Important information from the City of Clawson. So, What s Happening With My Water Bill?

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1 Important information from the City of Clawson So, What s Happening With My Water Bill? Although this is a somewhat lengthy document, it will explain the water and sewer bill and some of the history of the charges that are on it. Each year, the City Council sets the new water and sewer rates with the adoption of the budget in May. Since we want to levy the rates properly for the fiscal year, the first bills with adjusted rates are mailed in October to cover the first quarter of the City s fiscal year, which bills for July through September water usage. After those bills are mailed, many residents and businesses have questions about their water bill. Although the City of Clawson handles all of the water and sewer billing internally, the process is still quite the same as other utilities. As a customer, you are billed for your usage based on the reading of your meter. The quarterly usage meter read is then multiplied by the rate for water usage and the rate for sewer treatment. Most of that cost is a pass-through cost from SOCWA via Detroit Water and Sewer and Oakland County Drain System, which sends sewage to the Detroit treatment facility through the George Kuhn Drainage District. We budget our revenue and expenses to break even or have a slight surplus to be placed in reserve for future repairs to the system and to offset rising costs. Any additional revenue we may receive above our annual expenses is used to operate and maintain the water and sewer system. How can my bill be so high? Often when a customer receives an expectedly high water bill, they assume the bill must be a mistake, due to the large amount of water said to be used during the three-month period. The second assumption is that the City has unusually increased the rates to collect more revenue. Usually neither of those assumptions is the case. The first thing our water department will suggest to a customer who inquires about a high water bill is to check the reading against their current reading on meter. There is generally a lapse of about three to four weeks since the meter was read for the billing period. If the reading is relatively close to the reading on the bill, then the water has gone through the meter and the bill is accurate. The DPW will also check the meter reading for accuracy if you call the water department to make an appointment at (248) They can show you a red dial on the meter to verify that no water is leaking when all of the water in the home appears to be turned off. The water department employees will often suggest that the homeowner check toilets for bad seals or have a plumber check for leaks that may cause water to continue running. On extremely rare occasions, the meter reader will pick up a false read and the bill will be corrected. Why is my sewer cost so high and why can t I get a separate meter for watering my lawn? Clawson has a Combined Sewage Overflow system that combines both storm and sanitary sewage from sewage drains on private property and public streets. The reason for a combined system is that years ago a combined sewer system was less expensive to construct and maintain. The biggest drawback to this combined system is that it does not allow for a separate water meter for lawn irrigation in order to save the cost of sanitary sewage. This is because we are required to pay sewage rates based on our water consumption. That means, for every drop of water we sell to customers, we also have to pay for sewage treatment for that same amount of water. That rate is determined based upon our water usage, so that means everyone must pay the sewage rate as a pass-through cost.

2 What are these new fixed charges on my bill? First of all, the City would like to apologize to the residents and water customers in Clawson. There should have been new bills available to show the codes on the back. The City regrets the confusion and will be ordering new bills to put the new preprinted codes on the back. I will briefly explain what each charge is for. The WB is the fixed Water Billing charge and the SB is the fixed Sewer Billing charge. These charges take the place of the former BC or Billing Charge as our fixed cost charges. These are quarterly charges that cover the fixed costs of operating the water and sewer system that we must pay, even if no water or sewer is sold or treated. For many years, the City attempted to cover these costs with the consumption rate charge. The problem with having a fixed cost as part of the consumption rate, is that when we sell less water than we budgeted for, we do not collect enough revenue to cover the fixed costs. The fixed costs are the operating costs that must be paid every day, regardless of the use or treatment of water and sewer. The SD is the Sewer Debt quarterly charge for the State Revolving Fund (SRF) loans that we just started in September that will repair or replace $4 million worth of sewer pipes in Clawson. That s the charge that was mentioned earlier in this informational piece. Many of these sewer lines being repaired or replaced were put in the ground in the 1920s, 1930s, and 1940s and are in desperate need of immediate repair or replacement in order to prevent sewage back-ups into basements and homes. The State of Michigan, through the SRF, authorized low interest loans (our rate is 2.5%) to fund the projects and allow 20 years to pay back the project costs. Currently, we are collecting $4.35 per month - or $13.05 per quarter - for residential customers. It is likely that City Council will put this debt on the ballot for a vote, which would transfer the debt to taxes if the voters approve it. Is there a minimum bill? Whether or not we sell any water or treat any sewage from properties in Clawson, we still have fixed costs to run and maintain the system. Examples of those fixed costs are water main break repair, personnel costs, and general maintenance of the sewage system. For many years, the City of Clawson billed a minimum amount of usage to try to cover the fixed costs of the system. The minimum usage billing was one thousand cubic feet, for both water and sewer, per quarter. For example, back in 2001, the City had a minimum bill of $45.55 per quarter, because that was the rate for one thousand cubic feet of water. At that time, if you did not use any water for a billing quarter, you still had to pay for one thousand cubic feet of water and sewer, which was $45.55, for the maintenance and upkeep of the water and sewer system. With this new fixed billing cost method, even when adding the debt for the recent sewer repair work, the current minimum bill is much lower than in Currently, the combined minimum fixed rate is $ That s 23.6% lower than the minimum bill was 11 years ago. That figure, when calculated per month, is only $11.60 and includes the debt for city-wide sewer repair. Although our pass-through rates continue to increase from Detroit, we have consistently been able to maintain operational increases at or below the rate of inflation over the past 15 years. Each year we try to balance our water and sewer budget at a break-even level. What about unpaid water bills? The biggest difference here in Clawson as a utility provider, is that for decades, the City of Clawson has taken unpaid water bills and rolled the balance into taxes as a lien to the property. Although that process assured that the City would receive the money for the water and sewer bill, it also created a situation whereby the City was paying for water and sewer each month and the resident or business was not paying the bill for as many as 20 months later, through their taxes. As you can imagine, as in any business enterprise, that has created a huge cash issue for operation of the water and sewer system. To resolve this issue, the previous process has now been changed through a water shut-off program. If a water bill is unpaid, at least two notices are sent to the address or the property owner of record notifying them of the delinquency. Rollover to taxes of delinquent bills will no longer be an option to keep water service connected. We are asking our residents and businesses to keep their payments current, or risk the water service being disconnected. If water service is disconnected, a shut-off and reconnection fee of $50 each must be paid, along with the entire amount of delinquent water and sewer with penalties and interest. Because this is a new program, the City can work with those residents that may have a financial hardship and have allowed them a payment plan to catch up their delinquent water bill.

