City council authorizes water rate increases March 1

Sunday Times Newspapers

MELVINDALE – Water rates here could go up as much as 10 percent in the coming months.

The City Council unanimously approved and held the first reading of the resolution authorizing an increase at its Jan. 20 meeting based on recommendations by DPW commissioner Eric Witte. The increase would take effect March 1.

He said the 10 percent figure is on the high end, and that the final numbers aren’t in. Numerous other communities also will be hit with an increase because the Detroit Water and Sewerage Department’s debt cost went up due to the bad economy, and its budget, which was based on a predicted level of usage, acquired less revenue as usage decreased.

“They went from 4 1/2 percent on the variable rate; they spiked at 9 percent on short term until they got it locked in at 6 (percent). So the cost of debt went up,” Witte said. “If they have less overall sales, you have to increase your price to make up that difference.”

Water rates are affected by three components, he said: the wholesale cost of the water, debt obligation and maintenance costs within the department for meter readings, repairs and things of that nature. “We cannot change our debt obligation,” Witte said. While Detroit’s wholesale cost to the city rose, Melvindale’s sales also are declining because of an increased number of vacant houses, and the closing of Reilly Plating Co., which accounted for 10 percent of the city’s sales.

“But our debt obligations are the same amount,” he said, “so we have fewer sales to make the same amount of revenue.”

Witte said raising the rates are by the proposed date would allow the city to obtain the needed revenue by the end of the fiscal year. If the city waits until Detroit raises its rates on July 1, Melvindale would have to raise its rates even more to generate the amount of revenue needed by the end of the affected time period.

City Administrator Paul LaManes added that city auditors Plante & Moran have examined and agreed with Witte’s proposal and would present a rate study to the council soon.