FAQ - Utility Undergrounding in Medina

Last Update: November 14, 2023

FREQUENTLY ASKED QUESTIONS ABOUT UNDERGROUNDING UTILITIES IN MEDINA

1. What does the term “undergrounding utilities” refer to?

Puget Sound Energy (PSE), uses this term to describe the removal of the overhead electrical distribution system facilities consisting of wires, transformers, switches, and distribution poles, and replacing them with a system that is installed primarily underground. In an underground system the vaults, conduits, and cables are under ground while the transformers and switches are pad-mounted and sit above ground (on top of vaults). This is referred to as an underground conversion.

1. What are the advantages of undergrounding utilities?

A significant advantage of undergrounding is the aesthetic improvement resulting from eliminating the poles, lines and overhead transformers throughout the community. Additionally, studies have shown that underground systems: experience fewer service disruptions; reduce motor vehicle accidents; lower maintenance costs; require less tree trimming; and suffer fewer line losses.

1. Are there any disadvantages to undergrounding utilities?

Underground electric utility systems generally take up more of the public right-of-way (ROW) and may require additional easements on private property. Trouble shooting system problems and restoring power outages take longer. Data indicates that although the frequency of outages for underground systems is 50% lower than overhead systems, the average duration of such disruptions is 58% longer than for an overhead system outage. On average, converting to underground power lines costs five to ten times as much as installing new overhead power lines.

1. Is undergrounding utilities common and have any neighboring communities already completed this work?

Many communities incorporate undergrounding utilities in their road projects, both for new roads or road improvements. Many communities require that new development include undergrounding of utilities. The Town of Hunts Point converted to all underground utilities in the 1960s. The Town of Beaux Arts Village and Yarrow Point has also been converted to underground.

1. What is the City’s share of the estimated total cost of undergrounding utilities in Medina?

$40,000,000.00

1. How much of the undergrounding utilities cost is paid for by the utility companies and how much by the City?

In terms of electricity, the Washington Utilities and Transportation Commission (WUTC) has approved a tariff, commonly referred to as Schedule 74, that provides the terms and conditions under which PSE will convert its existing overhead electric distribution system to an underground system. Generally Schedule 74 calls for most conversion costs to be split 60% / 40% between PSE and the City, with the City also being responsible for all costs associated with surveying, trenching, excavation, backfill and restoration for the conversion.

1. How does the City plan to finance their share of the costs?

The City may borrow up to $40 million and will raise that money by selling long term general obligation bonds of the City. The proceeds of the bonds will be used to pay project costs. The bonds will be repaid over a term of 20 years with annual tax levies on all of the taxable properties within the City.

1. How will my share of the cost for undergrounding utilities be calculated?

Property owners within the City will pay a uniform tax rate that is calculated based upon the assessed value of their property.

1. If utilities in my neighborhood are already underground, will my property still be assessed the new bond levy?

Yes; the tax levy is required to be uniform on all taxable property, regardless of whether utilities in the area are already underground.

1. What is the expected tax levy rate?

Based on the City’s 2023 assessed valuation, the projected levy rate would need to be  approximately $0.40 per $1,000 of assessed value. For instance, if a home has an assessed value of $3 million, the annual assessment will be $1,200.

1. For how long will the tax levy be placed on my property tax bill?

Twenty years, starting with the year in which the bonds are issued.

1. Will my annual total bond repayment levy stay level, or will it increase as my home’s assessed valuation increases?

The City expects to structure the bond issue so that the dollar amount of the levy will stay the same during the 20 year payment period. The levy rate (dollars per thousand of assessed value) will change, of course, as the assessed valuation changes over time.

1. Can I choose to pay off my total bond tax levy in a lump sum, accelerate payments or otherwise retire the debt early?

An individual property owner cannot prepay property taxes for future years. The bonds will be structured, however, so that the City will be able to refinance the bonds if interest rates decrease in the future.

1. How is my senior citizen, widow, or widower of a veteran exemption affected by this new tax levy?

Any exemption or deferral you are entitled to affects the assessed valuation of your property and therefore is applied to this tax levy.

1. Since the bond levy tax is part of my property tax bill, is it also tax deductible?

The property tax allocable to the repayment of the bonds is deductible under current federal tax law in the same manner as other property taxes (if the property owner itemizes deductions).

