Cool (and not so ) Clear Water: The Politics of Water Policy in Saginaw County

Posted In: Politics, Local, News, Investigative Reporting, Local,   From Issue 626   By: Mike Thompson

16th November, 2006     0

With the elections over, we can get out of the mud and into the water.        

Your water bill. And water supply.

They mean more in Saginaw County than you may think - especially in the City of Saginaw, which controls the metropolitan water prices and supply for 17 suburbs and outer burbs.

Many local leaders describe water policy as the Number One issue that will affect our everyday lives in mid-Michigan, far more important than the bogus flash points you saw on TV in the muddy stank of this past election.

City Hall charges each outlying community for wholesale water prices from a 65-mile pipeline to Lake Huron's shore near Au Gres. Major changes took effect this month, displayed in a chart on these same pages of Review Magazine, although you may wait a while to see a difference in your bill.

Meanwhile, bargaining over supply - the amount of water that City Hall will provide each community for development - is moving at a slow pace.
And the impact goes far beyond water itself.

Will police & firefighters be there to respond in a time of need? Will Saginaw have resources for youth recreation, or for tearing down abandoned homes? Water revenue could help pay the costs in a new sort of way.

And what about jobs? Economic development requires water, first and foremost.

1) What are your views? Should the City of Saginaw continue providing water for development of more housing subdivisions in Freeland and more retail outlets in Birch Run? Is this a positive form of 'regional cooperation', or rather a self-destructive conduit for 'urban sprawl'? And when they get the water, should those outlying areas start giving the city a little bit of budget profit for public safety, for recreation, for housing?
2) Beyond your views, will you push public officials to act? The water bargaining since the late 1990s has crawled at a pace akin to Middle East peace talks. Money for consultants and attorneys, from the taxpayers and ratepayers of the various communities, has surpassed $500,000. There seems scant sense of urgency to settle the water questions that will play a major role in our region's future.

Seven Years, One Contract
 
Saginaw city leaders have stamped only one water agreement after all this time. That's with Thomas Township, and it happened only because of a strict deadline to assist Hemlock Semiconductor's expansion in Shields. Saginaw, as a 'distressed city' under state tax abatement law, was able to offer a far bigger break than Thomas Township could have done on its own.

Semiconductor annually will share more than $100,000 of the tax break with Saginaw. This is an example of the tradeoffs in city leaders' strategy. The jobs will go out of town, but the budget (mostly for public safety) will get some cash. In other words, urban sprawl is promoted at a price.

Let's say that down the road, City Hall manages to gather about $1 million per year in exchange for supplying water to various suburban development deals such as Semiconductor. This revenue would equal about 1.5 mills in city property taxes, helping to offset the 6-mill public safety levy that city voters approved last May.

Of course, some of Saginaw's neighbors don't want to hear this. Subsidize the city? No way. But guess what? City leaders ay they have been subsidizing the outer areas, through all these years, with cheap water. They say its time they get some cash back in return.

Boosting the Budget

Many local communities and school districts face tough times, but the City of Saginaw is especially hard up.

Police? The city has less than 100 cops, compared to 154 back at the turn of the millennium. The 6-mill tax simply prevented the number from dropping closer to 70.

Fire? Fewer than 70 firefighters are in the ranks, compared to more than 100 a few years ago. City Hall barely sustains four 'quadrant' fire stations. There were once 11.
Youth recreation? There's still a tiny subsidy of $25,000, but it's a far cry from the $800,000 annually in the recent past. This is during a tragic year with eight teenage homicide victims so far.

Abandoned housing demolition? Saginaw has about 500 vacant structures, the most ever, even after an arson spree that has turned a couple dozen to cinders. We can find up to eight eyesores on one city block.

To cope with these troubles, city leaders have a hard time figuring out where to turn.
Federal & State aid continues to dry up. Local taxes now are tapped out with those public safety 6 mills from last May, tacked on with the Saginaw School District's construction bond issue.

So we come back to water, and it's potential for city revenue.

This basic need is so essentially fulfilled here in Mid-Michigan that we take it for granted. We don't associate water with politics. But there's politics involved, big time.
Saginaw built the Waterworks near Hoyt Park in 1929 for water treatment, but the supply still came directly from the polluted river and households still went to corner pumping stations.

City Hall, in cooperation with Midland, installed the Lake Huron pipelines back in 1949 for what has been hailed as 'The World's Best Water'. Outlying communities - ranging from Buena Vista to Birch Run, from Freeland to Frankenmuth - also became customers. This today amounts to about 60,000 city residents and another 120,000 from outlying communities.

Some of us in Saginaw County drink 'city water' from the tap. Others among us perceive we get better quality from plastic bottles that carry soda pop prices. But we all rely on city water for our lawn and garden care, for our car washes, for our swimming pools, even ultimately for our baths & showers & toilet flushes.

The issues today?

