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Detroit Council to reconsider water rate hike after state warning

Jul 8, 2015

Credit Kate Boicourt / IAN

The Detroit City Council will reconsider whether to raise the city’s water rates, after the state treasurer warned that could trigger greater state oversight of the city’s finances.

Last week, the Council voted down a proposal to raise combined water and sewer rates by 7.5%.

A majority of Council members were wary of raising rates in a city where thousands of people face water shutoffs because they can’t afford their bills.

But city officials say that leaves the water department with a $27 million budget deficit – and leaves Detroit unable to meet the terms of its approved budget, which would let a state-appointed Financial Review Commission step in.  

“You’re putting at risk an extension of state oversight if you have a $27 million hole in the budget,” says Detroit Chief Operations Officer Gary Brown.

Brown says the Council effectively approved the rate increase when it voted on the city’s entire budget earlier this year.

Council member Andre Spivey said the city needs to fill that gap fast. “The longer we wait, the longer we’re going to have money spent that we don’t have in this budget,” he said. “And we know the ramifications of that.”

But other Council members say they won’t vote for any rate increase until the city finds a sustainable way to help low-income households pay their bills and avoid water shutoffs.

So far, Mayor Mike Duggan and the Detroit water department have used a combination of payment plans and water assistance funds to help those households. But it hasn’t worked well, and many advocates say the city needs a true, income-based water affordability plan.

“I will vote no again until we have that in place,” Council member Mary Sheffield said. “And maybe that can put pressure on whoever comes to this table…[to make] sure the people in the city of Detroit can afford the water within the city of Detroit.”

But Brown says a 1998 Michigan Supreme Court decision prohibits municipalities from charging residents for utilities based on anything other than the cost of service.

“The Supreme Court has ruled clearly you cannot base rates on a person’s ability to pay,” Brown says. “You can’t have an affordability plan. You can have a sustainable financial assistance plan.”

Brown said the water department and the Duggan administration will work with Council to strengthen assistance plans, and answer all of Council’s outstanding questions about the department’s finances, including whether cuts can be found elsewhere.

In the meantime, the matter has been sent back to Council committees for reconsideration. A re-vote could happen next week.