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Ann Arbor officials met Monday night inside city hall for a budget work session that focused on the city's water and sewer systems.

(Ryan Stanton | The Ann Arbor News)

Ann Arborites are using less water these days, and despite the environmental benefits of water conservation, city officials say there actually could be a cost associated with that.

As less water is consumed or used, and subsequently less wastewater is flushed down the drain, the city's water and sewer sales go down, which means less revenue going to the city.

And to keep up with the costs of operating the city's water and wastewater treatment plants, and maintaining and replacing aging infrastructure, city officials say additional water and sewer rate increases might be needed to make up for declining sales if the trend continues.

Information presented by the city's administration during a Monday night work session of the City Council shows city water and sewer usage peaked in fiscal year 2011-12, which is the 12-month period that started July 1, 2011.

In the two fiscal years that followed, water and sewer usage dropped off, even as the city has grown and welcomed new residents.

In the case of water, that means a drop back down to 2009-10 levels. And in the case of sewer, the numbers are the lowest they've been in at least five years.

Information on water and sewer usage in Ann Arbor presented at a City Council work session on March 30, 2015.

Craig Hupy, the city's public services administrator, discussed the implications of that Monday night.

"As we go forward, if that trend continues, there will have to be an adjustment in rates to make up for the loss of revenue," he said.

Council Member Sabra Briere, D-1st Ward, said it seems some of the incentive to use less water, which the city has encouraged residents to do, is taken away if it just means the per-gallon price charged to residents is going to increase to make up for the drop in use.

"It doesn't seem to me that this is moving well, so how do we really address that?" Briere asked city staff.

"That's a struggle nationally that the water industry and the sewer industry is struggling with," Hupy responded. "I don't have the answer tonight."

Hupy said he attributes the declining water sales to two things primarily. One is that people are more aware of their water usage and actively trying to conserve.

"But also, as people have changed out their washing machines, a lot of people get high-efficiency washing machines," he said. "As they change out shower heads, you can only buy efficient shower heads. Similarly with faucets, toilets."

He added, "New construction is all high-efficiency construction for water. So, while we have new units going online, they're not large users on a per-capita basis."

Craig Hupy, Ann Arbor's public services administrator, gives a budget presentation at a City Council work session on March 30, 2015.

The city

promotes water conservation on its website

, telling residents that it can save them money and lower the water plant's costs.

"Some benefits of water conservation are short term, for example using less water means less electricity and chemicals that are needed to treat the water," the website states, going on to argue that water conservation actually can help avoid future rate increases.

Consumers reducing peak water requirements in the summer, the city website states, has meant that the city has been able to defer, and perhaps eliminate, the need to secure additional water sources. The website notes developing new wells and building new pipelines to bring that water to the treatment plant would be expensive, and that would mean significantly higher water rates in the future.

"So again, conservation plays a very meaningful role in the long-term operational costs of our city's water system," the website states.

Council Member Kirk Westphal, D-2nd Ward, asked about the impact of new housing development on the water and sewer systems.

Hupy said there's capacity to handle the residential growth the city is seeing, and it actually helps spread out the costs of the systems among more users.

"I can say without additional units consuming more services, our downturn would have been greater," he said.

Hupy said the city hasn't yet calculated the exact water and sewer rates for the 2015-16 fiscal year, which starts July 1, but budget projections offer some indication they'll be going up again, as they typically do every year.

"Our rate goals have been approximately 4 to 4.5 percent on water," Hupy said of the annual rate increases.

"We've been trying to hold sanitary sewer to 6 percent or very close to it as we roll in the cost of rebuilding the wastewater plant," he added. "And stormwater has been more in the 6.5 percent range, and those are our goals going forward."

Hupy added, "The good news in the sewer fund is we are coming to the end of the 6 percent-plus rate increases. We have just about all of the debt rolled in."

The city is planning to do a comprehensive stormwater rate study this coming fiscal year, followed by a water and sewer rate study in 2016-17.

Hupy said the stormwater rate study will involve engaging the community and determining what is an acceptable rate and what level of service is desired.

He said rate increases for water and sewer have been largely driven by the need to make capital investments in the systems and replace aging infrastructure, including rebuilding portions of the water and sewer plants that date back to the 1930s.

The city also is looking at further increasing stormwater rates to fund planting and maintenance of city street trees that intercept stormwater, as well as meeting requirements of the city's "green streets" policy, which has made stormwater management a higher priority as part of street projects.

Hupy noted there are no large flood-control projects anticipated in the stormwater fund budget for the next two years.

"There are far more capital requests than the fund was originally set up to handle as we've dealt with the increase in rain storms, size of the rain storms," he said, adding the rate base also wasn't set up to be fully funding street trees.

The city planted 1,222 trees in 2013 and 885 in 2014, and it plans to plant 1,080 more in 2015. Those figures include both street trees and park trees.

Mayor Christopher Taylor said he's glad to hear the city is looking at doing studies to ensure it establishes appropriate rates. He said the city must balance rate affordability with providing the high-quality services that city residents expect.

"The city has long-term infrastructure challenges," he said. "In order to address infrastructure challenges, one must repair or replace aging infrastructure, and the only way to do that is through revenue. And so, as we have material infrastructure needs, we're going to need to work on how to fund that over the long term."

Council Member Jane Lumm, an independent from the 2nd Ward, raised concerns about continued rate increases.

"I certainly realize that reinvestment in the water and sewer infrastructure is a priority, but I don't think it's fair or appropriate to continue to raise rates to customers indefinitely," Lumm said, suggesting continued rate increases in the 4-6 percent range might be too much. "It's multiples of inflation that we're talking about."

Hupy responded, "Our rates are mainly driven by capital, and if we are going to reinvest in our capital, these are the rates that are necessary to do that."

In addition to spending more than $100 million to rebuild a portion of the wastewater treatment plant, the city is gearing up to spend more than $30 million in the coming years on rebuilding a portion of the water treatment plant on Sunset Road.

Hupy told council members that city staff looked at various alternatives for the water plant, including purchasing water from the Detroit water system or getting water from another supply source other than the Huron River, and it was determined that reinvesting in the facility was the most cost-effective solution.

Ryan Stanton covers the city beat for The Ann Arbor News. Reach him at ryanstanton@mlive.com or 734-623-2529 or follow him on Twitter.