4 percent water rate cap in jeopardy
Detroit — Suburban residents could see water rates rise higher than an agreed-upon 4 percent under a new regional water authority due to falling water sales.
A cooler than average, wet summer sharply lowered demand. And because 90 percent of the costs associated with the Detroit Water and Sewerage Department are fixed, the money from the lost revenues needs to be made up, officials said.
The average suburban household rate could top double digits by the time rates are voted on in March by the department.
"We have had two years of wet weather," said Nicolette Bateson, chief financial officer for the department. "When you have a wet year people do less outdoor watering."
Flint left the system in 2014, before the July 1 start of the fiscal year but after the rates were adopted, Bateson said.
"This accounts for a permanent revenue decline of approximately $12.5 million, which is an element of revenue forecasting adjustment for next year," she said.
The 4 percent rate cap was agreed upon as part of the deal to form the Great Lakes Water Authority, which takes over some oversight of the water department July 1. The authority was set up during the city's bankruptcy as a way to inject money into the department and to give suburban officials more input.
Robert Daddow, Oakland County's deputy county executive who is one of the three suburban appointees to the six-member authority, told The Detroit News on Tuesday water department revenues fell $17 million in 2014 because of declining consumption. Another $17 million was lost on the water side in the first 90 days of fiscal year 2015.
The rate cap in 2016 would generate only $15 million and "something is going to have to give," he said.
The water department faced criticism Tuesday from county executives at the annual "Big Four" luncheon sponsored by the Detroit Economic Club at the North American International Auto Show at Cobo Center.
"Right now, there is no guarantee they are going to continue paying the bills and (Detroit) is having a challenge getting their part of the money," L. Brooks Patterson, Oakland's executive, said Tuesday.
Under the agreement, Detroit will retain ownership of the area's water and sewage system, but the suburbs agreed to a 40-year, $50 million annual lease that gives them more control over the system outside Detroit.
Daddow on Thursday defended water department officials just two days after county leaders criticized the accuracy of numbers. He said he didn't believe water department or Detroit officials gave intentionally misleading numbers during the formation of the authority. Still, he said, accurate information is hard to glean from records.
Water revenues are coming in lower but sewer projections are now coming in slightly better compared to projections months ago, Daddow said
Daddow expects within the next three to four months, the authority "will be addressed with numbers that are credible."