1) How much should the water cost? Saginaw city residents have gotten the best deal through the years, because Saginaw owns the water system. But now city residents have to pay for replacement of old pipes. And how much should everyone else pay?
2) How should the city manage the supply of water? The Waterworks can receive and treat about 50 million gallons per day, and average use is about 30 million gallons. Should the outlying areas get as much water as they want, for as much development as they want?

'Uphill' in the Saginaw Valley?

We will start with prices.

The City of Saginaw historically charged two prices for water. Suburbs and outer burgs all were paying twice as much as the in-city rate.

By and large most everyone was happy from the 1950s and '60s all the way into the 1990s. Saginaw leaders had used their Great Lakes access to create one of the nation's best and most inexpensive fresh water delivery systems. Even at double the in-city cost, the region's outlying areas were getting a better deal than most other communities across the United States.

But then some protests started. Administrators from the inner suburbs - most notably Jerry Francis in Saginaw Township, who died last year - asked why city leaders were charging the same out-city rates across the board.

Results didn't come until January 2004, and then the anxious outlying customers were in for a shock tied to what seemed like an odd question: Is the Saginaw Valley really a valley?

Consultants calculated not only the distance that was an issue with Francis, but also 'elevation'. They asserted that water not only had to go a lot of miles to the small towns - such as beyond Saginaw Township to Tittabawassee Township - but that the water also had to go 'uphill'. In other words, Freeland was uphill from Saginaw Township.

Jaws dropped when the consultants said a long overdue 'cost of service' adjustment would more than double the prices for such outlying areas as Tittabawassee, Birch Run/Taymouth and Frankenmuth. The Waterworks near the river is about 600 feet above sea level, compared to 630 feet for the quote-unquote 'Saginaw Valley' outlying areas. How could 2 feet per mile make such an impact on water prices? Nonetheless, the consultants insisted that uphill is uphill.
Price Study Sparks Protests

Ten of the outlying communities formed a review group, the Saginaw Area Intermunicipality Water Committee. They raised about $100,000 to hire their own attorney and consultant. The chairman remains Ken Bayne, even though Kochville Township voters recalled him as supervisor in August and even though Kochville was not among communities that faced the huge increases in water prices.

"Without the efforts of our group, the ridiculous rates imposed by the first city study probably would still be in place," Bayne told Review Magazine. "When you look at the arbitrary nature of the different studies and proposed increases, there will be an ongoing need for townships to continue to monitor the city's rate-setting. That's why I was acting to protect Kochville Township."

The consultant for the Intermunicipality Committee ripped the city consultant's water price study. In response, city reps took a second look and acknowledged a pair of problems.

First, the heights of the various water pumps were not factored into the city consultant's calculations for the uphill elevation factor. This may seem like no big thing, but when 'distance elevation' was measured at 2 feet per mile, the height of the pumps came into play.

A second error was stunningly simple. In calculating 'maximum daily use' - a key factor in setting new prices - city workers went to pump stations and recorded daily numbers. On Mondays, they failed to account that they also were counting the weekend off days of Saturdays & Sundays. This made many dollars of difference in the escalated water bills for hundreds of families in the outlying areas.

City Hall hired new consultants who decided 'elevation' was a false factor that should not have been considered in the first place.

Number Rise, Then Fall

When city leaders finally made adjustments this month, Tittabawassee's water-price hike dropped to 15 percent instead of the original 190 percent. Frankenmuth's increase now stands at 7 percent instead of 112 percent. Birch Run actually gets a 4 percent decrease instead of a 170 percent boost. Obviously, these are huge changes.

In contrast, the new city study is less favorable for wholesale water prices to the inner suburbs. Saginaw Township's reduction is 5 percent instead of 24 percent. Thomas Twp. Faces a 26 percent increase instead of the original 8 percent decrease.

Saginaw city residents face the largest 'cost of service' increase, 100 percent. Some city residents are complaining that their own consultants hit them harder than residents of non-city areas. Tom Darnell, city public services director, says this is because many of the city's 300 miles of pipes are a century old, but the city was replacing less than one mile per year. Catch-up work is required to replace more pipes, and it will come at a cost. The suburbs have newer pipes.

A point in the City of Saginaw's favor is that even when water prices doubled to replace those old pipes, rates still will remain lower than costs in the suburbs. The main burden on a city ratepayer's bill is not for water supply, but for sewage retention basins that the federal & state governments dictated back in 1989 in response to Bay County complaints that Saginaw was sending polluted water up the river. So-called 'water bills' are actually water-sewer bills. (Editor's Note: Bay City was able to obtain federal grants to assist with the multi-million dollar cost of replacement pipes when they were available, but Saginaw did not even have a grant writer to apply for federal assistance when the window of opportunity was open).

Tittabawassee Manager Brian Kischnick says water talks eventually produced success. "We finally came up with a pretty good water-rate study based on a lot of peer review," says Kischnick, a key member of Ken Bayne's Intermunicipality Committee. "The process showed how subjective the various rate studies could be, even when done in context with Michigan law."

