|The Macomb Daily
Home News Government business and finance
Water rates to rise ‘substantially'
By Norb Franz, The Macomb Daily
POSTED: 12/31/15, 3:29 PM EST | UPDATED: ON 01/01/2016 22 COMMENTS
As the regional water authority created last fall to officially take over the Detroit Water and Sewerage Department at the start of the new year, Macomb County’s representative predicts the impact on suburban wallets will be significant.
“Rates are going to be going up substantially,” said Brian Baker, the finance director for the city of Sterling Heights and the county’s member on the Great Lakes Water Authority.
The GLWA, created under court order as part of Detroit’s emergency bankruptcy, is now leasing regional pipes and plants from the DWSD at $50 million a year for 40 years. It consists of a board that represents Macomb, Oakland and Wayne counties, the city of Detroit and one other at-large member appointed by Gov. Rick Snyder.
During 2015, most authority officials said water rate hikes will be capped at four percent for the next 10 years. In addition, the authority will service the estimated 3 million customers in more than 125 suburban communities -– and sewer service to Detroit and 76 neighboring communities –- while Detroit’s water department provides maintenance and service to customers in the city.
Baker claims that half of the annual lease payments will be used to subsidize Detroit to help the city fund its pension system and to cover Detroit’s water and sewer users who don’t pay their utility bill.
Pointing out that Sterling Heights, like other suburban communities, is on the hook for the amount billed, Baker said Detroit “will only pay what they collect.”
“We thought that was a fundamental problem in the start-up of the regional authority,” Baker said in an interview with a committee of The Macomb Daily news staff. “I don’t want to make this ‘Detroit versus the suburbs’ ... they certainly are trying to do a better job, but it’s an issue.”
Macomb County Executive Mark Hackel has said he’s surprised those officials are sticking to their claim of a four percent cap on increase, calling it unfeasible but hoping he’ll be proven wrong.
A feasibility study showed the GLWA could sustain a $50 million annual lease payment for Detroit’s water and sewer system plus contribute to city pensions and fund a water bill assistance program for Detroit. The Plante Moran study concluded the authority revenues will have to be raised by the four percent limitation which would likely result in customer rate increases of over four percent.
Macomb County’s representative on the authority, Sterling Heights Finance Director Brian Baker, opposed the historic agreement finalized in last June because of unanswered questions and skepticism that promised limits on water rate increases could be achieved.
He previously said he would oppose the lease after claiming customers will pay close to $90 million more under the deal. He predicted that would result in water rate hikes annually of 10 percent.
After Baker voted against the agreement, he was removed by authority members from a committee that conducted the search for a new director.
Baker stopped short of calling his removal retaliation for his lone vote against the lease agreement. Hackel, however, didn’t hesitate in making the connection.
“It was punitive. No question about it,” Hackel said at the time.
Detroit’s water system serves approximately 700,000 Detroit residents and four million people in southeastern Michigan. Detroit’s bankruptcy exit plan approved in 2014 called for the lease agreement to be in place, and the city retains ownership of the system.
Hackel did not oppose regional oversight of the water/sewer system but was against linking it to Detroit’s emergence from bankruptcy.
Beginning in 2016, the regional entity’s transition to running the Detroit facilities will also be the first time suburban communities will have a say in water rate-setting in the region.
“Even though we don’t have an even say, we have a greater say,” Baker said.
“Now we’re at the point we’ve got to make sure this works and have the rate-payer in mind.”
Oakland County Deputy Executive Bob Daddow, the county’s representative on the authority board, said rates are determined by usage, community costs and several other factors, as well. Officials have said the transition to a regional water authority will slow future rate increases.
Rates and revenue requirements should be completed no later than March, and would go into effect July 1, Daddow said.
The authority in 2016 also will be working to fully separate its financials, assets, liabilities and operations from Detroit’s water department, along with updating capital programs that include instituting a new personnel system, installing a separate financial system, and obtaining audited financial statements, among other tasks.
“We’ve held no less than two or three community events in November and December dealing with both rates and revenue requirements ... and will be hosting community meetings as information is developed, so nothing should be a surprise to (communities) when the board takes action in March,” Daddow said.
Another project the authority faces is a series of studies dealing with operations and improvements to facilities, fleet operations and employment.
The authority hired former DWSD director Sue McCormick as its new chief executive officer in October. Baker said the contract being negotiated with her will be significantly performance based.
“She have us the best change to hit the ground running,” he said. “If she does not get the savings, we’ll move in another direction.”
“In 2012, before the court order, the number of full time equivalent (jobs at the Detroit Water and Sewerage Department) was around 2,100,” said Daddow. “Over the past three to four years, about 1,000 employees have either retired or were let go.”
Daddow said that some full-time equivalent positions that were left unfilled will be filled in the coming months.
The Great Lakes Water Authority will meet again from 1-3 p.m. Jan. 13 during a workshop at the Water Board Building at 735 Randolph Street in Detroit.
Digital First Media reporter John Turk of The Oakland Press contributed to this report.
