City looks at possible hike to water, sewer rates

Alex Doty • May 22, 2018 at 10:00 AM

As part of its ongoing effort to build a sustainable infrastructure funding plan, city leaders are taking a look at the rates charged for water and sewer use and whether an update is needed.

The discussion follows a study that began late last year to find a long-term financial solution that addresses much-needed infrastructure improvements outlined in the city’s Capital Improvement Plan and the latest water system reliability study.

"The water rate is lower than your neighbors and everyone else in Ottawa County," Dan Sorek of Prein & Newhof, the firm responsible for the study, said during a presentation at Monday night’s Grand Haven City Council work session. "Same with your sewer rate."

City residents currently pay $2.38 per 1,000 gallons for water and $4.78 per 1,000 gallons for sewer each month. There is also a $4.17 ready-to-serve charge that residents pay each month for water and for sewer.

According to Sorek, the study used two scenarios to compare funding for future infrastructure improvements: a pay-as-you-go scenario that utilizes a systematic rate increase approach, and a second scenario that utilizes bonding as a source of funding with debt service spread over 20 years.

The study notes that the bonding option requires smaller rate increases annually to meet inflationary needs; however, it requires a large increase every five years or when new debt is issued.

The pay-as-you-go option includes larger upfront increases to raise needed funds for infrastructure improvements, then levels out to include only inflationary increases after five years, Sorek noted.

"Going with the pay-as-you-go scenario, that was the one that was recommended so you could build a sustainable fund balance to pay for capital improvement expenses over time, without bonding," he told council.

The study proposes that, for the first five years, rates would increase 12 percent for sewer and 8 percent for water. After five years, 2.5 percent inflationary increases are projected. Based on the proposal, the city's water rate would increase to $3.96 per 1,000 gallons after 10 years, while the sewer rate would increase to $9.53 per 1,000 gallons after 10 years, Sorek said.

The plan includes the cost to cover the debt requirements of the Grand Haven/Spring Lake Wastewater Treatment Plant upgrades that City Council has already approved. The rate increase would continue to produce approximately $2 million annually for both water and sewer infrastructure needs.

Sorek noted that, unlike the pay-as-you-go plan, the bonding plan doesn’t continue to produce funds for infrastructure investments after the initial 10-year plan has concluded.

City Manager Pat McGinnis said the next step is to bring back a proposal to council in the coming weeks based on the pay-as-you-go recommendation. This would likely include several scenarios, including the one proposed Monday night, McGinnis noted.

Scenarios include the current proposed increases, as well as options that have higher increases per year for the ready-to-serve charge, and lower increases in the price per 1,000 gallons charged.

“We’d like to come back with a rate recommendation that’s approved before we come back and talk about millages,” McGinnis said. 

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