Issaquah City Council approved a rate reduction and utility tax hike combination at a Dec. 21 meeting, saying it intended the actions to be revenue neutral.

The changes, passed with unanimous approval, come on the heels of an Oct. 2008 ruling by the State Supreme Court that city fire hydrants are general governmental services and not utility costs, thus requiring the city to pay for them out of its general fund.

The measures are intended to work out to affect approximately $129,000 the city spends each year on the hydrants, which would make the council actions revenue neutral.

“There will be no change in what the customer pays,” said City Attorney Wayne Tanaka.

The new tax will be implemented at the beginning of the year.

To bring the Issaquah in compliance with the court’s ruling and shield them from potential liability, the Public Works Department is proposing a combination of lowering city water rates by 2.28 percent, while raising utility taxes by 2.33 percent.

The actual tax rate would need to be reviewed on an annual basis, however, said Public Works Deputy Director Sheldon Lynne. In an exchange with Councilmember Joshua Schaer, he said the administration would need to readjust the rate periodically to avoid taking in more than the cost of maintaining the fire hydrants.

The City of Issaquah maintains 1,218 hydrants and provides water service to over 6900 customers both inside city limits and in potential annexation areas. Lynne said the city would also negotiate agreements with Bellevue and the Sammamish Plateau Water and Sewer District to pay for fire hydrants.

About 85 percent of Issaquah’s water utility customers are single family residences. Most of the public water is drawn from from wells with the remaining coming from Cascade Water Alliance.

The case, Lane v. City of Seattle, also found Seattle’s water utility, Seattle Public Utilities, liable for 12 percent interest on the money paid by customers. But officials said those penalties were unique to the case and wouldn’t apply here.