POULSBO — The Poulsbo City Council voted 4-3 to not raise stormwater rates in August, and will instead take a closer look at stormwater fund needs during 2014 budget planning.

The majority of council members were in favor of the stormwater rate increase. Public Works Director Barry Loveless made a presentation similar to one in March about why he was asking for the raise — chiefly that the stormwater fund has been operating in the red for the past five years.

The rate is $8.41 for a single-family residence and has not been raised since 2009 — a minor adjustment to the 2003 rate. Since 2009, the state Department of Ecology has conducted a water-quality study of Liberty Bay, and the city was issued a NPDES permit, which formalized stormwater management program requirements, Loveless said.

Because the permit requirements increase administrative and labor costs, Loveless proposed a rate increase to $10.43 in August 2013, and another increase in 2014.

The rate increase is “justified,” but timing is not right, Councilman Ed Stern said. Stern was not aware the stormwater fund had been operating at a loss, and was especially concerned that stormwater funds had been shifted to the general fund the last few years to balance the budget, he said.

“I’m as pro-environment as anyone in this town. I’m ready to roll up my sleeves and do all those projects that are feasible,” Stern said Thursday morning. “This is not about the environment. This is strictly about the fact that the fund for stormwater being in such perilous shape, is such new information.

“The city has been taking additional amounts out of [the] stormwater [fund] for the last three years. I want that stopped. Then we can determine, once we have the stormwater fund receiving its full increment of rate payer money, then we can see which increment is missing and then go to the ratepayer and ask for that increase.”

Councilman Dave Musgrove was also concerned the rate increase was not included in the budget cycle. He supported the increase, but voted to wait to find the best way to integrate the rate study into the budget.

“This isn’t a case of choice. We have to do this,” Musgrove said. “Hopefully [the public] is in support of this. If not, go to Olympia and talk to them … We’re instructed to do this. And we support it anyway.”

Musgrove voted against the increase Wednesday, along with Stern, Connie Lord and Jim Henry.

Mayor Becky Erickson was surprised by the vote Wednesday night. It was clear in the budgets in the past several years that the stormwater fund was spending more than it was taking in because of “regulatory burdens” coming from the federal and state level, she said.

“If Mr. Stern wasn’t aware, I feel bad, but the information was readily available to him,” Erickson said.

“There has been a large increase in regulatory burdens. That’s why it’s been going backward.”

The three council members on the Public Works Committee — Linda Berry-Maraist, Jeff McGinty and Gary Nystul — voted for the rate increase.

Stern wants the council and mayor to “get serious about this utility excise tax,” and not think of it as a fall-back reserve, he said. The council voted to increase the 6 percent tax — which pays for administration of the sewer, stormwater, water and trash utilities — to 8 percent two years ago and 10 percent last year.

The excise tax is a small amount — the fund is facing a $250,000 deficit in 2013, and the excise tax makes up around $72,000 of the budget, Loveless said.

Stern was also concerned about the impact on commercial ratepayers, he said. Non-residential properties pay what is called an “equivalent residential unit” (ERU) rate for every 3,000 square feet.

The North Kitsap School District is the city’s largest customer, paying for 455 ERU at a cost of $3,826 per month. The district’s annual payment would increase by $13,200.

Members of the North Kitsap School Board were at the meeting but did not speak during the public meeting. However, after the public hearing, most school board directors said they supported the rate increase.

“As a resident, I hope you do it,” Board President Dan Weedin said. “I fully support it.”

Director Bill Webb also supported the increase.

Directors Tom Anderson and Scott Henden said they would like to work with the city on how to eliminate stormwater runoff in order to reduce their rate in the future. Anderson suggested adding raingardens to schools within the city limits, which could reduce the number of ERUs.

Without a rate increase now, the department will not be able to save for capital projects, Loveless said. And, the city must reduce the amount of Liberty Bay pollution by more than 90 percent by 2018.