When utility bills become revenue tools
Published 1:30 am Wednesday, June 10, 2026
On May 27, the Everett City Council voted to double its tax on water and sewer services, replacing a 6% fee with a 12% utility tax to help close a general fund budget gap. For the average customer, that means paying $10 to $12 more every month on top of already rising utility rates. Last fall, after voters rejected a property tax levy lid lift, the Edmonds City Council doubled its utility tax from 10% to 20% without returning the question to voters.
Everett and Edmonds are not alone. Many cities facing budget gaps are turning to utility taxes as the easiest solution, one that generates significant revenue while making it appear that the utility is responsible for the increase. Seattle’s utility tax on water reaches the mid-teens and provides well over $100 million a year to its general fund. Lynnwood recently raised utility taxes on water, sewer, surface water, and solid waste from single to double digits. Port Townsend applies a double-digit tax on gross utility revenues to help fund general government services, and Vancouver’s utility tax is 28.9% on the gross receipts of its water and sewer utilities.
Some may argue that utility taxes are no different from other local revenue tools such as sales or property taxes. Cities do need stable revenue sources to fund essential services. The difference is how these taxes are applied and understood by the public. Property tax increases above statutory limits typically require voter approval, and sales taxes are highly visible at the point of purchase. Utility taxes, by contrast, are often adopted or increased without direct voter input and are folded into utility bills, with utilities left to collect the money on behalf of city hall, often with limited visibility to customers.
Water and sewer service is not optional. It is the foundation of public health, economic opportunity, and thriving communities. These systems provide safe drinking water, support fire protection, carry away wastewater, make new housing possible, and help local businesses grow and create jobs. Unlike many other services, customers cannot shop around for a different provider or simply choose to go without them. That is why water and sewer infrastructure is different, it is an essential public service that every community depends upon.
The problem is that these utility taxes are not used the way most customers would expect. The money does not go back into the utility system. It does not fund utility operations, pipes, pumps, treatment plants, infrastructure replacement, or long-term system resilience. Instead, these dollars are redirected to broader governmental budgets unrelated to utility operations. The result is not only higher utility bills, but additional pressure on household affordability.
Affordable housing is only sustainable if essential utility services remain affordable as well. Utility taxes and fees add another unavoidable cost to monthly household budgets, landing alongside rent, groceries, childcare, insurance, and fuel. These charges do not adjust based on income, so seniors on fixed incomes, working families, renters, and lower-income households all must absorb the same added cost. Because everyone pays the same extra dollars regardless of income, these are among the most regressive kinds of taxes a community can impose.
Meanwhile, utilities are already under pressure. Aging infrastructure, inflation, regulatory requirements, treatment upgrades, drought resilience, cybersecurity needs, and long-term replacement costs are pushing rates upward across Washington. At the same time, utility taxes imposed by cities create a growing rate compression problem. Customers often see only the total bill, not the distinction between utility rates and taxes. As taxes consume a larger share of the monthly charge, utilities face greater resistance when seeking the rate adjustments necessary to fund infrastructure replacement, system reliability, regulatory compliance, and future growth. In effect, local governments are using up a portion of the affordability capacity on the utility bill, making it harder for utilities to generate the revenue needed to sustain the very systems customers depend on for safe drinking water, wastewater treatment, fire protection, housing development, and economic growth. The need for investment does not disappear. It is simply deferred, often resulting in higher costs, greater risks, and reduced resilience in the future.
State law limits utility taxes on electricity, natural gas, steam, and telephone service unless voters approve a higher rate, yet water and sewer utilities do not receive the same statutory protection. That raises a simple question: why are essential water and sewer services treated differently, and what happens when these taxes are imposed on customers who cannot vote for the officials imposing them?
Everett’s new utility tax makes those questions more than theoretical. In this case, the tax is also being applied to wholesale utility customers outside the city’s boundaries. Some of the people paying the higher tax live in neighboring communities beyond the city limits. They cannot vote in Everett elections, cannot participate in selecting Everett City Council members, and have no voice in the decisions driving these additional charges. Yet they are still expected to help fund Everett’s general governmental budget through their monthly utility bills. That is a fundamental fairness issue about taxation and representation that deserves far more public discussion.
Cities face legitimate budget challenges, and local leaders must make difficult choices. But utility bills should not become a hidden substitute for broader tax policy discussions. Customers deserve transparency about what they are paying for and whether those charges support utility service or unrelated governmental functions. As utility taxes continue to grow across Washington, policymakers and residents alike should ask a simple question: if water and sewer service is essential to public health, housing affordability, and economic opportunity, should it be treated as a revenue source for balancing general government budgets? Washington residents deserve that conversation before more utility bills become revenue tools rather than transparent reflections of the actual cost of providing essential water and sewer service.
Clark Halvorson
Executive Director
Washington Association of Sewer & Water Districts
