an article on the “City of Auburn Utility Tax”. The article indicates that the Auburn tax will have a lesser impact on water rates due to the payment by Auburn of the District’s hydrant charge. After the Newsletter was prepared, Auburn informed the District that it would not be paying the hydrant charge. This lead the Board to adopt amended rates for Auburn water customers that includes the full 11.5% tax. Accordingly, the water rates in your bills will include the full amount of the tax.