Traverse City water and sewer customers could soon see changes to their bills – with the city considering moving to a new “ready to serve” rate intended to cover the costs of keeping the city’s water and wastewater plants maintained and “ready to serve customers.” The plan, which would charge a fixed rate even if water or sewer service isn’t being used, is common in other municipalities and will help more equitably distribute costs across users, staff said – especially with $30 million in water projects and $54 million in sewer projects planned in the next five years.

City staff gave commissioners part one of a planned two-part presentation this month on the city’s water and sewer operations. A second presentation is expected in January. According to staff, city water users are currently charged a monthly base rate determined by the size of their meter that includes some initial usage. A typical residential connection costs $16 for the first 600 cubic feet – approximately 4,500 gallons of water – and then $2.17 per 100 cubic feet for anything beyond that. Sewer rates are $47 for the first 600 cubic feet and $5.95 for each additional 100 cubic feet.

Deputy City Treasurer Jahna Robinson said the base usage of 600 cubic feet was set in the 1970s and is now considered outdated. Actual usage can vary from 400 cubic feet to over 900 cubic feet, depending on the time of year, she said. Sewer rates are based on a customer’s average usage from January to March, which helps smooth out summertime spikes from irrigation but can also unfairly benefit snowbirds who may have low or no winter usage.

Robinson said by contrast that most other communities use a “ready to serve” fee, plus additional usage costs. Such a rate typically equates to a fixed monthly charge on a water or sewer bill that covers the cost of operating the city’s plants and having water and sewer “ready to serve” a customer’s location – even if the service isn’t being used. That means seasonal customers who shut off service in the winter would still help keep plants operating and maintained year-round and available for use.

Robinson noted that water and sewer are enterprise funds, meaning “the cost of providing those services has to be recaptured by billing for those services.” There are no general fund appropriations from the city’s budget for water and sewer, she said. Therefore, rates charged must be sufficient to cover operating costs. The city has numerous infrastructure projects on deck, including $30 million in water projects and $54 million in sewer projects. “These are huge projects,” Robinson said. “We haven’t seen projects like these in a very long time.”

Those investments are expected to make the city’s debt service for water increase from $44,000 to $1.2 million annually by the end of the decade. Debt service for sewer is expected to increase from $195,000 to $2.1 million annually in the same time period. Representatives for the city’s water rate modeling software, Waterworth, said the goal is to gradually spread out rate increases for customers in the coming years to cover those costs – rather than do nothing for a decade and suddenly have a 20-30 percent fee hike.

Under the ready to serve model, customers would pay a base rate regardless of usage determined by their connection size, starting at $15.12 for a typical residential meter. Additional usage rates would then apply: 25 cents per 100 cubic feet for the first 400 cubic feet, then $2.17 per additional 100 cubic feet after that. A typical residential sewer connection would have a ready to serve rate of $39.95, with usage charged $2 per 100 cubic feet for the first 400 cubic feet and $5.95 per 100 cubic feet after that. Customers who keep their usage under 400 cubic feet for either water or sewer will see a decrease in rates – aligning with the city’s goal of encouraging conservation, Robinson said – while other customers are expected to see modest increases.

City Commissioner Jackie Anderson asked whether the rate changes could be skewed in such a way to impact smaller customers less and larger customers more. Robinson pointed out the goal was to distribute costs “equitably” across all users of the water and sewer systems, adding the city didn’t want to disproportionately target larger commercial users and make Traverse City a “place that’s too difficult to do business in.”

The second staff presentation in January is expected to focus on the city’s water meters and metering software, which Robinson said could soon give customers the ability to monitor their usage in real-time and make adjustments accordingly. Commissioners have not yet taken any action on the proposed rate changes, which will likely be considered for incorporation in the next budget planned to be reviewed this spring and approved by June.

Photo Credit: Jacobs (operating firm for Traverse City's wastewater treatment plant)