City Council Recap: Water and Sewer Rate Increases Approved

On a split vote, Lowell City Council voted to increase water rates by 58% and sewer rates by 41% over the next six years. The rate increases only apply to customers who live in the City of Lowell, and councilmembers say they are necessary to make repairs to the water and sewer lines on Washington Street.

In addition to approving the rate increases, councilmembers ran through eight pieces of new business. All councilmembers were present for the meeting.

Background on Infrastructure Projects

The public got its first look at the proposed water and sewer rates last week during a special meeting. The only piece of business on that meeting’s agenda was the “Washington Street Project.” However, the majority of the discussion revolved around the need to increase water and sewer rates to pay for the project.

During the regular council meeting this past Monday, City Manager Mike Burns provided a lengthy introduction to the matter, including the history of water, sewer and road projects in Lowell.

“We have not properly invested in our infrastructure,” Burns said. “It’s like death by a thousand cuts.”

Burns has been city manager since 2016 and noted that only one road project – Jefferson Street – was completed between 2016 and 2019 as the city looked for ways to fund repairs. A city income tax was put on the ballot, but that was voted down by residents. Council also approved recreational marijuana facilities and has been using tax money from those businesses for road repairs.

“When the income tax failed, we knew we had to address Monroe and Washington,” Burns said. “They had to be done.” To complete the repairs, the city has obtained financing through the USDA for the more than $7 million needed for the two street projects.

According to Burns, Washington was identified as one of three sources of significant groundwater infiltration into the wastewater system, making it a priority project. However, during an August 2019 meeting, a representative from Prien&Newhof said the firm had identified two main sources of infiltration: a section of Foreman Street and an alley north of Main Street and near Monroe Street.

Prien&Newhof is the engineering firm that inspected all city pipes and prepared a capital improvement plan as part of the city’s Stormwater Asset Management Grant Program, commonly referred to as the SAW grant.

According to a capital improvement plan prepared by the firm for the water system, the pipes on Washington Street from Main Street to north of North Street were considered to be at the lowest risk of failure while the remaining pipes on the road until Fremont Street were rated as having the second-lowest risk of failure. No comparable report for the sewer lines is available on the city website.

In January 2020, a representative from the firm Baker Tilly presented a rate study to Lowell City Council at a Committee of the Whole meeting. To pay for anticipated capital improvement projects, that study determined that water rates would need to increase 2% each year while sewer rates would need an initial bump of 6.5% followed by 2% annual increases. The draft capital improvements plan at the time called for the lines on Washington Street to be replaced at a cost of $1.5 million in 2021.

A later rate study, conducted by firm Vredeveld Haefner LLC in 2021, found water rates would need to increase between 1-3% annually and sewer rates would need to rise between 3-7% annually to pay for the bonds the city planned to use to fund capital improvement projects.

The current rate study was completed by Municipal Financial Consultants. It determined that water rates would need to increase each year between 0-35.37% and sewer rates would have to rise annually between 0-21.48% to cover the payments on existing debt service plus new bonds for the Washington Street project.

“No one likes to raise rates,” said Warren Creamer who completed the study on behalf of Municipal Financial Consultants. “(The rates) have been kept down, artificially low for a long time.”

Utilities Supervisor Ralph Brecken noted that water and sewer lines on Washington Street were roughly between 50-70 years old and past their expected lifespan. He noted that older sewer mains, which are made from clay, can be especially susceptible to failures after 50 years. The 4-inch water pipes on the street are also quite small and outdated.

Burns shared information from his personal budget and noted that even after the increases are fully phased in, his water and sewer bill would be less than his cable bill, phone bill and property tax bill. While it would be more than his natural gas bill and equal to his electric bill, Burns stressed that water and sewer are two services and not one. He also added that the monthly increase in rates is roughly the same amount as a 10-piece chicken nugget meal at McDonalds.

Public Comments

In total, seven residents spoke about the proposed rate increases.

Craig Fonger spoke first and said he worried people thought the rate increases were the result of growth in the township.

However, the rate increases are not a result of township growth, and township residents who use the city water and sewer system will not see their rates increase. Since the Washington project is wholly within the Lowell City limits, the rate increases to pay for it will only be applied to the bills of city customers.

Later, Susan Stevens commented that she didn’t envy councilmembers for having to make this decision. She felt the work needed to be done, but she was concerned that township residents weren’t being assessed the higher rates to maintain the system. She was also concerned that a state grant to run pipes to a development near I-96 in Lowell Township could end up costing the city more money.

Perry Beachum felt as though the current city administration and councilmembers needed to stop blaming previous councils. He also asked why the Washington project did not occur in 2021, as previously planned and when interest rates on the bonds would have been lower.

Burns replied that a last-minute request from the USDA for easements meant the project needed to be delayed. He also mentioned that the Monroe project, which was completed last year, required the replacement of lead service lines which added to the cost. Creamer added that government grants during the COVID-19 pandemic also led to increasing construction costs.

Beachum also asked about the expected $9 million cost of replacing the headworks at the wastewater plant. Burns said that cost wasn’t included in the rate calculations, and he had not yet begun planning for how to pay for that expense. “It’s been very complex issues, and that’s all I can really say,” Burns said.

