Council seeks correction of DUWA usage error to decrease required buy-in bond debt by 5 percent

Photo by Sue Suchyta Finance Director Bob Cady (left) explains to Councilman Larry Templin and others on the City Council how a past error in the city's Downriver Utility Wastewater Authority usage data – a 5 percent spike from 9 percent prior to 2013 to 14 percent – could have occurred, and how it could be corrected, so the city does not incur 5 percent more bond debt based on the inaccurate percentage to buy into the system and become a member of DUWA instead of a customer.

Photo by Sue Suchyta
Finance Director Bob Cady (left) explains to Councilman Larry Templin and others on the City Council how a past error in the city’s Downriver Utility Wastewater Authority usage data – a 5 percent spike from 9 percent prior to 2013 to 14 percent – could have occurred, and how it could be corrected, so the city does not incur 5 percent more bond debt based on the inaccurate percentage to buy into the system and become a member of DUWA instead of a customer.

By SUE SUCHYTA
Sunday Times Newspapers

ALLEN PARK – City officials want the Downriver Utility Wastewater Authority to correct city usage from 14 to 9 percent to adjust its share of the bond debt needed to join the authority.

Mayor William Matakas, a representative to DUWA, said at the Jan. 10 City Council meeting that a past error in the city’s Downriver Utility Wastewater Authority usage data – a 5 percent spike from 9 percent prior to 2013 to 14 percent occurred, and he wants it to be corrected, so the city does not incur 5 percent more bond debt based on the inaccurate percentage to buy into the system when potentially adopting the service agreement as a member of DUWA instead of a customer.

Of the 13 DUWA communities, Matakas said Allen Park and three others – Lincoln Park, Riverview and Southgate – have not voted whether to become members or customers.

Nine communities have joined DUWA: Dearborn Heights, Taylor, Wyandotte, Belleville, Brownstown Township, Ecorse, River Rouge, Romulus and Van Buren Township.

Matakas said the service agreement is necessary to move forward even though DUWA is probably 10 to 11 months away from closing on the purchase of the Wayne County sewer system that services the 13 DUWA communities.

“The county wants to be out of the wastewater treatment and collection business,” Matakas said. “They need to raise cash, and the Downriver communities felt it would be better for us to be in control of our own system rather than have it sold to a private company.”

Matakas said the 50-year service agreement signed in 1962 expired in 2012, and the system has functioned without a contract since then.

“We are kind of this group of communities working with the county, but we don’t exist as a legal entity,” he said. “The service agreement is an attempt to create a legal entity of the 13 communities.”

Matakas said not every city has to join as a member – they can choose to be a customer of the system.

He said Allen Park has asked for a review of the percentage that the city has to pay for its sewage treatment and collection system, and Wayne County has had the request for six weeks, and  indicated in a written memo that it probably will not be able to provide an answer until May.

“The pressure on the DUWA group is we need to know what the entity is, sooner rather than later,” Matakas said. “It will take two to three months for a bond rating agency to give us a rating. Without that rating, we have no way to issue bonds, and therefore no way to buy this system, which the county is asking $57.5 million for from the 13 communities.”

Matakas said he thinks that during the period when Allen Park was subject to an emergency manager there was a change in how the city’s sewer bills were administered, and there was a spike from 9 to 14 percent of Allen Park’s usage as a percentage of the system total.

City Administrator Mark Kibby said there are smart meters now in place measuring the wastewater flow, and about 18 percent of the city’s wastewater goes to the Detroit Water and Sewage Department, and 82 percent goes to DUWA.

“The problem there is (when the increase occurred) the entire 100 percent was being reported to DUWA,” Kibby said. “So the meters were vital to be able to separate that out.”

Finance Director Bob Cady said in the past, the city never had an accurate way of measuring what wastewater was going to DWSD and what was going to DUWA.

“Until we got the virtual meter system in, which occurred last September and October, there was no way I could accurately look at the flow and get accurate reads,” he said. “We have been reporting accurately now.”

Matakas said the 5 percent spike caused by the inaccurate billing is problematic, because he’d much rather have the city’s share of the bonds to buy into the sewage system be at the 9 percent than 14 percent.

Matakas said a 5 percent share difference over 30 years of bond payments to the city’s residents, with principal and interest, is a “very substantial amount of money.” He said the DUWA attorney does agree that an adjustment does need to me made, as do the Plante Moran accountants, and DUWA official and engineer Richard Hinshon.

Matakas said the service agreement with DUWA states that the usage percentage numbers that the city has as of the date that the ownership transfer from Wayne County to the communities would set the rate for five years.

“Unfortunately, the attorney for DUWA is not willing to say that if we get an answer before the service agreement would really take effect, then it would change the rate that Allen Park should pay; reduce it back to the 9 percent,” he said. “The service agreement doesn’t really provide that. It’s a five-year number, and in the service agreement it is 14 (percent).”

Matakas asked for the consensus of the City Council so that if the city does not by default lock itself into the 5 percent higher figure. He said if they don’t agree to the higher percentage, the amount is reallocated among the other member communities, since each member and customer’s percentage of usage would be recalculated.

The old debt will be spread among the members and customers, Matakas said, but the new bond debt, to purchase the system, will be based upon each community’s usage percentage.

Matakas said it made sense for the city to have input as a member of DUWA on capital expenditures for the system, and how rates and personnel issues are addressed.

Councilwoman Gail McLeod said a determination needs to be made about the 5 percent overages the city paid since 2013, not just going forward.

Matakas said there is agreement among DUWA that the city is owed for inflated usage charges, and they are willing to credit Allen Park for that.

Cady said the city has been working with a consultant to determine what was overpaid, and he has a meeting scheduled with Wayne County to discuss the over-payment.

Cady said the outflow sewage sensors were part of a total meter system upgrade that enables meters to be both read and bills sent out automatically.

Rourke moved to table the motion to join DUWA as a member until the relevant issues are resolved. Councilman Angelo DeGiulio seconded. The motion passed 5-1, with Councilwoman Tina Gaworecki casting a no vote.