Port Huron faces hike as sales sag
Port Huron - Port Huron could double its water and sewer fees over the next five years as it struggles to pay for its massive, 15-year rebuilding of the city's infrastructure.
That grim news was delivered Monday night when a consulting firm provided City Council with a report on water and sewer rates. It found the city is losing millions of dollars as local industries close their doors or curtail operations, leading to a sharp decrease in water sales. The report called for a 25.4% boost in water and sewer fees July 1 followed by increases of 25.5% next year, 10.5% in 2009, 10.4% in 2010 and 10.3% in 2011.
By the end of the five years, a Port Huron family using 10,000 cubic feet of water a year - a relatively typical amount - would see its bill jump from about $580 to $1,225 a year. Customers living in four neighboring townships could expect somewhat smaller although still sizable increases.
"The rate increases proposed by the consultant are not inevitable," City Manager Karl Tomion said. "However, the (city) cannot continue to provide all the services our citizens currently receive from our existing revenue sources without a rate increase of this magnitude."
Council members quickly endorsed Tomion's call for a campaign to "engage our citizens and educate them on what has led to this." He said residents would be asked for their opinions on how much to raise rates or where to make cuts in existing city services.
Given an ultimatum
When Port Huron built its original sewer system, storm drains often were plugged into sanitary sewers. About 50 times a year, rainfall or snowmelt would cause untreated sewage - 250 million gallons in an average year - to overflow into the St. Clair and Black rivers. A decade ago, state environmental officials gave Port Huron a 15-year deadline to stop the spills, either by building sewage lagoons or by separating sanitary and storm sewers.
City officials embarked on an elaborate $185 million effort to separate the sewers, rebuild streets and replace aging water mains.
Over the past nine years, Port Huron has spent $135 million. It has installed 105 miles of new sewers, replaced 45 miles of water lines, rebuilt 58 miles of streets and reduced the number of sewage-overflow sites from 19 to six. The area served by combined sewers has been cut from about 2,400 to 500 acres.
Thus far, 30 separate projects have been completed. City officials said the overall effort is running about $800,000 under budget. Port Huron expects to spend about $50 million in the next five years to complete the job.
Rates keep climbing
In 1998, as the project got under way, then-City Manager Larry Osborn announced plans for a 50% rate increase. After public protests and recall threats, the increase was lowered to 22.4%. Rates have risen annually ever since, including boosts of 6.5% for each of the past five years. All told, customers are paying not quite $180 today for service that would have cost $100 a decade ago.
And if the recommended increases were to take effect, Port Huron water and sewer rates would be nearly four times as high in 2012 as they were in 1997.
Tomion noted the new sewers and water mains should serve the city for the next 75 to 100 years.
"It seems unfair to have the current residents pick up the entire bill," Councilman B. Mark Neal said, suggesting the costs might be spread over a longer period.
Water sales plummet
Tomion said the looming financial crunch has two main causes:
A sharp decline in water usage. According to the report by Black & Veatch consultants, the city is selling 25% less water today than it did five years ago. Residential usage has fallen 9%, while industrial usage has declined a whopping 54%. Several industries have closed in recent years, including Blue Water Fiber in 2001 and London's Dairy and U.S. Manufacturing, both in 2002. Tomion noted several other manufacturers either have curtailed operations or undertaken conservation efforts.
"As rates go up, consumption goes down," he said.
The city has issued bonds and gone deeply into debt to raise money for the project. The cost of servicing that debt is expected to rise from $8.1 million last year to $12.1 million in 2012. Debt service will remain about $12 million a year until 2020, when it is scheduled to start declining. Officials expect to pay the last bill in 2031.
Tomion said a steady reduction in federal and state assistance has added to the city's struggles.
Thirty years ago, he said, Washington and Lansing would have picked up 75% of the cost for a mandated project. Port Huron also has lost about $1 million a year in state revenue-sharing funds that it had been transferring to the sewer project.
Road to bankruptcy
Port Huron is on course to deplete its sewer and water funds within two years. If nothing is done, Tomion said the city would deplete all of its reserve funds by 2012. "We would face insolvency at the end of these five years," he said.
If that were to happen, he said the state would take control of the city and mandate rate increases.
Tomion said he became aware of the situation last summer when he was doing "my due diligence" and deciding whether to leave his position as city manager of Midland, a larger city, to return to his hometown.
He noted that his predecessor, Tom Hutka, warned of declining water sales and growing debt service in annual budget messages issued in 2004, 2005 and 2006.
"No one seems to have picked up on it, including the media," he said. "It's a surprise to most people I've spoken with."
Tomion said the Black & Veatch report and other information will be posted on the city's Web site - www.porthuron.org.
Councilwoman Laurie Sample-Wynn expressed dismay over the prospect of rates rising more than 50% in the next two years. She urged residents to study the issue and join the discussion on what the council should do.
"Tell us how you want us to handle that," she said. "It's going to be a sacrifice one way or another."
Townships also affected
Ryan Nagel, the consultant who delivered the Black & Veatch report, noted Port Huron will face another significant expense in 2012 when the sewer project is wrapped up. He said the city's wastewater-treatment plant is at the end of its "design life" and will require major work.
Richard Cummings of the Thomas Edison Casino Committee recalled speaking at a council meeting nearly six years ago and observing that a casino would provide the city with an estimated $5 million a year to help pay off the sewer project.
Repeated efforts to win congressional approval for the casino have failed. Cummings called on the community to "put pressure on the Michigan delegation to get this done."
Port Huron has one of the nation's highest unemployment rates, he observed, and its residents can ill afford spiraling water and sewer bills.
The city sells water in four townships - Fort Gratiot, Port Huron, Kimball and Clyde - where residents are billed 150% the rate paid by city residents. The report recommends annual increases of 14.9%, 13.9%, 12.7%, 11.8% and 11.5% in township water bills.
Tomion said sewer customers in Fort Gratiot, Port Huron and Kimball townships could expect much smaller increases than those being proposed for city residents. A breakdown on proposed township sewer rates was not available.
Mike Connell is a reporter and columnist for the Times Herald. He can be reached at (810) 989-6259 or mconnell@gannett.com.
By MIKE CONNELL, Port Huron Times HeraldIn your voice
