New Water and Sewer Rates Effective April 1, 2015

April 2015

On March 23, 2015 the Township Board of Trustees approved rate increases in water and sewer usage effective April 1, 2015. Bloomfield Township currently purchases water from the Southeast Oakland County Water Authority (SOCWA) and sewage disposal services through the Oakland County Water Resources Commissioner (OCWRC). Both of these agencies are wholesale customers of the former Detroit Water and Sewerage Department (DWSD) soon to be known as the Great Lakes Water Authority (GLWA).

Customer History

The Township’s water and sewer system began with the construction of the County’s sewer system in 1958 and water was extended later by DWSD in 1964. The Township originally had 3,300 water customers in 1965. By 1995, there were over 14,000 customers and in 2015 there are now over 15,600 customers. In the early years, the system expanded rapidly with new developments and was supported largely by connection fees for new customers being added to the system. Development and system expansion has greatly decreased in the past twenty years and the system now largely is being funded by the customer usages. These usage charges have historically relied heavily on the customers with high water usages to generate the revenue needed for the system. In addition to a decline in development, water volumes have also shown historic declines. Water volumes are dependent on customer usage and seasonal precipitation. Since 2008, Bloomfield Township’s consumption has dropped nearly 25% and the volumes continued to drop in 2014. This decline mirrors the water use trends of all the customers on the DWSD regional system.

Usage Rates

The water and sewer usage rates are billed per 1000 gallons based on the water volumes read on the customer’s water meters. These rates consist of four components: 1) commodity charges, 2) operating expenses, 3) depreciation, and 4) capital projects.

Commodity Charges - The commodity charges are the largest component, making up 63% of the rates. These are the pass through costs from SOCWA for water and from the OCWRC for the sewage treatment. Both agencies are wholesale customers of DWSD and their costs consist largely on what DWSD charges them.

Operating Expenses - The Township DPW – Water Division is responsible for operating and maintaining the water and sewer system which includes a one million gallon storage reservoir, ten pumping facilities, over 500 miles of pipes along with the attached manholes, hydrants and valves. In addition over 15,000 water meters are read, billed and serviced. Township operating costs have been very consistent over the past several years, making up approximately 20% of the charges.

Depreciation - The average age of the water and sewer pipes within the Township’s system is 50 years old with some pipes nearly 90 years old. Much of the system is nearing or is beyond half of their useful service life. Depreciation makes up approximately 8% of the rates.

Capital Projects - Since 2006, the Township has bonded for major repairs and replacements needed for both systems. This adds additional cost to the customer to pay the debt for the bond. Depreciation alone is not a sufficient amount needed to continue the current and future capital projects. Including a component in the rate for capital projects will help the Township build the necessary reserve without selling bonds. New in 2015, a component in the rates of about 9% will be included to build up the reserve funds for current and future capital projects.

Other Charges

In addition to the usage rate components, there are flat charges, billed per customer, per quarter. These are the Ready To Serve (RTS) and Debt Charges.

Ready To Serve - In 2009, DWSD began applying a monthly flat rate to their water and sewer charges regardless of what water volumes were used. DWSD had determined that 90% of their overall costs do not vary with the water usage. This is known as the “Ready To Serve” (RTS) charge which is widely used in the utility industry for charging customers for the stationary cost of being connected to the system. This helps to cover some of the costs of the Township’s operating expenses that do not vary with water usage. This includes services such as service appointments, utility staking, meter replacements, engineering, system repairs (water main breaks) and after hour emergency calls. It is a fair way to spread the costs to provide service to all of our customers in an equitable manner.

Debt Charges - Debt charges have been in place by Township Ordinances for over 50 years and it is a mechanism for the Township to collect sufficient revenue to cover the bond debt for the water and sewer system.

Summary

In determining the 2015 water and sewer charges, changes in the Township, such as the decrease in water volumes and a slowdown of new development had to be considered. Also, in looking forward, a mechanism for sustaining the sufficient revenue to cover the day to day expenses of operating a water and sewer system, whether water is used or not, needed to be established. Relying solely on water usage would have placed the burden on the few customers with very high water usage and would be largely dependent on the unpredictable, seasonal weather.

Following are new rates, as approved by the Township Board of Trustees, in effect as of April 1, 2015.

Charges 2014 2015   Difference Billed
Water Usage $4.71 $5.20   $0.49 per 1,000 gallons
Water Ready To Serve $17.00 $34.00   $17.00 per customer, quarterly
Water Debt $11.00 $14.00   $3.00 per customer (REU), quarterly
Sewer Usage $6.35 $6.84   $0.49 per 1,000 gallons
Sewer Ready to Serve $20.00 $38.00   $18.00 per customer, quarterly
Sewer Debt $8.00 $9.00   $1.00 per customer (REU), quarterly

Unfortunately, increasing the rates is necessary to best recover the costs of the system expenses along with collecting sufficient funds for ongoing and future capital system improvements. Should you have any questions about these rate changes, please contact the Department of Public Works at 248-594-2800.

Kind Regards,
Bloomfield Township Department of Public Works