After years of low-cost living, Hermiston feels crunch of growth

Jaime Ruelas grew up in Hermiston but his family is from Tecomán, Mexico.

The small city near Mexico’s Pacific coast is near a lagoon with a crocodile reserve that the family so closely associated with the area they started calling their father’s hometown “La Laguna.”

Decades later in 2020, Ruelas and his family fulfilled a longtime dream and opened La Laguna Sportsbar on Hermiston’s Main Street, a grinning crocodile at the center of the business’s logo.

“I’ve always had the name in the back of my head,” he said. “I always had the mascot. So when I was able to start the business, I was like, ‘Hey, I got the name, I got the logo. Let’s get going.’”

La Laguna opened just months before the COVID-19 pandemic and barely survived the resulting shutdowns. While Ruelas feels good about the future of his family’s restaurant, he’s starting to feel the rising cost of living and doing business in Hermiston as another unforeseen pressure.

Residents got their first major price hike in the spring when the Hermiston City Council approved a 37% trash rate increase for the city’s garbage company. In the summer, the council instituted a business license fee for the first time in Hermiston’s history. And during the last meeting of the year, they agreed to raise electrical rates by 20% over the next three years.

It’s a significant development for a city that’s taken pride in its rapid growth and its business-friendly environment. Officials said they’re still trying to keep the town affordable while acknowledging that the costs of providing services in Eastern Oregon’s largest city were beginning to outstrip its revenue.

Hermiston is far from alone in seeing utility costs skyrocket. Energy utilities across the state have hiked prices by double digits. While many rural utility ratepayers are paying less than their urban neighbors, Hermiston officials think that smaller utilities will follow in their footsteps in the months ahead.

They say they understand the pain of rising utilities and new fees, but the era of suppressed costs is over as parts of the region grow.

Hermiston begins to show its age

Until World War II, Hermiston was a small farming town with less than 1,000 people. The war brought the Umatilla Army Depot in 1941, causing the town’s population to more than quadruple over the following decade. The advent of center-pivot irrigation helped turn western Umatilla County into one of the top-producing agricultural areas in Oregon and led to more growth. Hermiston surpassed 10,000 people in 1990 and reported nearly 20,000 in the 2020 census.

All of these decades of growth allowed the city to keep its utility rates and fees artificially low, according to Hermiston assistant city manager Mark Morgan. Newer infrastructure meant the city didn’t need to regularly replace decades-old water and power lines, with Hermiston focusing mainly on operating costs.

Morgan recalled a 2016 visit from Madras city officials, who asked him what Hermiston’s secret was in keeping its utility rates so low.

“The answer was, ‘There isn’t one,’” he said. “They are artificially suppressed. Eventually, the hens are gonna come home to roost. That’s where we really started to recognize we need to really ratchet up some of these fees that we’re charging. Otherwise, down the road, someone’s gonna have to pay for those costs.”

Hermiston residents have benefited from notably low utility costs for years. Before a December rate hike by the city-run utility — Hermiston Electric Services — a home that used 1,400 kilowatt hours of energy spent $124 per month. The statewide average was $235.

Suppressed prices could only last so long, however. The Hermiston City Council approved 15% rate hikes for water and sewer services in 2017. But the recent increase in electric bills caught residents’ attention.

Hermiston city officials argue that electricity there will still be cheaper than many of the other utilities in the region, like Pacific Power, which recently raised its residential rates by nearly 10%. But Morgan said he understood those explanations offer little solace to ratepayers.

“I absolutely get it,” he said. “People [say], ‘I was paying this [amount] and now I’m paying this. What do I care what people are paying in Baker City? … I don’t live in Baker City.’”

Hermiston city officials say not all the cost increases are under their control. The electricity rate hikes were partly inspired by increased costs from the city’s energy supplier, the federally-run Bonneville Power Administration. The garbage rate increase came years after the local trash company was bought by Waste Connections Inc., a national corporation that wanted higher rates to pay for fleet and equipment updates, Morgan said.

Oregon’s anti-tax measures of the 1990s, which significantly curtailed the amount of revenue local governments could collect from property taxes, also mean funding needs to come from elsewhere, according to Morgan.

