Why Are East Lansing’s Water and Sewer Rates Higher Than Meridian Township’s?
In mid-November, an ELi reader shared a chart distributed by Meridian Township in a recent newsletter suggesting that property owners there pay significantly less in rates for sewer and water service than East Lansing property owners.
Meridian Township, East Lansing and Michigan State University all use the East Lansing Water Resource Recovery Facility (WRRF). And the difference in rates between East Lansing and Meridian is real. According to an analysis by East Lansing Director of Public Works Scott House, in Fiscal Year 2020, for a monthly usage of 5000 gallons of water and sewer flow, Meridian Township residents paid $53.33 while East Lansing residents paid $86.91.
The main reason, as explained more below, is that East Lansing is dealing with older infrastructure.
But in his response to us, House noted that the Meridian Township chart did not match the actual rates. When we checked with Meridian Township Director of Public Works and Engineering Derek Perry, Perry agreed with House, explaining that the rates on the chart were incorrect, and from two budget cycles ago. (The rates quoted above are correct.)
Here’s more of what we learned:
There are two main types of cost in providing these services.
To run the WRRF, the system requires revenue (money coming in) for capital and operating costs.
Operating costs are the cost of taking care of the material that comes in, needs treatment, and goes out. Operating costs also include some maintenance costs. Capital costs include things like the purchase of new equipment, replacing roofs on plant buildings, and paying off debt, as when the system borrows from the state’s revolving fund.
“WRRF capital costs are a fixed percentage that do not change with flow and or population,” House explained in an email.
Here’s how capital costs are broken down in terms of responsibility:
- MSU: 40%
- Meridian Township: 33.33%
- East Lansing: 26.67%
According to House, the operational costs are calculated at the end of each fiscal year and they vary, because they’re based on the corresponding flow to the WRRF from each entity.
House provided 10-year averages for percentages of operating cost responsibility for MSU, Meridian Township and East Lansing. Here’s how that breaks down:
- MSU paid 37.37% of the operating costs
- Meridian Township paid 39.38%
- East Lansing paid 23.25%
For Fiscal Year 2020 (July 2019 – June 2020), MSU’s usage had dropped compared to that 10-year average, and Meridian’s had gone up:
- MSU: 35.81%
- Meridian Township: 42.03%
- East Lansing 22.16%
Scott also provided ELi with charts showing how the water and sewer rates have increased in East Lansing across the last decade.
Courtesy East Lansing Dept. Public Works
So, why do EL property owners pay higher rates individually if they produce less flow in aggregate?
The short answer to that question: East Lansing has older water and sewer infrastructure than Meridian Township does.
According to both House and Perry, East Lansing’s pipes are much older than those in Meridian Township.
“Unlike the City of EL,” Perry wrote in an email, “our distribution and collection system is relatively new, with the majority being built in the late 60s, 70s and 80s. This allows our rates to remain relatively low compared to our older neighbors. Our future rates will reflect the need to start replacing a larger portion of our system as it reaches its useful service life.”
“At one point,” House wrote, “we had rates very similar to Meridian Township’s that covered the cost of operations. The primary difference between our systems is that their system is much newer. We found that our prior rates did not generate the required revenue needed to replace first-generation infrastructure.”
House said that the rates had been increased to cover the costs of ongoing infrastructure repairs and replacement. He cited the “out of sight, out of mind” nature of underground infrastructure making it hard for many people to conceptualize its life cycle. Usually, the underground water and sewer infrastructure lasts between 50 and 75 years, House said.
Since most of East Lansing’s underground infrastructure was put in between 1920 and 1960, now it’s time to replace it.
How is Covid-19 and MSU’s halting of most on-campus activities affecting costs?
According to House, it’s hard to gauge what the reduced flow from MSU will mean economically, as the lowered flow lowers the amount paid but will reduce the operating costs, too.
Right now, the full extent of the financial impact isn’t known for Fiscal Year 2021.
“We are requesting mid-year flow data from MSU and MT to calculate the impact of COVID-19 as the sewer billing is performed annually at the end of the fiscal year (FY). The financial impact of decreased flow from MSU is not fully known at this point for FY 21,” House wrote.
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