Making water affordable for Detroiters: DWSD's affordability plan

BRPA Presentation_rev7_Page_01It’s not surprising – and was also inevitable – that the spotlight surrounding the Flint water catastrophe is now expanding to include Detroit’s water situation as well. Because it wasn’t much more than a year ago when Detroit was garnering unwanted local and national headlines due to customer shutoffs that were being imposed on delinquent customers, many of whom were simply too poor to pay their bills.
Since that time, there has been considerable discussion surrounding how to best deal with yet another crisis; people need water to live, but many cannot afford the water rates. And despite the pleas of those who insist that water is a human right, the uncomfortable fact (for some) remains that providing clean water to the masses cannot be done for free. In October 2015, a Blue Ribbon Panel was appointed to begin the heavy lifting of devising some feasible proposals on how best to solve the problem. The draft copy of the report has already been making its rounds through the local media, whose job it is to determine what is the key ‘takeaway’ buried inside all those pages.
Different reporters will come to differing conclusions, but one paragraph in the executive summary seems to stand out when it comes to summarizing the dilemma faced by DWSD – and Detroit – in broader terms:
“Nationally, water and wastewater utilities face the dual challenges of: (1) generating revenues sufficient to support infrastructure development and renewal, and (2) advancing universal access1 to services considered essential for human health and welfare. This dichotomy is amplified by economic conditions in Detroit, making it in some senses “ground zero” for the national water affordability challenge.2 Detroit is ranked as the poorest major metropolitan area in the United States according to the U.S. Census Bureau (2015), with an exceptionally high poverty rate coupled with a substantial loss of population. Although housing in Detroit is relatively affordable, the city is also challenged by relatively poorly valued housing stock. At the same time, charges for water and sewer (including drainage) services in Detroit are among the highest in the United States. Moreover, legal constraints on water and sewer service pricing, and on the use of system revenues to assist low-­‐income households, are seen to be more acute in Michigan than in many other states.”
So it’s safe to say that Ground Zero isn’t necessarily the desired location to be in this particular circumstance. Our water rates are higher than just about everybody else, and we’re poorer than  everybody else – even in the midst of this great and wonderful comeback we keep hearing so much about.  The challenge being faced by Detroit is brutally apparent.
On a more direct level, it is DWSD Director Gary Brown who must confront this challenge head-on. To point out that this challenge is not easy is to give the word ‘understatement’ an entirely new and comical definition. Nevertheless, Brown has been working hard toward a solution to the crisis – or at least a major first step -which will likely be approved for implementation by the Great Lakes Water Authority on Wednesday.
The plan (WRAP) being proposed by Brown will no doubt still attract criticism from those who insist that an income-based payment plan is the only fair solution, but Brown insists just as strongly that an income-based solution would be in violation of Michigan State Law (see Bolt vs. Lansing, and the Headlee Amendment) and could wind up strangled in lawsuits, while leaving the poor just as stranded – and dry – as before. So instead, Brown has created what he says is a workaround that will withstand any legal challenges while still achieving the desired result of providing affordable water to those most in need – defined more specifically as those who fall 150 percent below the federal poverty level. Those are the ones who will qualify for the four-pronged WRAP program.
In summary, WRAP aims to assist low-income homeowners by:

  • Offering up to $1,000 per household to address plumbing issues identified as being responsible for high water usage
  • Providing a free water audit for those identified as using 20 percent or more above average household water consumption in the city
  • Provide a conservation class that all who qualify for WRAP are strongly encouraged to attend
  • Providing payment assistance that will freeze any arrearage up to $1,000. If the customer makes timely payments each month or one year, the debt will be erased. The average debt of Detroit water customers is $663

“So for example, if you were a customer and you were calling for assistance, there’s only one eligibility criteria; to be 150% below the federal poverty level. If you are, and you use 20 percent more water than an average family of your size would use, you become eligible for a home audit. A plumber would come in and make recommendations on what needs to be repaired. And then you’d also be eligible to have a program to fix those problems up to $1,000. That’s in addition to the $1,000 that you could be eligible for in regards to payments on your bill on a monthly basis. So you have $1,000 available to pay toward arrears, plus $1,000 in plumbing assistance.”
So, in essence, the new program aims to achieve affordability by offering incentives. That’s one part of it. The second part will be what’s known as the increasing block rate program, which basically keeps everyone’s costs low in the group using the least amount of water. The next group – or block – will be charged slightly more, followed by the next block until it reaches the truly high consumers.
“At one time in Detroit’s not too distant history, we had what was called a declining block rate structure which is designed to help corporations and businesses and economic development. So it meant the more water that you used, your rate would be decreased. Well that helps with economic development, but that doesn’t help poor people. And then we went to a flat rate, which is what we have now. And what we’re proposing is going to an increasing block rate structure. Ann Arbor has an increasing block rate structure.
“With an increasing block rate structure, every 3-6,000 gallons [just as an example] would increase in price. So with an increasing block rate structure, somebody who is using just 6,000 gallons of water for a billing cycle, the first 3,000 gallons would be steeply discounted. And that goes for everyone, not just poor people. That’s why it fits with Bolt v Lansing is because it is not income based.”
Brown said that he can only use an example of how the block structure would work currently until the billing system – which he described as being seriously troubled – is straightened out. Until then, it’s impossible to say for sure what the cutoff point for the lowest water usage block might be. He has plans to bring in a billing expert.
“And I always leave this until last, but it is vitally important, and that is the wraparound services that stay with the customers that are receiving assistance, and you offer them all the other social services that are available to them. You know, if you could reduce a person’s prescriptions, that would leave more money for food and utility bills. And so we want to be able to stay with our customer, and offer all the other nonprofit and social services that are available to help them get through whatever issues that they are having, whether it is finding a job or whatever it is.
“It’s more than just giving someone monthly assistance. It’s more than just paying down their arrears. It’s more than just fixing their plumbing problem, it’s also staying with them and providing the wraparound services that nonprofits and social service agencies have available. It’s more than taking care of arrears and the bills and the monthly plumbing problems, it’s also trying to find additional assistance on an individual family basis.”
In 2005, Roger Colton, at the request of the city council, wrote a water affordability program for DWSD in 2005. And it was an income indexed rate program. Meaning that depending on what your income was, you pay a certain percentage, 2-3 percent of your income, would dictate your water bill. And that was deemed to be illegal by a state supreme court case, Bolt vs Lansing, which basically says that the water dept. can’t base rates on income. It has to be based on the cost of service. And so the blue ribbon panel took a look at that, and they wrote a new report that said if you change the rates to be an increasing block rate structure, as opposed to a flat rate structure – which is what we have now – that will have the same effect for poor people in reducing their bills.
What was being proposed by Colton with his proposal was to take a subset of your customers, poor people, and treat them differently than you would be treating everyone else. And we’re saying we can get to the same result with an increasing block rate structure by giving everybody the same rate (as an example) for the first three thousand gallons and then every 3-6000 gallons after that, the rate would step up.
And so if you conserve, and just want to use what’s essential to live on – what you need to flush your toilets, what you need to cook with, what you need to wash your clothes – you could almost cut your bill in half.


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