POULSBO — The City of Poulsbo is facing a hard truth. In the midst of environmental regulation, the city’s stormwater management fund is being depleted.

Because of the rising costs of the city’s stormwater program and an outdated rate study from 1999, Public Works Director Barry Loveless said the city needs to increase the rate that business and residential property owners pay to help support the stormwater utility.

The process will begin by talking with the commercial rate payers, who would be hardest hit, Loveless said. The current stormwater utility rate is $8.41 a month per household; commercial properties pay an “equivalent residential unit” rate for every 3,000 square feet. For example, the North Kitsap School District pays 455 ERU, at a cost of $3,826 per month.

At the current rate, the city could continue minimum maintenance of its current facilities — catch-basin cleaning, storm pond maintenance, and monitoring stormwater outfalls, Loveless said. Without a rate increase, the city won’t be able to pay for capital projects to enhance stormwater management.

Anderson Parkway is an example of a stormwater retrofit, and the city has a few more of those projects planned.

Loveless is concerned current stormwater management will not achieve the Department of Ecology’s mandated pollution-reduction targets, and the city would have to fund the retrofits anyway, he said.

The city conducted a Capital Improvement Program rate study in 2009 and found all of its utility rates needed to be raised because of a higher population and increased development.

At the March 20 City Council meeting, Loveless proposed a rate increase to $10.43 in August 2013, and another increase in 2014. While this would only be a $2 a month increase to households, commercial properties could be charged hundreds of dollars more per month.

Council members Ed Stern and Connie Lord both advised caution and worried about the impact on the school district’s budget during a tight economy.

Councilman Gary Nystul said it is a water quality issue, and the rate change will be a “good interim to put us on a good financial foundation.”

Council members Linda Berry-Maraist and Jim Henry agreed with Nystul.

“We can kick the can down the road again … but sometimes you have to bite the bullet,” Henry said.

Mayor Becky Erickson believes now is the time to raise rates.

“The [stormwater] fund has been negative for five years. That’s fiscally imprudent,” she said. “The [Department of Ecology study of Liberty Bay] could increase the responsibility more than we know now.”

She added, “I’m putting you formally on warning. We need to bite the bullet. I don’t like increasing utilities anymore than anyone at this table, but the fact remains there are huge regulatory burdens placed on us.”

Ecology hosted a public meeting March 21 and presented its findings on how to control bacterial pollution in Liberty Bay and tributary creeks. Most of the streams entering Liberty Bay — except Sam Snyder Creek — contain high levels of fecal coliform bacteria, according to Ecology’s study, causing problems for salmon and shellfish harvesting, and posing a threat to human health.