Dennis Kent said that since city residents were subject to a summer irrigation ban because of growth in the township, he wasn’t opposed to having township residents pitch in for repairs to the city water and sewer lines. As chair of the LCTV fund board, he also wasn’t opposed to using some of that money for the project as well. Finally, Kent thought there may be grant funds available through the Michigan Infrastructure Office.

Tyler Kent noted that the council had previously been discussing affordable housing and raising water and sewer rates so much would be a “slap in the face” to those discussions. As a new homeowner in the city, he found the rising rates to be discouraging, and he wondered if the city was required to do certain projects because of the SAW grant.

In referencing Burns’s example of his household bills, Sharon Ellison noted that people can cut their cable bill and choose not to eat at McDonalds, but water is a necessity. She thought raising the rates significantly could have a ripple effect that would encourage people and businesses to locate outside the city limits.

Like Kent, she thought using money from the LCTV fund would be appropriate. Ellison noted that the fund was created with the sale of a city asset – Lowell Cable Television – and that it had been “very generous” to include the townships in distributing grants from the fund. However, she thought maybe the city should prioritize using those funds for its needs, at least for a few years.

“We’ve got to move on Washington,” Burns said in response to these suggestions. “We can’t wait for grants.”

Beryl Bartkus was the final person to provide public comment and she asked whether the bonds being discussed would be used for other projects beyond the Washington project. Burns said the bonds were only for Washington Street.

Rate Increases Pass on 4-1 Vote

After public comments, Councilmember Eric Bartkus led off the council discussion.

“I’m an engineer, and I like to brainstorm ideas,” he said. “I don’t think we’ve done that. The council has only talked about this for three weeks.”

Bartkus suggested a three-fold approach to reduce the amount of debt needed for the Washington project:

• Delay a project on Avery Street and move the $500,000 budgeted for that to the Washington project.
• Use some of the cash reserves in the water and sewer funds. Both have approximately a 400-day cash reserve, and Creamer noted that the recommendation is usually to have a 9-month cash reserve.
• Use some of the marijuana excise tax money for the Washington project and adjust the 7-year street plan, potentially moving back other projects.

Bartkus asked if Creamer would be able to do some calculations by the end of the week so see how those adjustments might reduce the needed water and sewer rate hikes.

No one else seemed supportive of the suggestion, and Burns asked Creamer whether that would require the city to return to the USDA for approval if they were using different funding sources. Creamer didn’t know the answer, but City Attorney Jessica Wood said that yes, the city would need approval from the USDA.

“That would kill another construction cycle,” Burns said. Wood said she didn’t know how long it would take but approval would be needed.

Councilmember Jim Salzwedel and Mayor Mike DeVore said that while Bartkus was new to the council, the rest of the body had been discussing the issue for some time.

“It’s been on Eric’s radar for a short time because he’s been on council for a short time…whereas we had the luxury of knowing about it,” DeVore said. “I don’t want the public narrative to be that we just made this decision in three weeks cause that’s not the case.”

The current rate increases were first listed on the agenda at an April 8, 2024, special meeting. If councilmembers were considering them before that date, those deliberations were presumably done in private.

Councilmembers then discussed whether they could pass the water and sewer rate increases now to get the project started and then lower rates if they were able to find additional funding and prepay the debt.

The consensus seemed to be that this was the best approach, and Councilmember Leah Groves said it was important for the council to remain committed to finding other funding and not give up after, for example, six months.

Councilmembers then held four votes on the matter:

• Council unanimously approved Georgetown Construction as the contractor for the Washington Street project.
• Council voted 4-1 to approve water and sewer rate increases using an option that will result in 9.66% annual increases in water rates along with sewer rate increases that will be 9.66% for the first three years and 4% for the next three years. Bartkus was the no vote. More details about how much homeowners can expect to pay can be found in this article.
• Council voted 4-1 for each of two revenue bond agreements – one vote was for the water bonds and the other was for the sanitary sewer bonds. Bartkus was the no vote and initially asked if he should abstain. “I think you have to vote no,” Wood replied.

The first increase in rates will occur in 2024, but it was not stated whether the new rates would go into effect immediately or at a future date.

Other Agenda Items

 

Before getting to the discussion on the Washington Street project, councilmembers quickly ran through all their new business. Those items included:

• Unanimous approval of road closures for the 2024 Lowell Pride event. While no specific details were mentioned, Salzwedel and Councilmember Marty Chambers thanked the Lowell Pride board for providing additional information and addressing their concerns.
• Unanimous approval of the rezoning of 208 S. Hudson to industrial, as recommended by the Planning Commission.
• Unanimous approval of charitable gaming activities on the Lowell Showboat. Bartkus asked if this could potentially create a casino-type environment on the Showboat, and Salzwedel – who sits on the Showboat board – said there would probably be only two or three gaming events per year.
• Unanimous approval of including Easy Street, a new restaurant at the corner of Main and Riverside Drive, in the city’s social district.
• Unanimous approval of an application for $100,000 from the Michigan Recreation Passport Grant program for the reconstruction of Creekside Kingdom.
• Unanimous approval of an off-premise tasting license for Moravian Sons Distillery to serve drinks at The Old Theater.
• Unanimous approval of the termination of the agreement allowing the Kent County Youth Agricultural Association to use Recreation Park.
• Mayoral proclamation of Arbor Day and Week

The meeting adjourned at 9:33pm, and the next regular meeting of Lowell City Council will be Monday, May 6, at 7pm.

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