Detroit water rates headed up, as department's future remains in limbo

Jun 11, 2014

A DWSD interceptor sewer line during construction in 2001. This line is north of Detroit in the Clinton River watershed
A DWSD interceptor sewer line during construction in 2001. This line is north of Detroit in the Clinton River watershed
Credit Mark Brush / Michigan Radio

Detroit Water and Sewerage Department officials say they’re working to put the system on sound financial footing – including raising rates and shutting off service to thousands of households.

Water department officials briefed the Detroit City Council on planned rate hikes Tuesday.

They propose hiking the typical Detroit residential customer’s water bill by 8.7% to 10.4%.

By contrast, suburban customers will only pay an average of about 4% more. Individual communities set their own water rates, which can vary widely from place to place.

DWSD officials say there are two major reasons for Detroit’s larger rate hike: Water use in the city is way down, and lots of people aren’t paying their bills.

In March, DWSD announced plans to shut off service to more than 150,000 customers with delinquent accounts worth almost $120 million.

The department has already shut off thousands of households for non-payment, and will continue doing that. Officials say about two-thirds of those households have since had service restored.

But Detroit resident Erma Leaphart said there have been problems with that process. They include customers getting stuck with inflated bills, and getting shut off despite having entered into a payment plan.

“I do believe people should pay the bill – I’m not against that,” Leaphart said. “But until the process is improved, perhaps a moratorium should be considered.”

DWSD officials showed no indication of considering such a moratorium. But they did acknowledge some problems, and said a program to help needy households pay their water bills should be up and running by the end of the month.

Director Sue McCormick projects systemwide rates will go up about 4% a year over the next five years to meet the system’s revenue requirements.

But McCormick warned this might not be the final word on rate hikes, because Detroit’s bankruptcy has raised big questions about the department’s future.

Emergency manager Kevyn Orr’s bankruptcy restructuring plan outlines two potential paths: either spin the department off to a regional water authority, or lease it to a private operator.

McCormick told Council those governance issues are "outside of our purview."

“We’ve seen several iterations of changes in the plan of adjustment, and there may be additional ones," McCormick said. "So at this point, we’d just be guessing (about rates).”

The Board of Water Commissioners has already approved new wholesale water and sewer rates for suburban customers.

The Detroit City Council still has to vote on city rates.

DWSD has more than $6 billion in debt. Orr had hoped to refinance much of that by turning more control over to suburban customers, with the expectation that new governance would lead to more favorable interest rates.

Department officials say they aim to shrink that debt burden in the future. However, they plan to issue about $150 million in new bonds next month for capital improvements.