3 What condition is our water and sewer system in? The reality Clawson faces, as a City providing water and sewer service to nearly 5,000 customers, is that most of the water and sewer lines are from 60 to 85 years old. In 2006 and 2007, we had to address the aging lines and subsequently asked for a road and infrastructure bond to replace roads and water lines. That bond was approved by voters for $21.75 million and the work began in 2007 to replace the oldest water lines and the worst roads in the City. Through grants, we also received over $6 million in funding to assist with road and sewer replacement. Much of the oldest water main system has now been replaced and is being funded through the bond issue and repaid through taxes assessed to businesses and residents in Clawson. On top of our own infrastructure system needs, the Michigan Department of Environmental Quality also required a massive retention plan for combined sewer retention, formerly known as the 12 Towns Drainage System. In order to prevent sewage backup and to ensure environmental quality was sustained, 12 communities in this area of Oakland County were required to construct a drain system to contain the increase in sewage flow. Clawson continues to pay an apportioned percentage of that project, which totals $7 million to our City. An additional project included with the drainage project was the North Arm Drain. That drain assisted as a relief drain and impacted five communities, including Clawson. Our portion of that cost was an additional $2 million. The debt for the North Arm Drain will be paid in full in The 12 Town Drainage District name was changed to the George W. Kuhn Drainage District several years ago and we asked voters via a ballot question if they would prefer to pay both sewer debt issues through their taxes, rather than through their water bill. That ballot question passed and the item was removed from the water and sewer bill and was added to taxes beginning in The millage rate for 2012 summer taxes for that combined debt was 2.35 mills. Why is the sewer project creating this new debt? In order to complete a video recording of our entire sewer system in 2006, Clawson completed a water rate study as part of the requirements to apply for and receive a State of Michigan S-2 grant. We received nearly $1 million in grant money to complete that project. As a result of the video project, our engineering firm determined that many sewers needed to be replaced or repaired. To coincide with the S-2 grant program, we were also required to apply for sewer repair projects through the previously mentioned SRF program, which provides low interest loans to do the sewer repair work. For two years, we did not fall within the fundable range of the projects allowed for SRF loans. Early in 2012, we were informed by the State of Michigan that we were in the fundable range. Clawson submitted for an estimated $8 million in sewer project funding and we received approval for up to $5 million in sewer projects. Those projects began in September 2012 and were bid to cost just under $4 million. Due to the timing of the funding, we did not have the opportunity to place this project on the ballot for tax funding, so we placed the repayment of the debt on the water and sewer bill. City Council may decide to place this debt on the ballot for a vote to move it to taxes as early as next year. If there is one thing we can all agree upon, it is that no one likes to pay more for utilities every year. Here in Clawson, we have decided to upgrade our infrastructure before we have a major issue with our water and sewer system. Along with the roads, we are addressing issues that are in desperate need of fixing. It is our philosophy to address the issues before they address us. We do our best to keep the cost of running the system down by charging just enough to meet our costs. As painful as it is to pay higher bills, water is still our most vital utility resource and must be properly delivered, treated, and maintained to keep our water supply healthy, safe, and clean for many years to come.

