Christine Ferretti

The Detroit News

Detroit — The city’s Board of Water Commissioners on Wednesday gave its preliminary approval of a water rate hike for Detroit water customers.

The projected rate increases — about 3.25 percent for water and 3.5 percent for sewer — are a component of the Detroit Water and Sewerage Department’s budget proposed for the 2016-17 fiscal year that begins July 1.

Detroit Water and Sewerage Department Director Gary Brown noted Wednesday the bump is modest compared with past years and that officials have heard from the water board, City Council and residents that “double digit increases” in rates “was not going to be acceptable.”

“I’m quite proud to present a budget to you that is the lowest rate increase in recent history,” Brown told the board, adding the rate increase is probably the lowest in at least a decade.

DWSD is proposing a $113 million water system budget and $266 million for the sewerage disposal system in fiscal year 2016-17. For the 2017-18 fiscal year, the water budget is slated to be about $115 million and $274 million for sewage.

The lower rate increase is tied in part to the department’s improved collection rate, which officials say has gone from 85 percent to about 90 percent.

“We’re operating much more efficiently than we have in the past,” Brown added.

The department plans to hire 57 additional employees between its customer service and field operations and reduce the number of consultants. There will also be a rainy day fund of about $4.7 million that will further assist the department in keeping rates steady.

Officials also expect volumes will be down about 8 percent for water and 7.5 percent for sewer, which is consistent with the trend in recent years. A portion of the usage decline is tied to efforts to clean up accounts including vacant properties, officials said.

The budget plan now advances to the city’s Financial Review Commission on March 23. Officials on Wednesday said they plan to detail the financial impact for the varying classes of residential and business customers in May.

Officials have said that the average monthly residential bill in Detroit is $75.

“The typical customer in Detroit … is going to pay less than $2 more for water and sewer than they did last year,” DWSD’s Chief Financial Officer Marcus Hudson said.

Last July, a divided City Council narrowly approved an overall 7.5 percent increase in water rates for city residents. The move raised the average residential customers bills by about $5.33 per month.

Separately, officials with the new Great Lakes Water Authority said earlier this month that most suburban communities will pay more for water this summer.

Sue McCormick, CEO of the Great Lakes Water Authority, has said that the average wholesale customer will likely see a 4.5 percent increase in the charge for water service.

The increase included in the 2017 budget, which could take effect July 1 for most communities, is needed to offset a 0.3 percent drop in water usage, she said.

Metro Detroit homeowners’ water bills will likely be higher since many communities tack on additional costs to wholesale charges to cover their own infrastructure and operating costs.

Now as a wholesale customer of the authority, it’s expected that Detroit will pay the GLWA $15.5 million for its water service in the 2016-17 fiscal year.

The authority is working to set its 2017 wholesale water and sewerage charges for communities. Its charges for water service are a combination of monthly fixed costs and water usage. GLWA officials said 60 percent of what it charges a community is a monthly fixed cost and the rest is metered usage.

The GLWA was created last summer when officials with the state, Detroit and Oakland and Wayne counties agreed to turn over Detroit's water and sewer system to the authority for the next 40 years under an agreement reached as part of the city’s bankruptcy.

Under the deal, the authority is the water service provider for Detroit’s suburbs, while Detroit residents continue to be served by the city’s water department. The authority provides service to about 3 million customers in the suburbs. DWSD serves about 250,000 residential and commercial customers.

The agreement also calls for a 4 percent cap on the GLWA’s budget, meaning it cannot rise more than 4 percent. The authority projects its 2017 budget to total $795 million and forecasts its 2018 budget will be 4 percent higher, or $827 million.

In June, the authority’s board voted to lease the water and sewage system from Detroit for $50 million a year plus about $50 million a year toward pension costs and a fund to help struggling customers pay their bills.

CFerretti@detroitnews.com