Mon Jul 03, 2017 3:45 pm
|Ms, Natasha L, Henderson, City Administrator
City o f Flint
1101 S. Saginaw St.
Flint, Michigan 48502
Dear Ms. Henderson:
Thank you for your inquiry regarding the possibility olfreoonnecting the City of Flint to the Detroit
Water and Sewerage Department’s (DWSD) Water Supply system. Director McCormick has asked
me to respond to you and provide a brief outline of the basis for that reconnection. However, I
want to again emphasize what Ms. McCormick has previously stated to your City Council on this
issue: DWSD is willing to sit down and talk with the City of Flint without pre-condition, if that is
1 would be remiss if I did not point out that oil June 12, 2015, the City of Detroit and the Great
Lakes Water Authority (GLWA) executed a Lease Agreement that provides for the GLWA's
operation of the Regional Water Supply System. At present, we are transitioning management of
the system from DWSD to the GLWA while certain Conditions Precedent of the Lease Agreement
are satisfied. We have made substantial progress towards satisfying these Conditions Precedent
with a goal of having GLWA commence full system operations on or before January 1, 2016. I
can assure you that, like DWSD, the GLWA is concerned with the: challenges Flint’s residents
have faced in recent months, and will be willing to discuss service to your City.
That said, here is a likely list of issues that would need to be addressed;:
1} Rates : In Sue McCormick’s January 12, 2015 letter to Flint, she indicated that the
rates Flint would pay tor the remainder of the then current 2014-2015 Fiscal Year (FY)
would be “the same rates Flint was paying as a terminated customer when it left the
system but modified to include the 4% increase experienced by all other DWSD
wholesale customers in 2014.” As we are now in the 2015-16 FY, that offer must be
modified to include an additional adjustment similar to that which was received by other
customers, In this regard we propose that the rates be adjusted as follows:
a) Starting with the 2013-2014 FY terminated rate; and
b) Adding a 4% adjustment to that rate to account for the 20 1 4-20 1 5 FY increases: and
c) Adding an adjustment equal to the average Suburban Wholesale Charge Adjustment
for the current 2015-20:16 FY. This rate would remain in place until June 30, 2016, the
end of the current 2015-2016 FY.
Ms, Natasha L. Henderson, Oity Administrator
City of Flint
September 30, 2015
Page 2 — . w
d) Based upon the above considerations, the resulting rale structure is a fixed monthly
rate of $602,1 00 and a commodity rate of $8.93/Mef for the current 2015-2016 FY. Please
note that this rate structure is designed to be applicable to incremental water sales over and
above water sales to the Genesee County Drain water is
provided to the combined GCDC/Flint customer, alternative rate structures may be
e) Additionally, DWSD recently changed its wholesale customer billing methodology as
follows; Flint’s calculated share of the FY 2016 Budget is allocated 60% to the Fixed
Monthly Charge and 40% to the Commodity Charge, which is consistent with the
adopted FY 2015-2016 water wholesale rates
1) In extending this proposal, our assumption is that the service provided is to Flint only
and computations are based on data from our previous customer relationship.
g) It is anticipated that under the management of the GLWA, the rates for the 2016-2017
FY will be computed using the same methodology as applied to all other Water Supply
The proposed rate methodology is intended to. ensure that Flint is treated fairly by using the average
wholesale customer adjustment in the current Fiscal Year, and the same methodology as all other
2) Term: DWSD understands that Flint’s current long-term desire is to receive water
service from the KWA. Under these circumstances, Flint would be expected to remain a
DWSD customer from the time of reconnection until the time it begins to receive service
from KW'A. If Flint wishes to consider a longer term relationship with D WSD or
GI AVA, we would welcome that discussion.
3) . Reconnection : As previously indicated, by Ms. McCormick in her January 12, 2015,
letter, DWSD will not charge an additional fee for Flint to reconnect to the DWSD Water
System, and is prepared to immediately take those steps necessary on its end to facilitate
a reconnection. Any expenses incurred would be billed at: actual cost. Because DWSD
lacks sufficient information on the status of the disconnection, we are unable to provide
an estimate of those costs at this time, Nonetheless, we will work with you in good faith
to develop an expedited plan for reconnection, and to develop a mutually agreed good
faith estimate of the costs associated with that plan.
Thank you for raising this issue with us. We hope that this letter addresses the concerns you raised
during your recent conversation with Ms. McCormick, and we sincerely appreciate your interest
and the opportunity to serve Flint.
Ms. Natasha L, Henderson, City Administrator
City of Flint
September 30, 2015
Finally, we look forward to the opportunity to meet with you at. your earliest convenience to discuss
this letter, and how we may best assist Flint in serving its residents* needs. Please contact Ms-
McCormick's office at (3 1 3) 224-4701 to arrange this meeting.
William M. Wolfson
Chief Administrative and Compliance Officer/ General Counsel, DWSD
Interim General Counsel, GLAVA
Thu Jul 20, 2017 10:09 pm
F L I N T O I D
|It may be important to note that a 4% increase every year turns into
a 212% increase over 30 years
. I've seen people incorrectly thinking the increase would be (30*4)%. But you need to take into account that this is compounded annually.
$27.85-$8.93=$18.92 more per unit at the end of 30 years.
$19.02 / $8.93 = 2.12. ... concerting that to a percentage you get
a 212% increase by the end of 30 years
If you want to look at other situations such as 10% increase every 5th year and 4% for the rest you end up with 313% increase. Or if every 7th year were 10% you end up with a 290% increase.
(36.87-8.93)/8.93= 313% increase
(34.85-8.93)/8.93= 290% increase
Fri Jul 21, 2017 11:49 am