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Utica residents to see large rise in water rates

By: Kara Szymanski | Shelby - Utica News | Published June 17, 2019


UTICA — Utica residents will be seeing a hike in their water bills as soon as July 15.

A plan has been put into place to eliminate the current deficit in the city’s water and sewer fund within the next few years.

The deficit was the result of increasing costs over time, for which the rates were insufficient to cover. These costs included increases in the rates charged by the Great Lakes Water Authority and the Macomb County Waste Water Disposal District; increases in debt service arising from bonds issued by the MCWWDD for which the city, as a member of the MCWWDD, is in part responsible; and increases in the cost of maintaining the city’s systems.

The deficit in the water and sewer fund was $536,019 as of 2018 and continues to grow, so the city has implemented a change in rates in order to eliminate the deficit.

The city had been taking funds to cover the water and sewer deficit out of the general fund, but has decided that doing so was not beneficial.

“Our rates are so artificially low right now, which is why we experienced the $500,000 shortfall of cash in one fiscal year,” said Phil Paternoster, Utica’s treasurer.

The rates at which Utica buys water from the GLWA are assumed to increase by 4% each year.

“Part of our own issue is (that) we should have been raising our rates the last seven years,” said City Councilman Ken Sikora.

According to the city treasurer, the city must raise the water rates in order to cover the cost of water it is purchasing, and the cost to operate and transport the water, which has not been done since approximately 2012.

City Councilman Gus Calandrino questioned why the city didn’t raise rates before and was told that it slipped through the cracks.

Bill Lang, the Department of Public Works director, said that another reason the rates weren’t changed was because of the tough economy in the past.

“We also came out of one of the hardest times we’ve seen economically; people were losing their houses and everything. Whether it was politically right or not, our rate methodology, new rate methodology, wasn’t quite in place. We have been working on this for a number of years. Rates incrementally going up — right, wrong or indifferent — the rate structure that is in front of you is fair and amicable, and what do you pay for a case of water at the store? Even under the new rate structure, for $6 for 1,000 gallons … go to the store and try to buy a thousand gallons for $6,” said Lang.

An inflation rate of 2% is used to project increases in the cost of supplies and other services, with the exceptions of water and wastewater services.

In the current plan, which is being replaced, each customer is charged a minimum bill of $86.29 per quarter — $30.67 for water and $55.62 for sewer. This minimum rate includes using zero to nine units of water and sewer. One unit is equal to 1,000 gallons. For each unit of water consumed above nine units per quarter, the consumer is charged $5.17 for water and $9.79 for sewer.

With the new rate, the minimum bill with nine units, or 9,000 gallons, of consumption included will be replaced with a ready-to-serve charge. The ready-to-serve charge will be $8.38 for water and $20.27 for sewer per quarter for a 5/8-inch meter, with no consumption included. The ready-to-serve charge will be determined by the size of the meter and equals approximately a third of the current minimum bill. Each size meter has a different ready-to-serve charge. Most residents in Utica have a 5/8-inch meter.

The consumption rate per unit of water and sewer consumed will increase by approximately 12% from the current one.

Consumption rates will be calculated on every unit of consumption now; for example, a 5/8-inch meter that uses 9,000 gallons would have a commodity charge of $5.84 for water plus $10.98 for sewer. Since 9,000 gallons were used, it would be the two charges times nine units, plus the ready-to-serve charges of $8.38 for water and $20.27 for sewer. The total would be $180.03. That is a 208% jump from the $86.29 per quarter minimum bill for nine units.

Effective rates, when factoring in the change from a minimum bill that includes nine units of water and/or sewer to the ready-to-serve charge plus nine units of consumption, will increase by two or more times, depending on the meter size, since the meter size determines the ready-to-serve charge assessed to a customer.

Paternoster explained that the ready-to-serve charge comes from the total cost of capital, which is the depreciation of fixed assets plus principal and interest on long-term debt, divided by the number of residential equivalent units. The difference between the water rate and the sewer rate is primarily because the water system has no long-term debt associated with it. The ready-to-serve charge assessed to an individual customer is equal to the charge assessed to a 5/8-inch meter customer, which has a residential equivalent unit factor of 1, multiplied by the REU factor associated with the customer’s meter size.

“The ready-to-serve charge is established as a means of equitably allocating the fixed costs of capital to the consumers based upon the potential demand that a consumer places on the system, as determined by the meter size, since the fixed costs must be met, whether or not consumers use any water or sewer services in a given billing cycle,” Paternoster said in an email.

“The intention is to place the new rates into effect for billing cycles beginning on or after July 15, 2019,” he said.

Paternoster said that water customers can do a few things to lessen the effects of the increase.

“They can reduce the impact by reducing consumption, which they can achieve by installing low-flow shower heads and faucets and modern efficient toilets. For those who use a lot of water outside — sprinkling lawns, watering flower beds and vegetable gardens, washing cars, and filling swimming pools — an area maintenance meter is a good investment, as these meters are exempt from sanitary sewer charges,” he said.

“Area maintenance meters, for outside water use only, will continue to be available as a means of reducing the consumer’s sewer charges, since sewer consumption is based upon the water consumption as determined by the main water meter,” he said.

According to the city, the rates are not projected to ever go back down.

City Councilman Brad O’Donnell, who voted against the rate increase June 11, shared his thoughts as to why he did.

“The average Utica resident will see their water bill double under this sewer plan, so I stood alone as the sole no vote. These new water rates are brutal,” O’Donnell said in an email.

“I think that before we can ask for this huge of an increase ... we ought to institute something that many cities around here are doing, which is an impermeable surfaces fee, where if you have these giant sprawling parking lots where none of the water can seep out into the ground as nature intended, instead it’s all washing into our sewer system inadvertently, because that’s what you are causing. You are causing our rates to go up; we are going to charge you that.

“I proposed ideas, which are used in other cities, that would lower the burden on average residents and shift that cost to properties who use the most resources. Unfortunately, my ideas were not considered,” O’Donnell stated.

“My goal going forward is to work with City Council to make rate increases incremental and predictable. This year’s sticker shock should never be repeated again,” said O’Donnell.

For more information on the water rates, call the city at (586) 739-1600.