4 WATER and SEWER BILLING RATES SEWER CHARGES Sewer & Water Sewer & Water Rates per 1000 cu ft Rates per 1000 cu ft OC-GWKDD Sanitary Sewage Disposal Charge OC-GWK Storm Sewer Transport/Treatment Chg Sewer Operating Expense Sewer Depreciation Expense Total Sewer Consumption Charge $ $ Total Sewer Fixed Billing Charge-Per Quarter $ - $ 6.75 Total Combined Sewer Charge 1000 Cu Ft $ $ WATER CHARGES SOCWA Rate Charge Water Operating Expense Water Depreciation Expense Total Water Consumption Charge $ $ Total Water Fixed Billing Charge-Per Quarter $ 7.50 $ Total Combined Water Charge 1000 Cu Ft $ $ DEBT CHARGES SRF Sewer Rehabilitation $5 Million Project Total Sewer Debt Fixed Charge Per Quarter $ - $ Total Combined Charge-Per Quarter 1000 Cu/ft $ $ Avg Monthly Charge Water & Sewer 1000 Cu/ft $ $ *On average each member of a residential household will use 1000 cu/ft of water per quarter.

5 WATER and SEWER BILLING EXAMPLES Comparing the rates from last year and this year, a household with 2 occupants using an average amount of water per occupant would use 2,000 cu/ft for the quarter and the comparative bills would be as follows: Old Rates New Rates Water Usage 2 x $23.00 = $ x $20.00 = $40.00 Sewer Usage 2 x $67.00 = $ x $59.50 = $ Combined Usage Charge $ $ Fixed Water Billing Charge Per Quarter $ 7.50 $ Fixed Sewer Billing Charge Per Quarter $ - $ 6.75 Fixed Sewer Debt Charge Per Quarter $ - $ Combined Fixed Charge Per Quarter $ 7.50 $ Total Amount of Water and Sewer Bill for Quarter $ $ Average Amount Per Occupant per Quarter $ $ Average Amount Per Occupant per Month $ $ Comparing the rates from last year and this year, a household with 4 occupants using an average amount of water per occupant would use 4,000 cu/ft for the quarter and the comparative bills would be as follows: Old Rates New Rates Water Usage 4 x $23.00 = $ x $20.00 = $80.00 Sewer Usage 4 x $67.00 = $ x $59.50 = $ Combined Usage Charge $ $ Fixed Water Billing Charge Per Quarter $ 7.50 $ Fixed Sewer Billing Charge Per Quarter $ - $ 6.75 Fixed Sewer Debt Charge Per Quarter $ - $ Combined Fixed Charge Per Quarter $ 7.50 $ Total Amount of Water and Sewer Bill for Quarter $ $ Average Amount Per Occupant per Quarter $ $ Average Amount Per Occupant per Month $ $ *As you can see from the example above, the cost per quarter is $6.30 higher for the consumption of 2,000 cu/ft for one quarter and $14.70 lower with the consumption of 4,000 cu/ft for the quarter. The impact on a residential water and sewer customer is minimal or may even result in a lower bill than last year depending on usage.

6 WATER and SEWER BILLING CODES Codes on Water and Sewer Bill Charge Amount PB = Previous Balance on Bill Previous Balance This is any amount unpaid from a prior bill including penalty and interest WA = Water Consumption Amount Charged $20.00 Per 1000 cu/ft This covers the City cost for water and the operating cost of the department SW = Sewer Consumption Amount Charged $59.50 Per 1000 cu/ft This covers the City cost for sewer and the operating cost of the department WB = Water Billing Charge-Fixed Amount $15.00 Per Quarter This is to cover the fixed costs of operating the Water Department SB = Sewer Billing Charge-Fixed Amount $ 6.75 Per Quarter This is to cover the fixed costs of operating the Sewer Department SD = Sewer Debt Charge-Fixed Amount $13.05 Per Quarter This is to cover the City-wide sewer repair project that began on 10/1/2012 These rates are for residential water and sewer customers with a water meter up to 1" in size. All customers who have a meter of over 1" pay a multiplier for the fixed portion of theses costs. The bigger the water service meter, the higher the multiplier is. The reason that the sewer rate is so much higher than the water rate is that the treatment cost for sewage is three times that of the cost of the water. Clawson has a combined sewer overflow system that combines both sanitary and storm water into one system for treatment. The sewer flow is measured by meters and we are billed accordingly. Clawson also pays sewer rates based on the amount of water that we consume. That is why we cannot offer a cheaper rate for water irrigation for sprinkler systems. We pay for sewer treatment in our rates whether it ends up in the sewer system or not.