Corroded pipes that were recently replaced along Magnetic Street in Marquette are pictured. With an aging water infrastructure and depleting utility revenue funds, city officials along with a hired utility consulting firm suggest increasing the city’s water, sewer and stormwater rates will help fund projects and emergency situations. (Courtesy photos from Margaret Brumm)

MARQUETTE — Three public hearings will be held Monday during a Marquette City Commission meeting, which could result in a vote to increase water, sewer and stormwater utility rates, taking effect Dec. 1.

If approved, stormwater rates would increase by 15.25 percent, water would go up 12.25 percent and sewer would increase 25 percent.

For all three utilities combined, an average customer would see an increase of $16.78 per month, or $201.36 per year, if approved by the commission. The rates would be evaluated at the end of each fiscal year to determine the cost for the following year.

It’s estimated that this five-year financial plan will result in an additional $520,000 in revenues for the city’s water fund, $1.3 million in the sewer utility fund and $201,000 in the stormwater utility fund.

With an average household using around 4,000 gallons of water per month, the city’s website suggests that monthly 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.

Since residents in Marquette and Chocolay townships do not receive the same type of water and sewer service as city customers, their rates will not be impacted.

Curt Goodman, director of municipal utilities at Marquette, said increasing the utility rates would help achieve financial sustainability for each fund.

“For all three funds this means sufficient cash flow to fund operating expenses and replacements to critical infrastructure,” Goodman said in an email. “In addition, it is prudent to have a minimum level of operating reserves for each fund to deal with unforeseen expenses and fluctuations in revenue.”

Goodman said the sewer fund currently has negative cash flow and no reserves since the expenses have exceeded revenues, while water and stormwater funds have some reserves but are projected to be depleted in the near future.

“The sewer fund has been financially supported by the general fund. If sewer rates are not adjusted, this fund will likely continue to need similar support,” Goodman said. “The water and stormwater funds may need similar support if rates are not adjusted. The objective of the increases is to get each fund in a position where it can stand on its own.”

For all three utilities, the increases will stabilize funds and build up a reserve equivalent to 90 days of operation and maintenance and debt service, Goodman said.

“This would be sufficient to cover just three months of the utilities’ minimum cash expenses,” he explained.

It’s anticipated that it’ll take five years for the city to break even. Eventually, the extra money will help fix an aging water infrastructure and also be used for emergency situations.

Corroded iron and wood-and-fiber-based Orangeburg pipes are common throughout the city, dating back many decades. Replacement projects are planned annually per the city’s Capital Improvement Plan, but are executed by top priority and what the city can afford.

Since utility rates are typically set by elected boards, the Michigan Department of Environmental Quality encourages governing bodies to use “sound financial and asset management practices to set rates,” according to Jay Parent from the DEQ Resources Division and Doug Pascoe from the DEQ Drinking Water and Municipal Assistance Division.

In 2015, Marquette received over $1 million through the DEQ’s Stormwater, Asset Management, and Wastewater — or SAW — program for development of an overall asset management plan.

The requirements of the SAW grant asks that the city develop a plan which incorporates funding for repair and replacement of capital assets and balancing revenues and expenditures over a reasonable period of time. Under new water supply regulations, municipalities have 20 years to fix infrastructure issues starting in 2021.

Through the SAW grant, the city hired Raftelis Financial Consultants Inc. to develop water, sewer and stormwater financial plans and rate structure alternatives to meet the city’s pricing objectives. The final study can be found at www.marquettemi.gov/utilityratestudy.

The city has adjusted water, sewer and stormwater rates periodically over the last decade but did not adjust them for the current fiscal year because officials were waiting for the results of the Raftelis study to see how to move forward.

Gary Simpson, the city’s chief financial officer, said the study fell in line with what was expected — there’s a need to increase the utility rates. If the commission opposes the increase, Simpson said the city will have to “slash and burn the budget as much as possible.”

“We would have to get real creative because we can’t operate all three utilities at the rate it’s going without any increase,” he said.

Over the last few years, users have started conserving more water which has hurt utility revenues, Simpson added.

“As soon as we increased the rates, everybody was conserving more,” he said. “For instance, we raised rates 10 percent one year and then saw a 10 percent decrease in usage. It’s a weird situation because everybody wants to conserve and help out, but in this case — yes, thank you for conserving, but the reward is we have to raise rates to make up for it because we have minimum cost to cover and currently we’re just barely getting by.”

Presently, the city has “next to nothing” for reserves, Simpson said.

“A few years ago during what’s called the ’emergency freeze,’ the weather got so cold, the city started having water mains break all over the place and we didn’t really have the money to cover it,” he said, adding that although the city was reimbursed for that cost eventually, “the city would be in a world of hurt” if it happened today.

Speaking personally, rather than on behalf of the city commission, Mayor Dave Campana said increasing the rates is necessary.

“We need to be proactive in keeping the water infrastructure up-to-date,” he said. “Revenues are declining in regards to our expenses and we need to get our revenues back up to cover those expenses.”

Campana said if an emergency situation occurred, the city would have to request a bond for financial help, which then would have to be paid back with interest.

“It’s a fact of life that we are losing money at this point,” he said. “If you raise the rates and establish a cash reserve, then when you have real big problems — usually it’s in the winter when all the pipes are breaking around the city — you don’t have the big expense because the city doesn’t have to borrow the money by bonding for it.

“Right now, the city’s trying to get out of that situation so they don’t go into debt. This isn’t the only place in the world doing this. Lots of townships had to raise the rates by even 50 percent and we’re actually in the lower half of the charts, even after an increase.”

A Upper Peninsula utility rate survey was recently conducted by the DEQ U.P. District Office, which can be found on the city’s website at www.marquettemi.gov.

Along with city officials, representatives from Raftelis and the DEQ will be available to provide more information and address concerns at the commission’s Monday meeting, which starts at 6 p.m. in commission chambers at city hall.

Jaymie Depew can be reached at 906-228-2500, ext. 206. Her email address is jdepew@miningjournal.net.