July 17, 2013 - It's official Oxford Township sewer rates are going to double beginning Oct. 1 in order to stop the system from operating at an annual loss of approximately $900,000.
Last week, township officials voted 7-0 to increase the non-metered sewer rate from $86 per Residential Equivalent Unit (REU) every six months to $86 per REU every three months.
Basically, the total non-metered cost for sewer services will jump from $172 to $344 per REU annually and all of the township's 3,484 sewer customers will be billed four times per year instead of twice.
An REU is a unit of measurement that's equal to the average water/sewer usage of one single family home. A single family home is assigned one REU, while a business, like a restaurant or car wash, may be assigned multiple REUs.
The metered sewer rate, which is primarily paid by commercial customers, was not addressed, so it will remain at $23 per thousand cubic feet (mcf) of flow.
According to Clerk Curtis Wright, the township only has 96 customers who pay for sewer use based on metered flow.
Given the county charges the township $20.62/mcf, Wright said there's a $2.38 "cushion" in the township's rate, so an increase isn't needed at this point.
Officials also voted 5-2 to increase the sewer tap fee the cost to connect to the system from $2,500 to $3,500 per REU beginning Jan. 1, 2014.
Township officials raised the usage rates in order to meet the sewer system's current operating expenses.
"We're paying out more than we're collecting," explained Trustee Jack Curtis, who chairs the Water and Sewer Committee.
"The reason we're doing this is we need to take in enough money to pay our debt," said Supervisor Bill Dunn. "We're not making any money. All we're doing is paying the bill."
Last year, the township was charged $1.6 million by the Oakland County Water Resources Commissioner's Office for the operation and maintenance of its sewer system. The county basically functions as the township's Department of Public Works.
Factor in depreciation of the sewer system's infrastructure, which amounted to $195,255 and is considered an expense, and it cost about $1.8 million to operate the township sewer system last year.
The problem is only $899,169 in payments were collected from sewer customers, so the system operated at a loss of $897,703.
"(Customers are) only paying for half of the sewer (cost) through the usage rate," Curtis said.
"We're not increasing it so we can sock money away," Dunn said. "We're increasing it so we can (meet) our obligations."
Granted, the township, as of the end of 2012, had about $3.9 million in reserves in its sewer fund.
However, Dunn noted losing $900,000 annually will quickly eat up those reserves.
"It's not going to take long (before) you have nothing," he said.
Dunn explained the township needs those reserves to cover "any future repairs" the sewer system may require.
"If we have a major break in the system (and the reserves are gone), where are we going to get that money (to fix it)?" he said.
Officials raised the tap fees by $1,000 per REU in the hopes of covering the existing and proposed bond debts associated with the Oakland-Macomb Interceptor (OMI) rehabilitation project and improvements to the Clinton-Oakland Sewage Disposal System (COSDS).
"It captures funds for what's coming up," Curtis explained.
The township's sewage travels through the OMI Drain on its way to Detroit for treatment. Oxford's sewage gets to the OMI Drain via the Clinton-Oakland system.
The township's share of the principal for these existing and proposed debts associated with the OMI and COSDS projects amounts to approximately $4.7 million.
Factor in interest rates ranging from 2 to 5.5 percent and the township's looking at an average total of approximately $310,000 in annual debt service payments over a 20-year-period.
Due to the sewer fund's healthy reserves, officials felt comfortable increasing the tap fee to help pay for upcoming bond debts instead of further raising the usage rate or creating a new $13 per REU quarterly capital charge.
The hope is that new construction and new sewer customers are "going to make up that difference (to) where we don't have to raise (rates again)," Dunn said. "We are going to keep an eye on it."
In a previous Water and Sewer Committee meeting, Dunn noted the township is expecting to have 30 to 50 new sewer customers this year based on building permits.
The township has also given preliminary approval for the addition of 52 new detached condominiums in The Hills of Oxford development. A sewer tap fee would be charged for each unit.
Treasurer Joe Ferrari felt the $1,000 per REU increase to the sewer connection fee wasn't enough, so he made a motion proposing it be raised by $1,500, making it a $4,000 per REU charge to hook up.
"I think $3,500 (per REU) is too low," he said. "I think it should be around $5,000 (per REU), but I put $4,000 (in the motion) as a compromise."
Ferrari's motion found no support, so it died.
CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.