Commission reviews water, sewer, stormwater rate study

Gary Simpson, city chief financial officer

MARQUETTE — The Marquette City Commission during a work session Monday listened to a water, sewer, and stormwater rate study presentation by representatives from Raftelis Financial Consultants Inc. at city hall.

Tom Beckley and Collin Drat of Raftelis, a nationwide consultant firm, said Marquette area rate payers could face a 12 percent increase on monthly water utility bills, which are estimated to be around $16 more.

According to the city’s website, average water rates for one adult is currently $66 to $99.94; two adults is $99.94 to $167.82; three adults is $133.88 to $235; and four adults is $167.82 to $303.58.

For most customers, the utility bill is made up of four separate charges: water, sewer, solid waste and stormwater.

Water and sewer charges typically vary from month to month and are calculated using the meter readings taken each month. The solid waste fee and stormwater charge are fixed rate monthly charges, and generally are adjusted annually, the website states. The city changed the way it measures water use in January by switching from cubic feet to gallons.

Fred Stonehouse, member, Marquette City Commission

Curt Goodman, director of municipal utilities, said the average household uses around 4,000 gallons of water per month.

According to Drat, the lead analyst of the study, the primary objective of a rate study is to determine the level of revenues needed to ensure the city has “financially sustainable water and wastewater and stormwater utilities,” also noting that “it’s prudent to have a certain level of reserves in the bank” to address any emergency issues that could occur.

Water usage per account has been declining over time throughout the country, Drat explained.

“Every new account that comes online, new houses that are built, the fixture is more efficient, the toilets use less water per flush, so even though we may have some account growth, our revenues will still tend to decline, maybe 1 to 2 percent a year just because people are using less water,” he said. “If they go down every year, we have to make up that 1 (or) 2 percent with our rates.”

The presentation focused on two possible systems such as an “across-the-board” utility rate increase or having a higher fixed charge to “better align with current costs.”

“The downside to the fixed charge is it makes it harder to control their bills and there is a concern about lower usage customers in that, less of their bill is essentially generated by that volume charge, so when you increase the fixed charge more, you’re actually impacting those lower usage customers more then you would the larger volume customers,” Drat said, adding that revenues would be a “little more stable” if the fixed-charge was implemented.

Mayor Pro Tem Frederick Stonehouse asked if it’s possible to have a hybrid system where property owners can select the system they want to use — per use or fixed rate.

Beckley said it might be possible but there would be an “inequity in the rate structure.”

“We need to develop the rate structure as a whole and allocate costs based on the rate structure. I wouldn’t recommend doing that. We could certainly do the math to make that work but in the end, you’d have the people who benefit taking advantage of the rate structure … and you wouldn’t get equitable recovery of cost,” he said.

Stonehouse said it would be “equitable” to the customer by allowing them to choose.

“As we are a public service, that would seem to make more sense to me than have either or,” Stonehouse said.

Beckley replied that as policy-makers, “we have to decide what the pricing objectives of the utility are and then develop a rate that meets the pricing objectives.”

Marquette’s Chief Financial Officer Gary Simpson said he’s not sure if a dual-billing system would work.

“My inclination is to say that it can’t but we can check into it if that’s the way you want to go,” he said.

The last change was a 7 percent rate increase in October 2016. If the rates increase next year, Goodman said townships who use the utilities would not be affected right away because they’re wholesale customers.

Since the commission did not vote on anything during the work session, rates will continue to be discussed as the city works on its budget.