Metro area residents whose attention was focused on the zoo issue last week may not have noticed, but the Detroit water department, like the rest of city government, is cruising dangerously close to treacherous financial shoals.
To make a long story slightly shorter, here are the basics: The Detroit City Council needed to approve an increase in water rates for the coming year on March 1 to have the new prices go into effect by the start of the coming fiscal year. According to Victor Mercado, head of the city's Water & Sewerage Department, the council needed to approve rate increases of nearly 6 percent for the city and its suburban customers. By his estimate, for every week that passes without a rate increase, the water department will lose about $1.1 million. Flushing that much money down the toilet doesn't exactly seem like a good idea for a city hemorrhaging red ink.
The other issue, he said, is the potential for missing bond obligations. That could have two possible results, neither of which is good: An increase in the cost of borrowing money and $30 million in penalties.
"We urge you to please pass rates," Mercado told the council. "We know that other cities have run into major problems when they didn't approve rates."
After all the debate, council declined to pass water rate increases by a 5-4 vote.
The reason?
Earlier in the week, Ted Phillips, executive director of the Detroit-based United Community Housing Coalition, told council that 40,000 Detroit households had their water shut off last year because of their inability to pay their bills. This roused council's ire, fairly enough. But some members refused to approve new rates unless a water affordability plan was tied to any proposed rate increase. The council had called for the formulation of such a plan a year ago, but city lawyers never got around to creating one. Council is now saying no plan, no rate approval — something it could have conceivably signaled before it came down to crunch time.
The city's lawyers are looking into creating an affordability plan that wouldn't have higher-income residents subsidizing those with lower incomes. Otherwise, such a plan could be considered a de facto "water tax," which would violate state law. The city's Law Department promised to have something in front of the council by April 15.
Not fast enough, said Councilwoman JoAnn Watson. She said she wouldn't vote to approve rates until an affordability plan was presented. Four other council members concurred.
Mercado left the auditorium before we could ask about his reaction to the vote. But his beet-red face spoke volumes. We did get to talk to Councilwoman Sheila Cockrel, who said she supports having an affordability plan but voted for the rate approval to meet financial obligations. Her take is that this inability to make the most basic decisions for the water department will give ammunition to outside interests already looking to gain control of the city's water department.
"It sends an unfortunate message to some of the forces in Lansing that want to take it over," she said.
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