Tacoma Water staff presented a proposed wholesale water supply contract with the Cascade Water Alliance to the Government Performance and Finance Committee on Feb. 18, 2025, outlining two linked agreements: a perpetual wholesale contract and a temporary market agreement running from 2041 to 2062.

The council briefing described how the permanent deal would use Tacoma's published wholesale rates under the Tacoma Municipal Code and include a one-time system development charge of about $50,800,000. The temporary market agreement would provide shorter-term capacity — roughly 12 million gallons per day (MGD) average, about 17.5 MGD peak in presentation figures — and include a capacity reservation fee and a variable volumetric charge. "This agreement is essentially in the same shape as all of our other wholesale agreements," said Sean Senskall, a Tacoma Water staff member, explaining the pricing structure. "They will be paying essentially buying into [surplus capacity] with this one-time system development charge."

Why it matters: Tacoma staff said the two agreements together are intended to manage financial risk, preserve existing revenue streams, and use surplus system capacity following the recent departure of the WestRock pulp mill. Staff projected approximately $1.5 billion in revenue from the arrangement through 2075 and roughly $120 million in gross earnings tax receipts, though they emphasized those figures will vary with future demand and rate assumptions.

Details of the agreements and finances
- Two linked agreements: a perpetual wholesale agreement (uses Tacoma's wholesale rate and includes the system development charge) and a 24-year temporary market agreement (2041–2062) that charges a mix of fixed and volumetric fees and no system development charge.
- System development charge: Tacoma staff identified a system development charge around $50.8 million tied to the perpetual agreement.
- Temporary market size: staff described the temporary market capacity as about 12 MGD average and roughly 17.5 MGD peak (seasonal variability expected).
- Existing revenue preservation: Tacoma currently receives roughly $6–$6.5 million per year from a prior agreement with Cascade; staff said both new agreements must be executed together to preserve the present value of that revenue stream.
- Revenue projection: staff presented an illustrative projection of about $1.5 billion in total revenue to Tacoma through 2075 and an estimated ~$120 million in gross earnings tax revenue; staff noted sensitivity to future rate increases and actual delivery schedules.

Infrastructure, ownership and operations
Tacoma staff said Cascade would pay the capital costs to build the interconnection facilities off Pipeline 5 but that those assets would be on Tacoma's books; the pipeline north of the interconnection would be Cascade's responsibility. "When we build the interconnection facilities off of Pipeline 5, Cascade will pay the entirety of those capital costs, but those assets will be on Tacoma's books," Mark Powell, project manager, said. Staff also indicated Tacoma will retain rate-setting authority for water sold under Tacoma's wholesale tariffs.

System impacts and operations
Staff described operational changes, including shifting source use. With WestRock offline, Tacoma currently gets about 95% of delivered water from the Green River and 5% from wells in a typical year; at the peak of Cascade's temporary demand, staff estimated the mix could shift to about two-thirds Green River supply and one-third well water from the South Tacoma well field. Staff noted significant planning and hydraulic work will be required to support additional northbound flow through Pipeline 5.

Water quality, reserves and shortage provisions
Committee members raised PFAS and water-quality cost questions. Staff said regional supply costs (including treatment) will be reflected in the rates Cascade pays: "Regardless of the molecules that they're taking, they're going to be paying for regional supply as a package," Sean Senskall said. Tacoma staff also said the contracts include water-shortage response provisions and require Cascade to achieve parity in conservation and shortage measures.

Taxes and rate questions
Staff clarified tax and rate issues raised by committee members. Tacoma applies a 20% outside-city retail differential to retail customers outside the city limits, but that differential is not applied to wholesale contracts. Staff said the agreement revenue would be subject to the utility's gross earnings tax.

Next steps and schedule
Staff told the committee that both agreements must be executed together and that staff plan to bring the agreements to the council for first reading at the March 4, 2025 meeting (a previously scheduled March 11 meeting was canceled). No formal approvals or votes on the agreements occurred during the Feb. 18 briefing.

Quotes from committee members
Deputy Mayor Daniels said she welcomed the opportunity to support long-term investments: "I have been waiting for the opportunity to make a decision on an investment that our children and the council members years later will thank us for." Vice Chair Wristel and other members described the proposal as a resilience and regional partnership opportunity while asking for follow-up briefings on infrastructure planning, stranded assets, and system vulnerability assessments.

Context and background
Staff said Cascade's capacity from Seattle declines in the early 2040s, which is the driver for the bundles of capacity in the proposed agreements. Tacoma staff also explained that the closure of the WestRock pulp mill removed a large, steady industrial demand from Tacoma's system and thus freed capacity that Tacoma could make available to Cascade through these agreements. Staff said Cascade must build roughly $1 billion of transmission infrastructure in King County to connect to Tacoma's system, and that the earliest deliveries in the agreements begin when Cascade's pipeline is complete.

What the committee recorded formally
The Feb. 18 session was a briefing. No formal approval of the Cascade agreements occurred at the meeting; staff were directed to return with the agreements for legislative action at the March 4 council meeting.

Ending
Tacoma staff emphasized uncertainty in far-future projections and the need for subsequent council-level reviews of rates, operational plans, and infrastructure investments. Staff recommended additional briefings on Tacoma's vulnerability assessment, advanced metering data, and an integrated resource planning-style review to show how the proposed agreements fit into long-range utility planning.