Clawson city budget approved with increase in water and sewer rates

By: Victoria Mitchell | Royal Oak Review | Published June 1, 2016

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CLAWSON — Water rates will increase in the city following City Council approval of the 2016-17 annual budget.

Council members unanimously adopted the $15.17 million budget and accompanying millage and water and sewer rates during the council’s May 17 meeting. The council adopted the budget following public hearings where no one spoke.

Water and sewer rates will increase about 5.6 percent per 1,000 cubic feet per quarter for the upcoming fiscal year beginning July 1.

City Manager Mark Pollack said that based on average water usage, a Clawson family of three would see an increase in its bill of about $22.05 per quarter.

The higher amount includes increasing the water consumption rate to $26.80 per 1,000 cubic feet, the sewer consumption rate to $68.20 per 1,000 cubic feet and the sewer debt fixed charge to $10.50. The quarterly billing charge also will be increased to $16.50 per quarter for water and $16.50 for sewer. Changes will be seen in residents’ October bills.

Pollack said the overall impact of these changes would result in a $7.35 total charge increase per 1,000 cubic feet per quarter. The new total water and sewer rate is $138.50 per 1,000 cubic feet.

Pollack said the increase includes a pass-through cost through the Great Lakes Water Authority. He said the commitment is to pass through an increase at about 4 percent annually moving forward, the majority of which will go to Detroit’s water and sewer system.

The city’s increase is more for sewer service than water service, with the highest increase for payments to the 2012 State Revolving Fund program. The city incurred debt to participate in the program, which resulted in the city cleaning and televising the entire system.

“We took the worst-condition sewers and we fixed them,” Pollack said. “We either relined them, replaced them — whatever was necessary. If it was collapsed, we went through and actually had it dug up and replaced.”

Pollock expects the debt payments to decrease beginning next year, when the city will receive an adjusted payment schedule, as the city did not use the entire $4 million borrowed for the project.

“We have to invest in our water and sewer, which is what we do every year. Every year, the water rate goes up,” said Mayor Penny Luebs.   She added that increasing the rates is her least favorite thing to do.

Luebs said it is expensive to keep the city’s sewers and underground infrastructure in good repair.

“We have been doing that. This rate increase will allow us to continue to do that,” she said.

The May 17 approval also included changes in the city’s millage rates.

The city will experience a small net decrease in the general operating millage rate beginning in the new fiscal year.

Luebs said each year it is necessary for the council to establish a general operating millage rate in order to partially fund the city’s operations.

City officials said the establishment of this millage rate will generate an estimated $3.4 million — after the Downtown Development Authority’s capture amount — in general property tax revenue.

The total general fund expenditures for Clawson’s budget is $7,354,896

Pollack said the general fund’s fund balance will remain at 10 percent of expenses, or just more than $750,000. He said this would leave the city’s 10 percent fund balance reserve amount, per city policy, at $753,025 and its unreserved and undesignated fund balance at $506,421.

Pollack said the city had an increase in overall taxable value of 2.04 percent during 2015.

He said the largest increase came from a significant rise in residential property values. The residential values went up more than 10 percent, but Proposal A and the Headlee millage rollback fraction reduced the city’s gains to the rate of inflation, which was 0.3 percent.

Pollack said this left the city with flat property tax revenue from the last fiscal year due to the required Headlee millage rollback.

He said after the city rolls back its millage rates, he expects property tax revenue to be basically the same as it was in the 2015-16 fiscal year.

“Unfortunately, this led to the removal of the additional police officer from the draft budget,” he said.

Pollack said he plans to continue to appeal to the state Legislature to fix the revenue system that saw Clawson lose 27 percent of its taxable value over a four-year period and in turn now will not allow the city to gain back any of the double-digit increase in residential home values due to the combination of Proposal A and Headlee.

“The 0.3 percent rate of inflation this year was great for buying power for the average consumer, but it killed our chance to gain from the recovery in property values,” he said.

The May 17 approval included Clawson’s 2016-2021 capital improvement plan, which covers the general fund as well as the eight other funds that combine to complete the range of services provided by the city.

The council also approved increasing the monthly rental rates at the city-owned Renshaw Senior Apartments by $10 for one-bedroom and efficiency units. This will increase the rent of the standard apartments to $460 and the rent of the efficiency apartments to $430.