Water Bills and Beyond

Water Bills and Beyond:

Understanding the Water and Sewer Fund

(Crystal A. Proxmire, 1/19/2011)

Water bills and the water meter replacement program, combined with recent allegations of abuse in the Detroit Water and Sewer Department, have residents asking questions about how they are being charged for water.

The Ferndale 115 News sat down with Department of Public Works Director Byron Photiades, who has been with the DPW since 1976, to better understand how the water and sewer fund works, and how the system affects residents.

While it’s not the most exciting topic, understanding the fundamentals of water and sewage funding is an essential part of understanding the economic challenges that affect everyone in the city.

WATER METER REPLACEMENT

Over the past year, the DPW has been going through the City and replacing water meters in every home with digital ones that can be read electronically.  (http://oaklandcounty115.com/2010/01/15/inside-every-home-water-meters-will-be-replaced/)  The new meters save the City money by being easier to check and by having a more accurate reading. “The old meters were over 20 years old,” said DPW Director Byron Photiades.  “Things like that wear out and sometimes don’t work as well.”  Photiades said there have been some phone calls from residents whose water bills have gone up since the replacement, but ultimately it’s because they were under-paying before due to low-flow through the old meters.

The replacements will be complete by spring.  Homeowners who do not allow the DPW to change the meter risk fines and having their water turned off, which is what happens to vacant properties where the titleholder does not respond.  “In those cases we just don’t turn the water back on until they let us in to install the new equipment,” Photiades said.

TIES TO DETROIT

Stories of corruption, water fee hikes, and a legislative takeover of Detroit’s water system have been making headlines in the area.  (See The Detroit News – http://www.mlive.com/news/detroit/index.ssf/2011/01/regional_control_of_detroit_wa.html).  And while Ferndale does purchase its water from Detroit, Photiades said residents have no need to fear skyrocketing bills.

“Without really getting into the politics of it, Detroit has an image problem and the news wants to play on that, but in reality it doesn’t affect us that much because so little of what you pay on your bill is actually for your water usage.

He explained the way water bills are broken down, and also talked about ways the City has been proactive in setting up infrastructure designed to save the public money.  Unfortunately those savings aren’t always evident, because other factors have caused water bills to increase. Below are the plusses and the minuses that have affected water bills, followed by a breakdown of what water bill money is used for.

THE PLUSSES

In 1956 The City of Ferndale recognized the importance of keeping a supply of water on hand.  They built the pumping station (the big white tank with Ferndale painted on the side that can be seen off Hilton near Marshall) to create a back stock in the event of an emergency, and so that they could fill the tanks up at night while water rates are the lowest.  The tank holds three million gallons of water. That saved-up water is then used during peak hours.

Because the City of Detroit charges more money per gallon during peak usage hours, Ferndale residents benefit from using the supply on hand from the night before when they get up to take their morning showers, make coffee, water their lawns, etc.  Most surrounding cities must depend continuously on their direct lines to the City of Detroit, and thus consume water at the highest possible rates instead of at the lowest.  Wixom has chosen to build their own pumping and storage station, and Rochester Hills is currently considering it.

Other cities that don’t have pumping stations have had to ask residents to alter their habits to avoid using water at the most expensive times of the day.  According to the Winter 2011 edition of Semscope, a publication of the Southeast Michigan Council of Governments, “Communities like Northville Township and Troy have passed water ordinances that establish designated times for residents to water their yards using in-ground automated sprinklers.”  Ferndale residents do not need to worry about tailoring their usage to fit non-peak hours, because of the water reserve.

Additionally The City of Ferndale recognized the need to have a well-functioning water and sewer system and took the opportunity to make improvements at a time when other cities were taking reactive approaches to problems.  According to Photiades, the City used bonds to invest in overhauling the water and sewer system, meaning that while other cities are now facing water main breaks and other repairs that have been un-planned-for, Ferndale’s water and sewer system is in superior shape.  There are about 80 miles of water mains and 86 miles of sewers that need regular inspection and care.  Other things that the DPW does, like regular leaf collection, street sweeping, and vacuuming out of catch drains, mean that the water system functions un-noticeably well.

THE MINUSES

The minus of course is that having newer, higher quality systems cost money.  When voters approved the bond in 1994 they had no idea that hard economic times were coming.  The biggest consumers of water were the manufacturing businesses in the City.  So, at the time, places like Rikel Chemical, LTC Steel, and numerous tool and die shops were paying the bulk of the bills.  As businesses closed down or moved (often out of state), that debt fell on the shoulders of the remaining residents and businesses.

