As CSO, infrastructure costs rise, council increases rates

AVERAGE WATER/SEWER BILL TO RISE BY $7.46
 

 

MANISTIQUE – City residents can expect an additional rate increase for water and sewer services beginning in July. The increases were approved as part of the city’s budget during Tuesday’s online meeting of the Manistique City Council.

According to a memorandum from Coleman Engineering Company, the city’s retained engineering firm, the rate increases are a result of the city’s ongoing combined sewer overflow project. The Phase 1 and Phase 2 Combined Sewer Overflow projects aim to eliminate the city’s combined sewer system, which allows diluted sewage overflow from a high snowmelt or significant rainfall to be transported to the wastewater treatment plant. Currently, city’s CSO is approximately 65 percent complete, due to past infrastructure projects.

Phase 1 of the CSO project, funded by approximately $6 million in USDA – Rural Development loan and grant funding will involve infrastructure work on the east side of town. Streets included in the water main and sanitary sewer replacement of Phase 1 include Oak Street, Cherry Street, and Range Street.

Oak Street will be section one of Phase 1 – Range Street and Cherry Street will be section two, and Arbutus Avenue and Gero Avenue will be section three

Phase 2 of the CSO project, funded by $10 million in USDA Rural Development loan and grant funding, involves the replacement of the current siphon, a type of pipe that uses atmospheric pressure to transport wastewater, under the Manistique River.

“The required closure of the city’s last remaining combined sewer overflow and annual cost of living increases to cover increasing costs associated with operating the city’s utility system have dictated required rate increases in recent years,” the memo reads. “Current USDA – Rural Development projects are separated into two phases. The Phase 1 project has generally been scoped to eliminate inflow from combined sewer catch basins on the east side of the river. The Phase 2 project has targeted the replacement of the existing sanitary sewer siphon connecting the east and west sides of Manistique in order to increase flow capacity to the water plant.”

The memo noted that, in 2017, Manistique utility rates were increased to cover the loan portion of the USDA-funded Phase 1 project. However, the one and only bid received for the Phase 1 project came in at $10.3 million – far above the allotted $4.7 million available for construction.

“The general consensus was the one bid received was not responsive with prices significantly higher than regional market prices. Even though several other contractors looked at the plans, their response was the Manistique work in rock and groundwater was too difficult in comparison to other available work,” the memo explained. “The general comments we hear were that the project should be broken into smaller projects to lessen the overall financial risk if digging conditions are more difficult than they estimate.”

When the project was rebid in October 2019, Coleman eliminated the following sections from the project: three blocks of Arbutus Street; one block of Steuben Street; one block of the Gero cutoff road; and one block of the alley south of Main Street.

“The remaining project was broken into two separate construction bids,” the memo stated. “Three bids were received on Oct. 17 2019 from construction contractors for the Oak Street Project. The low bid was received from FA Industrial Services, Inc. in the amount of $3.9 million. Two bids were received on Oct. 23, 2019 from construction contractors for the Cherry and Range streets project. The low bid was received from Woleske Construction Company, Inc. in the amount of $1.8 million.”

According to Coleman, the combined cost of the low bids, even with the reduced project scope, still exceeded the allotted funds available for construction.

“The city has received subsequent funding from USDA Rural Development for the additional funds needed to complete the … projects. Utility rates are required by USDA to be adjusted so bond payments can be covered for the terms of the notes,” the memo explained. “The city has already implemented rate increases necessary to cover bond payments associated with the CSO Phase 2 project in 2019,” because the CSO Phase 2 project has not yet been bid out, a portion of the rate increases instituted for that project were used to secure the subsequent USDA funding in order to proceed with CSO

Phase 1.”

Another obstacle was met, however, when a main sanitary sewer pipe on the city’s westside collapses under U.S. Highway 2 last fall.

“Emergency repairs were completed at a cost of approximately $1.1 million,” the memo stated. The city has been working with USDA Rural Development in an effort to secure grant and loan funding to cover these costs. Recently, USDA Rural Development has offered the city a $300,000 grant and a $800,000 loan.”

To accommodate both the high construction costs of Phase 1 and the emergency repairs completed in fall, Coleman stated that proposed rate increases in the upcoming fiscal year were calculated.

“The CSO Phase 1 and CSO Phase 2 projects will not fully address the improvements required in order to comply with the state’s Combined Sewer Overflow Control Program,” the memo explained “At this time, city is beginning discussion with USDA Rural Development for a CSO Phase 3 project. A CSO Phase 4 project is also in the planning stages. Future rate adjustments are likely to be required in order to finance construction required to close the city’s last remaining combined sewer overflow and comply with the state of Michigan’s requirements.”

During Tuesday’s Manistique City Council meeting, Manistique City Manager Sheila Aldrich noted that the U.S. Highway 2 sinkhole repair significantly affected the sewer budget.

“The cost of the repair on U.S. 2 was about $1.1 million and we had hoped … for a 75 percent grant from Rural Development, but I was on a call with the state the week before last and they said that that (match amount) has decreased significantly,” Aldrich explained. “It’s almost switched to a 25 percent grant, instead of a 75 percent grant.”

Corey Barr, Manistique water/ wastewater superintendent, explained that the proposed sewer rate increase “is going to account for, basically, the CSO Phase 2 dollars that we used to shore up the overage of bid costs in CSO Phase 1, plus the U.S. 2 emergency repairs.”

“That said, we ended up, from last year to this year, with about $105,000 shortfall,” he said. “In order to remedy that, we have to adjust rates accordingly.

It (the rate increase) will be similar for water, but sewer is taking a bigger hit than water.”

Barr said that on the average resident’s water/sewer bill, the increase will be approximately 6.62 percent increase or approximately a $7.46 increase per water/ sewer bill.

“It will be an additional $2.13 on water and an additional $5.33 cents on sewer,” Barr said. “The reason the sewer is so much higher than the water is because of that U.S. 2 repair … we’re going to have an additionally loan debt of approximately $800,000.”

Mayor Kimberly Shiner noted that families could equate the increase to a few gallons of milk each month.

“We can find something we can equate to $7.46,” Councilperson Martha Johnson said. “$7.46 a month is doable considering the undertakings that we have.”

City council members unanimously approved the updated rate table and included rate increase.

QUICK FACTS

• Most average water/sewer users in Manistique will see an approximately $7.46 difference on their bills beginning in July.

• Manistique City Council on Tuesday approved the rate increase as part of the city’s 2020-21 fiscal year budget.

• The rate increase is directly linked to the city’s ongoing infrastructure improvements – the CSO closeout projects – and an emergency infrastructure repair under U.S. 2 late last year.

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