1. What happens if the total bond proceeds are not sufficient to cover the cost of all undergrounding?

If funds are insufficient, the City could choose to complete work in high priority areas only, or could seek alternative funding sources.

1. What happens to surplus bond proceeds if the cost of undergrounding comes in under budget?

Bond proceeds can only be used for the undergrounding project. If the cost of the undergrounding comes in under budget, then any remaining bond proceeds (and interest earnings) will be deposited in the City’s debt service fund, and used to retire bonds or make interest payments, thereby lowering the upcoming tax levy.

1. Can the City retire this bond debt early, refinance the bonds later at more attractive interest rates, or otherwise reduce the total bond cost to property owners over the term of the bonds?

If interest rates decrease, the City will have the ability to refinance the debt. However, it is expected that cost savings from a refinancing would be available only after 10 years (which is a standard call provision for tax-exempt municipal bonds).

1. Will undergrounding utilities affect my future monthly service bills?

Possibly. Although initial costs for conversions will be covered under the terms of the tariff schedule, future costs for maintenance and upkeep may be born by rate payers. However, rate increases depend on many factors and are currently based on Puget Sound Energy’s entire service area. Any changes in the rates would also be subject to approval by the WUTC.

1. What exactly is the scope of work that must be undertaken to underground utilities?

New underground utility distribution systems must be designed and engineered. Some additional public rights-of-way or utility easements may need to be acquired. New underground utility systems must be constructed (this will require excavation of roads, shoulders, sidewalks and possibly some property frontages for the installation of conduits and vaults) and connected to the existing utility systems. Customer service lines must then be disconnected from the existing utility systems and connected to new underground utility systems. Lastly, the existing overhead utility systems will be removed and surface restoration will be completed.

1. Will any utility equipment remain above ground and visible, such as vaults and connection boxes, and where might they be located?

Yes. On the electric utility side, pad-mounted transformers and switches (green boxes ranging in size from about three feet square and two feet tall to five feet square and four feet tall) will be above ground. There will be vault lids at grade that will be visible and access to the lids will have to be maintained. Typically these facilities will be located within public rights-of-way where sufficient operating space can be made available. Otherwise, some facilities may need to be located in easements outside of public rights-of-way.

1. Who is responsible for undergrounding the service connection between my home’s electrical panel and the street?

Washington state law (RCW 35.96) makes customers responsible for disconnection and removal of overhead services lines. PSE tariff Schedules 74 and 85 make customers responsible for the installation of new underground services lines to their homes.  For most single family homes, the customer must provide trench and conduit from the utility system to the meter at the home for the installation by PSE of a service line to the home. The customer is also responsible for making necessary modifications at the home to allow for connection of a new underground service line (this typically must be done by a qualified electrical contractor hired by the customer). The customer is responsible for all costs associated with the above work.

1. Can I choose not to underground the service connection between my home’s electrical panel and the street?

Washington state law (RCW 35.96) requires removal of overhead services lines within underground conversion areas, but does provide the opportunity for a customer to object to the requirement and to have a hearing before the City. PSE Tariff Schedule 74 requires conversion of all service lines unless otherwise agreed between the City and PSE.

1. Can I get an estimate of this cost before I cast my vote on the bond issue?

Most licensed electrical contractors can provide you a general estimate of the cost; however they may need additional design information about the undergrounding connections at the street before an accurate cost can be provided.

1. How long will I have to complete this work, and what is the estimated cost?

PSE provides property owners with 90 days notice in anticipation of service cutover. The estimated total costs for this work will range from $5,000 to over $10,000.00

First there is the cost to make modifications at the premises, dig the trench and lay the conduit from the house to the street. Property owners will need to hire, and make payment directly to, an independent contractor to do this work. This work typically requires City permits and inspections.

PSE will charge customers to install and connect the new service line. These charges are adjusted from time to time along with other rates for service.

1. How do I find qualified technicians to perform this service, and will there be payment options?

Service directories, contractor’s licensing boards, and personal referrals are all good ways to find qualified technicians. The City may also compile a list of qualified technicians, but will not make individual recommendations. PSE does not currently have payment options for this work, and such options for independent contractor work are up to the individual vendor.

1. If my home already has underground utility cabling to the street will I escape these added homeowner costs?

Yes, though in some rare cases some incidental costs could result, based on individual property owner conditions.