“For example, when LTD Steel moved out five years ago, it took away 10% of the water fund’s customer base,” Photiades said, “Ten percent.  So that was ten percent of what we needed to pay down the bond debt just gone.”  That ten percent drop in reduction is small compared to the overall amount of usage decline over the years.

When Photiades started with the DPW in the 1970s, the city provided 146,000 cubic square feet of water per year.  Now it is down to 70,000.

While the community has been proactive about bringing in new businesses, most of the new companies are not manufacturing-related.  Since water and sewer billing is based on usage, the new companies pay a share more similar to residents than did the large manufacturing companies that were here in the 1990s.  So basically because there are fewer people to pay the bills, each person or business is chipping in more towards them.  If more people and businesses choose to move to Ferndale, it will spread those expenses back out again.  Ideally the debt will continue to be paid down and residents will continue to enjoy good water service at a time when other cities are likely to be making repairs or raising taxes to replace their older system.

Bad debt is another, albeit much smaller, problem for the water and sewer fund.  In 2006 the city collected $168,134 in water penalties from people and businesses that hadn’t paid their bill.  In 2009 that number was 116% greater, at $364,243.

HOW DOES MY BILL BREAK DOWN

The bulk of the water and sewer fund comes from water and sewer sales.  Using the Requested FYE 2011 numbers, the DPW expects $7,575,000 in revenue.  (Another  $2,396,993 comes from grants, other fees and fines, sprinkler charges, meter repairs, paid water penalties, and other misc. income, making total revenue est. at $9,971,993).

The total expenditures are est. $10,789,989.  Here is how that total breaks down by expense, and the percentage of the total that expense represents. This gives a rough idea of what money collected for the water and sewer fund is used for.

The most noteworthy expense of course is the actual cost of water.  Ferndale paid an est. $711,000 to the City of Detroit for water.  That means that overall water is only 6.59% of the total bill.

Travel and Training $4500 .04%
External Audit Fee $75000 .07%
Phones $9000 .08%
Building Rental $10000 .09%
Postage $17767 .16%
Utilities $50000 .46%
Repair and maintenance $57000 .52%
Memberships and Dues $7888 .73%
Contractual Services $111960 1.04%
Equipment Rental $150000 1.39%
SRF Debt Service & Interest (sewer replacement fund) $476300 4.41%
Water – City of Detroit $711000 6.59%
GWK Debt Service & Interest (for EPA mandated drain upgrades) $863400 8.00%
Payroll $1278519 11.85%
Capital Outlay (replace meter reading system, main replacement at Fern and Chesterfield, and HVAC controls at the pump station) $1624750 15.06%
Meter Replacement Reserve Depreciation (offset by grants) $2004409 18.58%
Sewage Treatment $3056000 28.32%

The Meter Replacement Reserve Depreciation seems a high number at 18.58%, but that is actually covered in part by grants of $1277493.  This is an expense not normally incurred.  The capital outlay projects are also not regular expenses.

Sewer treatment is the largest expense at 28.32%, while debt service makes up a total of 12.41%.  These debts are expenses that will eventually be paid off.  The SRF was the 1994 bond to repair and replace the sewer system, and the GWK Debt Service is the result of an EPA (Environmental Protection Agency) Required upgrade to the drainage and overflow storage systems.

HOW MUCH WILL WATER CONSERVATION HELP MY BILL

In Ferndale, because the City purchases water at the lowest possible rates from the City of Detroit by pumping and storing at non-peak hours, restraints on water usage times are not necessary to save money.

Cutting back on water usage may be good for the environment, but it’s not going to do much for your bill when only 6.59% of your bill is for the purchase of water.

HOW CAN YOU IMPACT YOUR WATER BILL?

Most of those expenses are either fixed costs or debt that is going to stay until it is paid down.  The more people and businesses who move to Ferndale, the more people there are to share the burden of expenses.  Inviting people and businesses into the City can be an empowering way to make a difference…not just in the neighborhoods and business districts, but in your pocketbook as well.

To be well-informed about how the city works, please continue reading The Ferndale 115 News, the city’s only LOCALLY-OWNED online newspaper serving the community since 2009.  For previous in-depth articles about budget-related issues, check out our Politics and Government Page: http://oaklandcounty115.com/category/politics/.

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