The Hows and Whys of Rates
Orion Township Water & Sewer serves over 5,000 water customers and over 7,000 sewer customers. The water and sewer system contains 170.2 miles of water mains; 152.18 miles of sewer mains; 24 sewer lift stations; 7 pressure-reducing valves; 2,141 fire hydrants; and a 2.5-million-gallon water storage facility. It is the Township’s responsibility to maintain this infrastructure, most of which is underground. Orion Township Water & Sewer does not treat any water coming in or leaving the Township. Instead, fresh water is provided by the Great Lakes Water Authority (GLWA) and sewage treatment is provided by the Oakland County Water Resources Commissioner (WRC).
GLWA and WRC charge the Township for the volume of water coming into the Township (GLWA) and the sewage leaving the Township (WRC). These fees are increased almost every year. In addition to the actual water and sewage treatment provided by GLWA and WRC, the Township has its own operational costs associated with maintaining the infrastructure and administrative responsibilities of the system, as well as capital costs for completing repairs and system enhancements. Over the years, the Township has found creative ways to maintain lower costs for users of the water and sewer systems, including the construction of the water tower and joining the North Oakland County Water Authority (NOCWA). In the past, the Township has also subsidized the rates that users pay, but that practice is not sustainable long-term. The Township must raise rates to keep up with our suppliers' increases, as well as annual cost increases for maintaining the water and sewer infrastructure.
All Water and Sewer financials are accounted for in the Water and Sewer Fund, which is an Enterprise Fund. As an Enterprise Fund, the water and sewer accounts are separated from other accounts (such as General Fund accounts) with the purpose that only revenues generated from water and sewer activities are used to fund water and sewer operations; the fund is to be entirely self-supported by user charges. As such, only water and sewer customers contribute to this fund.
The Water and Sewer Department can experience fluctuations in revenues and expenditures based on development, emergency repairs, capital projects, and water consumption. The chart below demonstrates these trends.
Future projected capital projects and equipment purchases include:
- Indianwood water and sewer main replacement ($1 million),
- Vactor truck for sewer maintenance ($532,000.00),
- Mini excavator ($100,000.00), and
- Trailer replacement ($25,000.00).
The department always restricts $3 to $5 million dollars annually for potential water main replacements in older neighborhoods. Additionally, the oldest sewer lift stations were installed in the 1970s and are now over 50 years old. These stations will require complete re-tooling within the next 5-10 years at a cost of $300,000.00 to $600,000.00 each.
To ensure Orion Township will generate sufficient revenue to provide for ongoing operational requirements and capital expenditures, Yeo & Yeo, an independent financial and accounting consulting firm, was hired to perform a rate study in 2023. A five-year forecast for rates was provided using eight different rate scenarios. These scenarios ranged from a 0% increase, to a simple pass-through of Orion’s rate increases from GLWA and WRC, to a 14% increase. The last independent rate study was performed by Plante Moran in 2002. Since that time, the Township has experienced tremendous growth, which has resulted in additional water and sewer infrastructure being added to the system.
The eight scenarios provided by Yeo & Yeo were studied thoroughly. Many factors were reviewed and analyzed in determining our water and sewer rates for 2023-2024. These included:
- Historical usage patterns,
- Supplier plans regarding rates (for 2023-2024 GLWA has increased our rate 5.9%),
- Historical financial trends for major expenses, and
- Future capital requirements.
Based on the information provided, the Orion Township Board of Trustees approved the recommendation for a 7% increase for 2023-2024, with the new rates effective July 1, 2023. This rate increase will help the department cover not only current operating costs but will assist in the budgeting of capital improvements and equipment that are necessary to maintain the system into the future.
Drinking water quality and sewage disposal is important to the health of Township residents and the overall community. Together, we remain committed to protecting public health and maintaining open communication with the public about our system. If you have any questions, please contact the Department of Public Services at (248) 391-0304 extension 8500.