Tom Darnell agrees.

"We brought in Raftelis (the new consultant) because there were some mistakes and things that we tried to fix," Darnell says. "The elevation changes in our area really were not enough to justify proposing such major changes in the price of water. We're not like the Detroit area, where there can be hundreds of feet of difference in the elevation."  

Jerry Francis' home community of Saginaw Township will now get a smaller rate break compared to the city's first study, but Manager Ron Lee says he understands.
"The city officials all along have simply been trying to 'right size' the water rate structure," Lee says. "We support their efforts to get a more fair distribution formula and a more fair system of rate changes. When you put a large number of engineers and technical geeks in the same room, they will find different ways of looking at things, but in the end the city's formula for water prices makes sense. We would like to have gotten a rate-study break in Saginaw Township, but I'm just trying to be objective."

In the end, says Kochville's Ken Bayne, the City of Saginaw should not have needed two consultants to review water prices and water supply policies.

"This all led to a lot of unnecessary headaches for everyone involved," Bayne says.

The Next Chapter: Supply

State law historically has prevented core cities like Saginaw from making profit on water sales to suburbs & outlying areas. Any surplus had to go back into the water system, not into a core city's general budget for public safety and other services.

Then a decade ago came a new state law, Public Act 425, in an effort to help struggling cities, allows profits to supply water for new developments such as Semiconductor, housing subdivisions and retail stores. City leaders still can't make money from regular water sales, but they now can make a profit from new projects.

The Semiconductor-based contract in Thomas Twp. Is our region's only firm Act 425 agreement, but City Hall has two other tentative pacts. One is with Tittabawassee for new housing. The other is with Birch Run for a new Meijer store and other retail expansion.

But if you buy one of those new homes in Tittabawassee, you will face a $2,000 water hook-up surcharge. If you get a job at that new Meijer in Birch Run, you will find yourself paying the city's .075% nonresident income tax. You may live in 'sprawl' territory, but under the terms of these new agreements you still will subsidize Saginaw city government through Act 425. Water supply is the reason.

Jeff Kingzett, Birch Run's former village manager, received notice in April 1999 that Saginaw City Hall was ready to begin water talks. He started on an office chalkboard to record the days of slow bargaining. By 2004, when he departed, he said a 'snail's pace' in water supply talks had caused his chalkboard count to exceed 1,800 days. He said progress was blocked for "a new Meijer, other big-box stores, added commercial, added tourism and entertainment, and 1,400 units of housing."

Kingzett made an analogy to an old-time TV game show.

"You can call me Monte Hall," he said. "Let's make a deal."

Birch Run now has a tentative water pact, and the Meijer store is slated for construction on Dixie Highway at Birch Run Road.

Throwing Down the Gauntlet

Some outlying leaders are taking tough stands. Ken Bayne says Kochville leaders, despite their differences, "never" will agree to share Act 425 water revenue with Saginaw. And Frankenmuth's City Council has invested nearly $100,000 with a consultant to explore cutting ties with Saginaw's system and getting water from somewhere else, says Manager Charlie Graham.

Saginaw's adjustment to Frankenmuth's water rate, back down to 7 percent, has calmed some of the sentiment to withdraw from the Saginaw water system.

Still, the question of Frankenmuth Act 425 development agreement to share water supply revenue with Saginaw continues to loom large.

"People in Franknemuth simply would not accept it," Graham says. "Our citizens at first were concerned about their water prices, but I don't think initially they understood about the Act 425 supply agreements and the long-term implications for sharing revenue with Saginaw."

The challenge is tough, says Graham, because precedents are set through Saginaw's permanent or tentative water agreements with Thomas, Tittabawassee and Birch Run.
"Saginaw can't exactly come to us and offer more of a compromise for us," Graham says, "because then they would have to go back and face the entities with the previous agreements. I'm assuming that there' snot a whole lot more they can do."        

And so water supply will remain Saginaw's top issue for the jobs & economic development that could make a big difference in our lives.

Your Water Bill

Outlying communities rely on Saginaw's city water system. Consultants in recent years started to look at a more specific 'cost of service' for each community.

Saginaw's first water-price study in 2004 contained huge increases for the outer suburbs based on 'distance elevation' to pump the water. A follow-up study revoked the factor of 'elevation' and sharply reduced the price increases for the outer areas.

Leaders of Saginaw neighbor communities endured these various studies and changes for water prices. We are showing you the results and how they changed form one study to another. Take note of the huge changes for distant places such as Birch Run, Frankenmuth, Thomas Township, and Tittabawassee Township. The numbers below are based on changes in basic prices that stared with the 2003 rates, and based on average use of 7,000 gallons per month.

The prices you see below are only for water. Your bill also includes sewer charges.
November '06 increases reflect the final word in fierce water contract bargaining that gave major benefits to the outlying areas.

City water prices start lower because the city owns the water system, but the in-city 100% increase is rooted in a need to replace pipes that are older than those in the suburbs.

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