The city has long wanted to hire more police to account for the last decade’s worth of growth. But the police department already costs more than a third of the city’s general fund budget, a fund mainly derived from property taxes. That’s in line with major urban areas, which typically spend between 25 and 40% of their discretionary funds on police.

Morgan said the city had seriously considered a business license fee as far back as 2012, but decided it was better to table it for a time when the city needed it more.

“From the city administration standpoint, we kind of viewed that as like you’re climbing Mount Everest,” he said. “You want to have some extra oxygen bottles in your backpack. You don’t want to just use a revenue source just because it’s there.”

Little choice but to pay

With La Laguna’s garbage bill rising, Ruelas said he’s keeping an extra close eye on the alley behind the restaurant.

“The thing is that we have our trash in the back, and once in a while, you’ll see people just come and throw stuff in there,” he said with a chuckle, “and you’re like, ‘Hey, I’m paying for that.’

Ruelas said he’s already felt the pain of that garbage rate increase and is bracing for a bigger electric bill and the business license fee, which will go into effect this year.

He’ll try to conserve energy where he can, but there’s only so much he said he can do when he has TVs playing live sports all day and the bar frequently hosts live music and DJs. While he recently switched vendors to save money on rising food prices, he doesn’t have that option with public utilities.

Customers at La Laguna may end up seeing some of those rising costs in their bills, but Ruelas understands that the city is raising its rates to cover its own costs, and he supports the idea of more law enforcement.

He remains optimistic about the future of his family’s restaurant, regardless of the growing pains.

Hermiston residents often travel 30 minutes north to the Tri-Cities region in Washington for dining and entertainment, Ruelas said, but he sees La Laguna as an attempt to build a nightlife in Hermiston as it matures as a city.

“You do hear a lot of people complaining that, ‘Oh, we wish we had this, we wish we had that,’” he said. “But those businesses won’t come here until they see that the money’s being spent here.”

‘Are we overgrowing our means?’

Before ascending to the mayor’s seat, Doug Primmer spent one of his last votes as city councilor supporting the electricity rate hike.

He said growth doesn’t come without costs, but he’s open to asking questions about how the city will grow in the future.

“Is our growth rate sustainable?” he said. “Are we growing too fast? Are we overgrowing our means?”

For his part, Morgan, the assistant city manager, said inflation was on the right track, which would help the city’s rates and fees stay aligned with its costs. But he said one potential obstacle is a national push toward tariffs.

The Trump administration has promised to impose 25% tariffs on Canada and Mexico starting in February. Lumber tariffs during the last Trump administration raised construction costs, Morgan said, and as the city attempts to replace its aging infrastructure, he’s concerned it could happen again.

“I think there’s some concern in the industry that, depending on what happens with those tariffs, we could be heading back up the other side,” he said.

Roy Barrón was the sole vote against the electric utility rate hike, even as he knew the city needed the money.

Barrón voted against it because he wanted the rate increases implemented on a tighter timeline. The council elected to spread them out over three years, and Hermiston Energy Services will eat significantly into its reserves because of that decision.

Still, he was sympathetic to how many new fees and rate hikes the council approved over the last year.

“I think this is just more a part of a bigger thing that’s happening here in the US, where our wages aren’t increasing in accordance with inflation. That’s something that’s not very unique to Hermiston.”

The city of Portland is grappling with how to cover a potential $100 million shortfall, with a governor’s advisory group blaming the budget woes on businesses and wealthy residents moving out of the city to avoid paying higher taxes. Last year, the mayors of Salem and Bend attributed their cities’ strained budgets on the same anti-tax measures mentioned by Morgan.

Hermiston is expected to keep growing. Amazon is in the midst of building a new data center in town and city officials are considering further expansion of the urban growth boundary. For Barrón, any drawbacks from growth are outweighed by its potential to improve Hermiston’s quality of life.

“I think as long as we keep a pulse on the community (and) open these conversations to the community, we’re doing a good job,” he said. “That’s how I feel about Hermiston and the growth that we’re experiencing. It just makes me excited.”