City Considers Water Rates, Removes Fees
(Crystal A. Proxmire, April 2, 2013)
When City Councilperson Dan Martin was running for office, the biggest concern he heard was over water bills. Between high water bills and the new meter reading system, residents were generally not happy, and not informed about what makes a water bill so costly. That’s why he and other members of council directed staff to research water rates, shut off procedures and fees, meter reader issues and to audit the overall health of the water and sewer fund.
The results of the research were presented at the March 25 City Council meeting, and consequentially Council Members voted to remove fees associated with water shut offs, and to move forward with a more in-depth look at the water rates.
Staff worked with the Southeastern Oakland County Water Association (SOCWA) and the Michigan Local Government Benchmarking Consortium (MGLBC) to gather data about how other communities handle water and sewage billing.
Some of the results were surprising. To begin with, at any given time 1/3 of the accounts are delinquent. This includes both residential and business customers. On top of this, the City had a shut 
off fee schedule that was much higher than other communities – charging $50 quarterly on any past due balances. Council voted to eliminate this fee, while retaining a 10% fee which is more in line with other cities.
The fee, Department of Public Works Director Lloyd Cureton explained, was originally meant to help fund the staffing required to do shut offs and to restore service. He said that to turn off water, a crew must go to the property and access an underground valve. Sometimes the valves work, but other times they are old and they break, causing more work than simply turning it on or off.
Councilmembers also directed staff to look further into water rates so that they can be considered at a future meeting. The initial study gave rates for other cities, but did not factor in minimum usage rates. For example most cities will charge a minimum per property whether the customer uses that amount of water or not. This ensures that there is enough money coming in to fund the system, even when properties are vacant or water usage is low. Some cities may have lower rates, but higher minimums which balance them out. City staff is re-visiting the rate comparisons to figure this in.
SOCWA conducted a rate comparison study in 2012, in which 31 of the 37 cities participated. The report presented to council states “When reviewing the data on rates it is clear that more research will be required. The average rate of water per 1000 cubic foot is $27.60, the City of Ferndale is $55, exactly double, whereas the average sewer rate per 1000 cubic foot is $53.28 and the City of Ferndale is $55.00. However, this data is skewed even more when you look at minimum charges. While some communities 
have a much lower rate per cubic foot, the minimum charges are much greater than the City of Ferndale. At this point the data collected has created more questions than have been answered.”
Looking at the water rate, Ferndale was the highest among the communities at $55. Rochester Hills is the next highest with a rate of $48. Hazel Park was $39.50. Oak Park was $32.66. Royal Oak was $26.60. And Berkley was $15.80. The lowest was Waterford Twp. at $12.
Pleasant Ridge provided a rate that included both water and sewer for 121.71. Clawson also provided only a combined rate, which was $79.50.
For sewer, Ferndale was $55. Hazel Park was $ 44.50. Oak Park was $60.79. Royal Oak was $68.40. And Berkley was $17.10. Royal Oak’s sewer fee was the highest. All dollar amounts are the cost per 1,000 cubic foot. The lowest was Berkley at $17.10.
However, the minimum fees vary widely. Meridian Twp. had a minimum bill of $3.92. Birmingham had a minimum bill of $5. While Pleasant Ridge had a minimum of $109.54 and Berkley was $119.
In short, there are no standard fees even among similar communities. There is also not consistency in billing practices. Bills may come monthly, bi-monthly or quarterly depending on where one lives. Of 24 communities that responded to this question, 19 reported offering online bill pay. Ferndale does not currently have this service, but it is being considered as part of the new website redesign. Each city has their own infrastructure needs and various amounts of bond debt.
There are several factors that go into a water bill, which were explained at the March 25 meeting. “People have it in their head when the water bill goes up that its water, but actually it’s sewer that we have to pay for,” said April Lynch, Ferndale City Manager. Costs for sewer and drain systems from Detroit and Oakland County are figured in, as is bond debt that the City has for water and sewer related projects in Ferndale.
For the past five years, total fixed costs (debt service and minimum water and sewer usage charges) have been between 60 and 65% of total operating costs. From 2003 to 2012 the water and sewage costs to Detroit and Oakland County have increased by 54%.
Water usage has also declined significantly. In 2005 the City used 121,822 MCFs (which equal 1,000 cubic feet) and had 11,637 customers. In 2012 it used 72,577 MCFs and had 11,138 customers. This means that not only are there fewer customers to pay the bills, those customers are using less. Much can be attributed to the decline of industrial production facilities which were once the city’s biggest consumers. But even on a household level, people have simply been more efficient in their water usage by wasting less, using rain barrels, etc.
The rate being charged to the City from Detroit has also gone up. In 2003 that rate was $5.28 per MCF for water plus $8.76 MCF for sewer to Detroit and Oakland County. In 2010 the water rate peaked at $8.33, but the following year in 2011 the rate was $7.64 plus a fixed rate of $100,356. In 2012 the water rate was $6.27 with a fixed rate of $256,872.
The sewer rate has gone from $8.76 in 2003 to $15.92 in 2012.
Water and sewer rates must also factor in the cost to the City of operating the system, including maintenance and staff.
Taking the total cost and dividing it by usage, the report shows that in 2003 the cost per MCF was $26.17. In 2012 the cost per MCF was $59.04. The cost is expected to continue to increase. The projected cost in 2013 is $61.82, gradually rising to $69.77 in 2017. Changes to the board administering Detroit’s water supply also leave uncertainty as to future costs.
The rate charged to residents has remained in line with the City’s costs. The rub comes from the fact that there are fewer customers, using less water and so customers are paying more to support the system.
Council members and City staff are looking further into the rates to see if more can be done to improve the system and the costs. The City recently hired a new Department of Public Works Director Lloyd Cureton who brings fresh eyes to the situation. Plus they are working with other cities to compare rates, practices and ideas. Further discussion on the rates is expected.
Another issue the DPW has faced has been the implementation of digital meters which are designed to save money by allowing for remote readings as opposed to sending a meter reader out to each home. The report explains that situation:
“The City of Ferndale has been working with Elster to address issues with the reading system for the new water meters. The new meters were installed in 2009, however the Evonet radio read system failed to automatically read the water meters causing the city to continually manually read meters or estimate quarterly bills. The meters were calculating correctly, however the automatic reading system wasn’t working properly. In spring of 2012 Elster determined it could not find a solution to address the original readers and moved toward complete replacement of the meter reading system. As of March 25, 2013, 9509 readers have been replaced, which is 97% of the total project.” It goes on to explain that 94% of the new meter readers are reporting data. This system saves the City the personnel expense of meter reading manually.
Some residents have received higher than normal bills due to estimates that were low during the period of time that the meters were not remotely reading.
To address the problem of unpaid bills, Council voted unanimously to remove the $50 quarterly fee. “I’m not comfortable with 1/3 of our accounts being delinquent,” Martin said. “Hopefully this will help people get caught up.”
To view the entire report or watch the March 25th City Council meeting, visit the City of Ferndale’s website at http://www.ferndale-mi.com/ and look for the March 25th meeting.
