30% sewer hike spread over two years
Published 10:10 pm Wednesday, May 14, 2008
By By JOHN EBY / Dowagiac Daily News
Faced with a 30-percent rate hike recommendation from its consultant, Utility Financial Solutions, Dowagiac City Council Monday night divided the increase into two of 15 percent each without raising water bills.
Because the city has historically increased water and sewer rates in tandem, by increasing only the sewer rate, the overall increase to the combined sewer/water bill will essentially climb by about 8.3 percent, Mayor Donald D. Lyons explained.
The aging wastewater treatment plant on M-62 West in 2000 had a capacity of 1.5 million gallons in a 24-hour period, plus odor complaints from surrounding homes.
Eight years ago Dowagiac began by separating the main storm sewers from the main sanitary sewers throughout the community, greatly reducing the maximum flow through the treatment plant during rains and effectively creating more capacity for sewage treatment.
Besides upgrading the collection system, the city also did a number of upgrades to the plant, including:
Improving the primary treatment process.
Modernizing processing equipment to allow sludge to go to landfills, which is less expensive than the past practice of spreading it on farm fields. "Probably the most important improvement," Lyons said. "Land-applying it is becoming more and more difficult to do because of state regulations. It is also becoming more expensive, consequently. We now meet the very significant requirements as to what goes into landfills. And we've picked up a million gallons a day of flow rate due to the improvements, which should serve us for another generation to come. We're looking at this as a 20-year program, serving all the governmental units that we're currently serving, as well as picking up perhaps a little bit of Pokagon going down M-51. If that should ever become an issue, we want to be prepared to do that."
Renovating the filter building.
Making major safety improvements, such as converting from chlorine gas to chlorine liquid. "That's the other important one," Lyons said.
Computerizing the plant.
All of these upgrades created a modern, reliable facility with more treatment capacity.
Maximum flow rate is now 2.5 million gallons in a 24-hour period, while at the same time reducing the amount of water Dowagiac puts through the facility.
But improvements came at a significant cost, rapidly depleting the fund balance. Given scheduled projects which will take about two more years to accomplish, the city will fall below 20-percent reserve targets without the rate increase which the administration plotted out for six years.
Increases revert to 4 percent the third through sixth years.
Eight years ago Dowagiac also adopted the practice of regular modest utility rate increases, particularly water and sewer. They averaged about 5 percent and were intended to cover cost-of-living increases while allowing for needed upgrades to a system that was more than 30 years old and had had very little done outside of routine maintenance.
Lyons explained that the sewage treatment system consists of two separate and distinct entities. The first is the pipes, pumps and other items that allow sewage to be moved from its collection point to treatment point.
The treatment facility itself is a second distinct element. Almost all cities have historically collected sewage for about the last 100 years. Only recently, however, have cities begun to recognize the need to treat sewage before releasing it back into the environment.
Since that time, other Cass County governmental entities have also recognized the need for sewage treatment and constructed their own collection systems, including Vandalia, Donnell Lake, Paradise Lake, Cassopolis, Diamond Lake, the Sister Lakes area and Indian Lake.
However, they all found it more effective to build a connector line and to install a series of pipes to move untreated sewage from its collection point to Dowagiac's treatment plant, rather than construct and operate their own treatment plants.
With the exception of Sister Lake and Indian Lake, which the city maintain on a contractual basis, each entity is responsible for maintaining its own collection system.
As they tied into Dowagiac's treatment plant, they were assessed "tap-in" fees. Dowagiac also charges a processing fee for each gallon of waste treated for those other entities.
These tap-in and processing fees had grown over the years and a few years ago amounted to a good cushion from which to extract needed repairs or upgrades.
Cash reserves included: 2000, $1,611,952; 2001, $2,018,185; 2002, $1,782,250; 2003, $1,862,775; 2004, $1,662,009; 2005, $1,494,504; 2006, $1,338,350; and 2007, $870,673.
Additional points to consider with the rate-hike proposal are that usage of the system declined due to the losses of Ameriwood and Dowagiac Nursing Home. City officials have also seen a general belt-tightening as people react to across-the-board price increases. People shut off lawn sprinkling systems, swimming pools and other non-essential uses.
But probably the largest impact has been from low-flow plumbing fixtures, which Michigan building codes now mandate in new construction.
Unfortunately, Dowagiac cannot reduce its costs. The city still must have a fully maintained and operation collection system and treatment plant.
Dowagiac has long-term treatment contracts with the various governmental units. Contracts define rates, which are adjusted annually to reflect increased costs.
Indian Lake and Sister Lakes systems started doing their own customer billing, costing Dowagiac about $35,000 in revenue annually.
To assist in offsetting these reserve losses, the city Finance Department eliminated a full-time position.
The city administration sees the need to create a fund for future system upgrades as has been done for vehicle and computer replacements.
Sewage treatment historically has been a percentage of the water bill because it's more accurate to measure the flow of water into a building rather than the sewage out.
For the time being the water system is in acceptable financial condition, the mayor said, so the city can forego increasing water rates at this time.
City officials also point to a comparison of Dowagiac rates with those of surrounding communities.
Even with the rate increases, the city will enjoy the lowest rates in the area.