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By the Numbers:

Suburban surcharges often double or triple Detroit’s wholesale rates

March 7, 2006 | By Charlene Crowell
Great Lakes Bulletin News Service

The question of who pays what for the Detroit Water and Sewerage Department services is as complicated as the system is sprawling. As the nation’s third-largest system, Detroit also ranked among the most affordable, according to a 2003 survey.

In comparing rates among the country’s 20 large metropolitan systems, the national average for sewer and water was $39.82. Detroit’s 2003 rate of $32.50 made it one of the most affordable. By comparison, San Diego led the list with rates of $70.73, followed by Boston ($66.92), San Francisco ($66.92), and Austin ($58.32). 

With Detroit’s rates causing such a suburban uproar, DWSD Director of Public Affairs George Ellenwood recently spoke with Great Lakes Bulletin News Service about the vast differences in perception and practice when it comes to water and sewer rates. 

According to Ellenwood, the utility has two rate systems—one for Detroit households, known as retail customers, and another system for wholesale customers. 

Detroit residents bear the cost of both service and the bond indebtedness that builds the regional system.

Between 1990 and 2005, outstanding bond totals stood at $6.3 billion dollars; capital asserts were $7.5 billion. During these same years, each of the three major bond houses—Standard & Poor’s, Moody’s and Fitch rated DWSD bonds at A or higher.  

Suburban municipalities are wholesale customers. Each of the 125 municipal accounts in the eight county service area (Genesee, Lapeer, Macomb, Monroe, Oakland, St. Clair, Washtenaw, and Wayne Counties) is separately billed by the city for bringing water through Detroit-owned mains to their locales.

Each jurisdiction maintains its own community water and sewer infrastructure. For these local services, suburban communities impose surcharge fees. These fees are set by each suburban community, independent of DWSD.  Suburban customers then receive bills that reflect DWSD charges as well as their own local jurisdiction’s fees. Because DWSD does not set suburban residents’ fees, the department does not have records of how local communities assess, review, or utilize these add-on charges. But it does have information on how high each suburb’s markup is.

Using a typical monthly residential bill standard of 1,000 cubic feet or 7,500 gallon consumption as a baseline measure, the actual 2003 suburban markup on water bills in contract communities ranged from a low of 9.66 percent in Roseville to a high of 336.08 percent in Montrose.

Seventy-one communities out of 125 had a markup of at least a 100 percent. Of those, 23 had markups of at least 200 percent or greater and included communities such as Augusta Township (239.90), Eastpointe (305.67), Genesee Township (270.66), and Pontiac (310.59).

For 2003 sewer charges, using the same 7,500 gallon measure, suburban markups of DWSD charges ranged from 12.26 percent in Redford Township to 535.41 percent in Franklin.

Overall, in 56 out of the 77 suburban communities served, sewer surcharges were at least a 100 percent markup over fees charged by DWSD. Within this group, 24 had surcharges in excess of 200 percent or more. These communities included: Birmingham (282.94), Dearborn East (200.44), Eastpointe (383.43), Grosse Pointe Woods (221.35), Royal Oak (311.72) and St. Clair Shores (262.64).

The sewer and water bills generated by suburban communities are not reviewed or approved by DWSD. Each bill represents a combination of DWSD’s wholesale rates and the local community’s surcharges. In all of these contract communities, customer bills are actually generated by their own local officials, not DWSD. 

For suburban customers in fiscal year 2005/2006, DWSD’s average monthly charges amount to $21.47 cents per household. Yet most suburban families do not realize that DWSD’s charges are just a fraction of their total bills. 

By contrast, Detroit customers for the same year, paid an average of $46.76 per month. This higher figure includes both metered service and repayment of bonds.

Even with these suburban add-on costs to suburban customers, DWSD was among the lowest combined water and sewer rates per month among the most populated cities in the United States.

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