The city is preparing to pay significantly more for water purchased from Warrenton.

Gearhart can meet 75% of annual water needs, City Administrator Chad Sweet said, but the city must purchase water from Warrenton during summer months due to water production restrictions.

Gearhart should anticipate spending about $465,000 for Warrenton water, a 49.5% increase from this fiscal year’s estimated $311,000, City Treasurer Justine Hill said.

Water operations, maintenance and improvements have increased without an increase in the revenue stream, Hill said. The last water rate increase was implemented in 2013.

“At this point, the only offset is to increase the transfer from the water reserve fund,” Hill wrote in a message to the city’s budget committee.

Because it is projected that the water operating fund is on a financially unsustainable course, a transfer of up to $198,000 from the water reserve fund has been placed in the budget to provide a supplemental revenue source.

If some form of financial correction is not implemented, the water operating fund is in jeopardy of producing a negative ending fund balance.

“This transfer is critical and will provide the necessary resources to keep the operating fund balanced,” Hill said.

The city is studying how to adequately fund water utility operations and infrastructure costs and promote conservation while minimizing rates to the greatest degree possible, Hill said.

A customer rate hike remains “a pathway that the city is investigating as a possible solution,” she said.

If a rate increase is the most viable solution to adequately support the water operating fund and the City Council agrees, increased revenue in the water meter receipts account could offset the transfer from the water reserve fund without any complicated budget adjustments, Hill said.

The city budget for the next fiscal year is expected to be approved in June.