Detroit water system proposes 9.3% water rate hike
Detroit — Costs for water service would rise an average of 9.3 percent this year in Metro Detroit under rates proposed Wednesday by the Detroit Water and Sewerage Department.
The department's board discussed preliminary water rates for the 2015-16 fiscal year, which would rise 3.4 percent for Detroit customers and 11.3 percent for suburban users, on average.
Suburban customers' water bills could be even higher, since many communities tack on additional charges to the wholesale rate billed by the Detroit water department to cover their own infrastructure and operating costs.
The seven-member water and sewerage department board is expected to vote March 11 on the rates for the next fiscal year, which begins July 1 — the same day a newly created regional water authority begins partial oversight of the system.
Once the board sets rates next month, Detroit City Council would have to sign off on them.
Under the proposal, sewer costs would increase an average 6 percent systemwide.
Rates are based on several factors, including annual sales volume and maximum day and peak hour demands, as well as distance and elevation from water treatment plants.
Gregory Eno, a spokesman for the water and sewer department, said as of Wednesday evening officials had not calculated how much the proposed rates would cost the average customer. He said currently, the average residential customer pays $70.67 a month for water and sewer service. Under this year's average sewer and water increase of 7.4 percent, that would add about $60 to the average customer's annual tab.
Water costs have two components, which vary by community: A flat monthly amount plus a charge for every 1,000 cubic feet (7,480 gallons) used.
For many communities, monthly charges would rise this year, while rates based on usage would fall.
Water department officials said a decline in water sales is a major reason behind the increase in flat monthly charges. They estimate the department lost more than $26 million between July and December due to lower water usage and are projecting a $59 million shortfall this fiscal year.
"We have lower usage in the system and ultimately that results in a revenue shortfall," said Sue McCormick, the water and sewerage department's director and CEO.
She said demand is down because of many factors, including Michigan's cooler temperatures and wet weather over the past couple of years. However, since 90 percent of the water utility's costs are fixed, it has to recoup lost revenue by raising rates.
"There are still the same amount of pipes, pumps at pump stations that must be maintained and invested in to ensure a high quality of service to customers," McCormick said. "Ultimately, the unit costs must be adjusted or increased to eliminate the shortfall."
Suburban officials said they weren't surprised by the size of the proposed increases.
"I suspect it will be a surprise to the public," said Macomb County Executive Mark Hackel. "I don't think people realize the Detroit Water and Sewerage Board is still in control.
"And those rates are going to go up because they have to, based upon low assumptions of water consumption," he said. "If you have less consumption and you still have all of these bills to pay, the only way to get that back is to raise rates."
Chip Snider, Northville Township's manager, said Wednesday evening he and community officials had not seen the proposed water and sewer rates for the township. Figures released by the water department showed the township's usage rate would fall 16.7 percent, while its flat monthly cost would rise 89 percent.
"We know in western Wayne County, we're the farthest from Detroit, so we understand often times our rates are higher based on that," he said. "We're expecting our rate to go up somewhere in the area of 24 percent."
Snider said lower water demand has put communities like Northville in a dicey situation.
"The rate is generally based on consumption, which has been down in our community, largely because we developed an ordinance to conserve water," he said. "But in doing so, we've somewhat shot ourselves in the foot because we've decreased consumption, which then resulted in a rate increase.
"We're trying to find some balance within that equation."
McCormick said the department's 2015-16 budget — which is about $934 million — has not increased from the previous year and costs have been contained.
In January, water officials said a $12.5 million decline in water sales might push rates higher than a 4 percent cap to be established under the new Great Lakes Water Authority.
Macomb, Oakland and Wayne counties agreed to a 40-year, $50 million annual lease of the area's water and sewerage system. The Detroit Water and Sewerage Department will provide maintenance and service to customers in the city while the authority will serve about 3 million in the suburbs.
Water department officials also said Wednesday they expect the utility will collect from 85 percent of its Detroit customers in the next fiscal year, up from about 83 percent now.