Dearborn voters to decide on final CSO payoff method

Photo courtesy of the city of Dearborn About $60 million is needed to complete Dearborn’s section of a federally mandated Combined Sewer Overflow project to reduce pollution in the Rouge River.

Photo courtesy of the city of Dearborn
About $60 million is needed to complete Dearborn’s section of a federally mandated Combined Sewer Overflow project to reduce pollution in the Rouge River.

DEARBORN –  Dearborn voters on Aug. 7 will determine how they want to pay for the remaining $60 million portion of the federally mandated pollution control project known as the Combined Sewer Overflow project, which has updated much of the city’s infrastructure, including sewers, water mains and neighborhood roads.

Voters will decide to either approve a property tax hike averaging .87 mills over 26 years or have the cost applied to water bills, if the proposal fails, according to city officials. The tax increase will cost the average home owner $48 per year over the life of the bonds.

The additional $60 million in construction projects are required for the city to fully comply with the CSO permit issued by the Michigan Department of Environmental Quality. The permit is based on the federal mandate directing Dearborn to reduce pollution in the Rouge River.
More than 40 communities, including Dearborn, are in the Rouge River watershed, and many have been affected by the federal mandate to clean up the river.

More than $300 million in work on the massive infrastructure project in Dearborn already has been completed or is under way after voters approved a designated tax in 2004 to meet the federal mandate.

Along with addressing sanitary sewers to improve water quality, Dearborn leveraged the required disruption to also replace roads, sidewalks, and water mains, upgrading and enhancing neighborhoods throughout the city.

As in 2004 when preparation for the construction began, the city has no choice but to proceed with the final stages of the CSO project.

Voters, however, do have a choice about how to pay for the remaining $60 million in project costs. As in 2004, voters are being asked to decide on a proposal on the Aug. 7 ballot that would authorize a designated property tax.

If voters reject the property tax proposal on the Aug. 7 ballot, the $60 million cost would be funded instead through water bills and applied to all customers.

The City Council would need to set water rates for all customers at a level that would cover the $60 million final CSO costs.

Online calculator compares two funding methods for every home

Each household will be affected by either the property tax or the water and sewer bill funding methods. To compare the likely impact on households under each of the funding methods, the city will offer an online calculator. Go to www.cityofdearborn.org after July 18 for details.
(Some homeowners can deduct some portion of their property taxes from their federal income tax bill. The online calculator is not able to incorporate those deductions and potential savings.)
Common questions regarding this issue are:

Why is the property tax option on the ballot, but not the water bill option?

The city requires voter approval to levy a new property tax. Voter approval is not needed for increases in water rates, so that option does not appear on the ballot. The city must pay for the remaining portion of the CSO project somehow, and it will initiate new water rates only if the ballot proposal is rejected.

What is the cost to a property owner if the tax is approved by voters?

If voters approve the property tax increase, the cost is estimated to be $48 a year over the life of the bonds for the owner of a home with the average taxable value of all Dearborn homes. The average taxable value is about $55,000.

The rate of the property tax designated for the CSO will fluctuate each year, because project costs will fluctuate each year, depending on the stage of the construction.

It is estimated that it will start at .22 mills, with an average annual rate of .87 mills. It is not expected to rise beyond 1.12 mills. (One mill represents $1 for every $1,000 of a property’s taxable value.)

What is the cost of the anticipated higher water rates if the property tax is rejected?

An average residential customer with a five-eighths-inch water meter with 100 CCF will experience an average increase of about $68 a year if the remaining CSO cost is added to water bills.

What are the factors to weigh when considering the water bill option?

How much the increase in the water rates affects your household depends on your water usage. Water bills are two parts: a basic charge to be connected to the system, which is known as the capacity charge, and a commodity charge, which is based on usage.

Customers who reduce water usage should expect to experience less of an impact from an increase in water rates.

However, if water usage declines dramatically across the system, the rates may be adjusted in order to meet the overall financial obligations for the CSO project. That would mean that each unit of water used would cost more.

When will payments begin and end for the $60 million final stage?

If approved by voters, the property tax would appear on tax bills in winter 2018. If the property tax is rejected by voters and instead the costs are added to the water rates, the new rates could begin with bills as early as 2018, following action by the City Council.

It is expected that the final payments for the $60 million in remaining projects will be on tax bills in 2045.

We already approved a CSO millage in 2004. Why is more money needed now?

In order to meet the federal anti-pollution mandate, the final CSO construction projects must be finished.

Since 2010, the city has met the federal mandate through a method that generally separates sanitary sewers from storm sewers. This is different from the caisson construction originally pursued when the 2004 tax was approved.

This sewer separation method has the added benefit of providing reconstructed roads and water mains in neighborhoods. These upgrades improve the driving and bicycling experience; ensure minimum water pressure for households and businesses, as well as for firefighting; and reduce the chance of basement flooding.

When will CSO construction end?

It is expected that all CSO projects will be completed in 2025.
Source: City of Dearborn