Explaining the Detroit Water and Sewerage Department's latest rate hike

DETROIT – The snail mail will soon deliver to your mailbox unwelcome news; a higher water bill.

It's likely your bill will jump about 10 percent. You are likely to wonder how that is possible considering under the new Metro Detroit Regional Water Authority agreement, announced as part of Detroit's Bankruptcy exit last fall, your rate hikes would be capped at 4 percent. You remember correctly, but the authority hasn't been established just yet.

The Detroit Water and Sewerage Department that is still under the city's control is going to raise its wholesale water rates 6.4 percent to the communities in the system this year. As that rate hike rolls downhill to your local water department, they will tack on their own increased expenses so your bill is coming in 6 percent higher than you expected. You then wonder what in the world is going on and rightfully so. It turns out in the first quarter of this year the DWSD is already $25 Million in the hole and is quickly looking to patch it.

Part of the problem is water usage in the system is way down at the same time the costs remain roughly the same. Water department Director Sue McCormick did an exclusive interview with Local 4 on Thursday. She said people aren't using as much water as they used to; like 25 percent less. Now, that may help you and your budget, but it is a major problem for the water department with its massive amounts of bond debt and fixed costs in pipes and pumping stations along with the oft complained about water main breaks.

McCormick said the system lost a lot of money in the door when Flint opted out of the DWSD system. Then, she blames communities "gaming" the water estimation system. She claims many have been over-estimating by double the need. They do so, she says, because they then qualify for the higher volume discount. But McCormick says that hurts other communities that are more careful with their estimates because they're paying the higher rate their neighbors should be paying as well.

"Unfortunately what we've seen over the course of the last few years that they have overestimated what they're going to buy and so if you look at that the way we calculate their average unit cost and recovery, they're under-meeting their obligation to the system," she said.

She intends to fix this problem by changing the game under the next budget and estimating cycle. Instead of the communities deciding what their needs, McCormick intends to have the DWSD average the past two years use to set the bar.

"We're using their actual purchases their actual sales for those communities over the most recent two year period," she said.

They will work this out through public hearings at the DWSD downtown offices February 25th, March 4th and March 11th at 1 p.m.

Now that's the story we picked up from McCormick in an exclusive interview. Frankly, trying to decipher the mind-numbing calculus that goes into your water rates is no easy feat and when in the director's office it seems to make perfect sense. But let's remember a few things history tells us about DWSD: Maintenance on the system has been in many ways nearly non-existent, thus all the costly and frustrating water main breaks, and 50 percent of DWSD's costs are bond debt, bonds floated for the cash but the bankruptcy told us did not lead to repairs the bonds were purchased for. It's this kind of trouble that had the counties like Oakland and Macomb screaming about having to continually pour cash into the system through higher rates and having no say on how things are run. So the regional authority came up in the bankruptcy and they are still trying to negotiate that deal.

Macomb County Executive Mark Hackel was hopping mad at this latest DWSD rate hike. First, he's angry about the fact people think the regional water authority is in place already when it's not. His phone has been ringing with upset taxpayers wondering what's going on. He says the authority is a necessity now because DWSD and its endless need for more revenue must to be reined in, in a big way.

"Having an authority in place moving forward is going to be a huge asset or benefit to us. Why? Because we're really going to get to know what these numbers are and really understand why we need to increase rates if we need to increase rates," said Hackel.

He wants transparency he still does not possess.

Meanwhile, the mediation process to get to a workable regional water authority is ongoing. You'll recall that last month Oakland County Executive L. Brooks Patterson and Hackel both questioned whether the authority deal could work because they still haven't been able to get at the true numbers of what this deal would cost and the costs appear to be spiraling out of control. Well, the mediator is Judge Sean Cox, the same judge who presided over the water department when it was under federal consent decree. He just slapped another gag order on the parties in negotiations to quiet things down. It's a gag order Hackel blanches at wondering why there is a need for secrecy when discussing taxpayer dollars, especially taxpayer dollars in the billions.

So on and on it goes with no good news for us who hydrate, bathe regularly or water our lawns. The only thing for certain is that water rates will continue rising for the foreseeable future and there is little to nothing we can do about it.

About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.