Saline City Council Approves Utility Rate Hikes, Mayor Votes No

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As expected, Saline City Council voted to increase the water and sewer rates, effective June 1, to begin paying for expected upgrades to the city's utilities.

But perhaps what wasn't expected was the "no" vote from Saline Mayor Brian Marl.

Saline City Council voted 5-2 (Councillor Dell'Orco also voted no) to approve the new water and sewer bills, expected to raise utility rates by more than $80 per quarterly bill next year for the average water customer in the city. And that's just the start. Currently, the average user pays $236/quarter. That number is expected to jump to $317 beginning in June. And then that number is expected to climb to $395 in 2023-24, $417 in 2024-25, $4339 in 2025-26, $461 in 2026-27 and then $484 in 2027-28.

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Rates are rising because of the $62 million wastewater treatment plant upgrade - and then a $20 million project expected in 2027-28.

The city is being compelled by the state to improve the wastewater treatment plant after environmental violations in 2019. Most of the first phase of the wastewater treatment plant project deals with meeting state guidelines and improving the plant to meet current needs. 

The rate increases were recommended by City Manager Colleen O'Toole. City council twice spoke with officials from Baker Tilly about their recommended rates for the city. O'Toole noted the city needed to take action on the rates Monday night in order to publish the rates - a stipulation as the city applies for a low-interest loan from the state for the first phase of the project. 

Water and Sewer rates are made up of several factors. There are fixed charges (the ready-to-serve rate) and there is the consumption rate. Both are increasing.

Councillor Dell'Orco has been arguing that low-volume users (seniors) are subsidizing high-volume users (businesses). He had asked O'Toole and Baker Tilly to run numbers with her consumption rates and lower fixed charges.

O'Toole, however, said the city's model is shifting towards commodity charges. Currently, O'Toole said, the city receives about 81 percent of its utility revenue from consumption charges. That number is increasing to between 83 and 85 percent, O'Toole said.

"This is really the maximum amount (Baker Tilly) would feel comfortable recommending because commodity charges are more subject to fluctuation and the service fees should cover the fixed costs of the system. So we are already learning a little heavier on commodity charges to begin with," Dell'Orco said.

Dell'Orco asked about the new "smart meters," which are supposed to help the city recover revenue because the current meters miss a lot of water consumption. Dell'Orco said DPW Director Larry Sirls said the new system might capture 20 percent more revenue. If so, Dell'Orco said, that would more than cover the increases in the ready-to-serve charge increases proposed.

O'Toole said the numbers don't reflect a potential increase in consumption revenue. She noted that these rates only reflect the current estimates by Baker Tilly - numbers that can change next year when the city learns the actual cost of the project, whether it will receive federal or state grants to reduce costs, and if the new meter system is performing as advertised.

She reiterated that she could not recommend shifting more of the charges towards consumption.

"To the question of commodity charges, both our financial advisors and, frankly, myself, cannot recommend that we fund the system with any more than 85 percent (of the revenue) from commodity charges," O'Toole said.

Dell'Orco said he disagreed with that stance.

Councillor Dean Girbach provided the strongest argument from the council table in favor of O'Toole's recommendation.

"We've been talking about this plant and improving it for over a decade. This (the rates) are just a downpayment on what we plan to be a 20-30 year bond. We need to make it clear that we have the funds available to do this project," Girbach said. "We can't push it down the road. It's a thing we're elected to do."

Girbach said the city has made a number of adjustments in the last 20 years to smooth or reduce rates and not place burdens on developers - he said the city needs to stop that practice.

"At this point, this needs to be done. We can't push off the state anymore. This is a good plan. We've reviewed it with our advisors. We've reviewed it with our consultants. We have a defendable position," Girbach said, saying he didn't want to adopt a two-tiered consumption rate that might land the city in court.

Girbach urged council to support the rates - even if they are painful.

"To vote no on this is to not move forward on the future for our city," Girbach said. "This is for a system which can support its current people. This is not for growth, it's for getting back to square one."

Councillor Jack Ceo a recent NPR report on Michigan's infrastructure crisis underlined the need for Saline to improve its water and sewer system.

"They talked specifically about water and sewer and they said, especially among smaller communities in this state, there's a real difficulty in trying to update and upgrade the old infrastructure that at one time was adequate but no longer is. And I think it just pointed even further in my mind to the fact that we do need to move forward with this water and sewer rate," Ceo said.

Councillor Janet Dillon agreed with Ceo and Girbach.

"We've got to fix our infrastructure. We're at the point now where it's critical and we can't put it off any longer," Dillon said. 

She said the city has made an effort to keep rates low over the years, but that it no longer can.

"We've tried delays. We've tried smoothing. We've done everything to lessen the impact on our residents. But at this point, this is what has to be done," Dillon said.

Mayor Marl said that no reasonable or objective person could conclude that rates would not rise in the coming years. However, he said, he favored a more nominal increase this year.

Marl is hoping the city receives an $18 million grant. He's asking city officials to join him in lobbying federal elected officials for the funds.

The motion was made by Girbach and seconded by Ceo. All but Marl and Dell'Orco voted in favor of the motion.

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