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LO-Tigard team up on water utility

Lake Oswego and Tigard have officially tied the knot.

At separate meetings Tuesday, city councils from both communities agreed to build a joint water utility, with benefits on both sides.

Lake Oswego ratepayers will see substantial savings in the exchange, saving $25 million in planned upgrades to the water utility currently owned by the city.

And Tigard ratepayers, in absorbing those costs, will become part owner of a water utility for the first time in that city's history.

Though each town will bill its customers separately, both will share in the future costs of operating the system. For ratepayers, the union means higher water bills in the short term but future financial savings in both towns.

Lake Oswego currently gets its water from the Clackamas River. The city supplies more than 37,000 customers, including wholesale water customers like Tigard, after treating the water at a plant in West Linn.

But Lake Oswego's water demands are on track to exceed the carrying capacity of the water utility in 2009, in part because water usage here is high. The water utility also needs costly maintenance upgrades.

Facing $78 million in costs in the next 10 years, Lake Oswego officials began probing a partnership with Tigard in 2006 in hopes of curbing expenses.

Expanding the water utility to add Tigard customers ultimately boosts costs for upgrades from $78 million to $135 million. However, Tigard ratepayers shoulder a greater burden of those costs, $82 million, through the partnership. Long-term savings are projected for ratepayers in both towns.

Lake Oswego ratepayers currently receive a water bill averaging $128 every two months, the third lowest water rate among 11 cities in the Portland metro area. Fees for sewer, street maintenance and storm water are included in the bill, $44.56 of which is for water.

That average bill is projected to climb to $281 by 2017, in part to fund a new buoyant pipe in Oswego Lake to replace a failing in-lake pipe in the city's sewer system. The water-related portion of the bill will also increase $75.14 to $119.70 to fund upgrades in the water utility.

Without the Tigard partnership, however, Lake Oswego ratepayers would have paid an extra $25 million in capital costs to upgrade the utility. That added cost would have increased average bi-monthly costs for water by $14.16 to $133.86.

In Tigard, water bills were expected to triple without the partnership with Lake Oswego.

Tigard currently purchases its water at wholesale rates from other cities, buying about 90 percent from Portland, which is predominately fed by the Bull Run River. Expensive habitat restoration planned for the Bull Run watershed is anticipated to drive up wholesale water rates for Portland customers.

Tigard ratepayers now pay an average rate of $51.65 for water every two months. Those rates are expected to nearly double over the next 10 years through the partnership with Lake Oswego but costs are then expected to level off rather than triple.

'Some things just sort of come together,' said John Turchi, a city councilor in Lake Oswego who was initially skeptical of the water partnership.

'What we had here was a convergence of interests,' he said. 'In this case it turned out to be in the best interest of the city of Lake Oswego and not too bad for Tigard either.'

While both cities now jointly own the utility - called the Lake Oswego Expansion and Water Partnership - Lake Oswego retains ownership of its water rights on the Clackamas River.

Through the partnership, each city has the incentive to save money by leasing excess capacity in the system to the other when water is conserved.

Once construction of the expanded water system is complete, Tigard and Lake Oswego will own one of only two water pipes in the region that crosses the Willamette River. The east-to-west connection gives both cities the ability to tap alternate water supplies in a crisis affecting the Clackamas River.