Watervliet Township special meeting heard presentation on sewer rate study

Timothy Warren, Associate; Financing Specialist from Jones & Henry Engineers, LTD, gave a presentation to the Watervliet Charter Township board and audience of four on Jan. 10, 2024 regarding the sewer rate study. The study was recommended to meet operations, maintenance, replacement, capital improvement and debt service expenses of the sewer utility to allow it to operate in a sustainable manner.

The sewer rate model was developed for short-term (5-year) rate setting and long term (20-year) planning purposes. These time frames are consistent with the Michigan’s Asset Management Program requirements.

Operations and maintenance expenses are projected on 4% annual inflation. And the contract expenses (Paw Paw Lake Regional Waste Water Treatment Plant) are projected based on 6% annual increases for 2025 through 2028 and a 4% annual increase for 2029 through 2044. Capital improvement and replacement expenses are projected based on the capital improvements identified in the township’s Wastewater Sewer System Asset Management plan dated May 27, 2021. Debt service for the previous pump station upgrades is included. The outstanding debt will be paid off by 2027, actually Sept. 11, 2026.

Reserves are provided, as required by ordinance, for the following purposes; Operating Reserve – three months of operations and maintenance costs. Contract Payment Reserve – three months of contract payment costs. Replacement Reserve – Estimated replacement cost for assets with a useful life of 20 years or less. Improvement Reserve – Any remaining funds after the foregoing requirements are satisfied. Debt Service Reserve - Total annual debt service payment. There will be no projected debt service after 2027.

In calculating all the above criteria for cash-flow, rates are projected to increase by 2.6% annually beginning in 2025. If you calculate all the above criteria on an accrual basis which includes depreciation, the rates are projected to increase by 4.4% annually beginning in 2025.

In the study report presented to the board, Warren pointed out things to consider; for example, what and how much of the Paw Paw Lake Regional WWTP improvements are expected now and in 2029. Right now, 80% of the sewer plant has been replaced or upgraded. There will be a need in the near future to replace the sludge tank container. Last year’s quote for a tank was one million dollars, but now a tank is $2.5 million to replace.

By having a fund reserve will help to not borrow as much for capital improvements and puts the township in a better position to avoid a 25% increase to users later. The reserve also protects against an increase cost for weather related water that gets in the sewer system, or another pandemic, or a recession.

Board’s thoughts going forward

In their discussion concerning the findings, the board talked over the need to inspect the sewer system in sections for cracks and faulty manhole covers that let rainwater infiltrate the sewer system and to consider lining the sewer system. Also, fix any major problems now and schedule work that needs to be done.

Additionally, the board discussed if they should consider the 2.6% rate increase annually and explore doing a smoke test to find sump pumps and gutters illegally connected into the sewer system. If sump pumps are discontinued, what is the plan for excess water that would accumulate on a property? Are their grants to help with investigation or replacements?

It was brought to the board that Michigan has a Stormwater, Asset Management, and Wastewater (SAW) grant program that allows municipalities to apply for a $2M maximum grant; the terms require 10% match for the first million dollars and 25% match for the second million dollars. This grant was established to help municipalities develop, update and improve asset management plans for their wastewater and storm water systems. This could be used for televised manhole and sewer review to find cracks in the sewer system.