Recent news accounts of the massive water shut-offs by the City of Detroit has drawn national and international attention to this essential utility that we sometimes take for granted. Over 17,000 residents have had their water shut off in that city for non-payment. About 12% of the 90,000 Detroit utility customers are delinquent by more than 60 days, and nearly half of the water customers are behind in payments (the latter fact according to an LA Times report). Since April of this year the city has targeted shut offs for 4,000 residents per week who are $150 or more in arrears.
The delinquency rates aren't new. Detroit is a shrinking city with lots of poor residents left behind. The city is bankrupt. The aggressive enforcement measures towards those behind in their bill is new. City-management officials claim that the water and sewer utility has been plagued by corruption, incompetence and inadequate maintenance for decades, and is seriously in debt. The utility's bond rating is Baa with $5.4 billion in bond obligations. Moody's Financial Ratio Analysis places the utilities-debt ratio at around 90%.
Detroit is currently run by an appointed emergency manager selected by the state governor under a controversial new Michigan law. The emergency manager supersedes all elected authority in the city and has nearly absolute power. Pressure to shut off delinquent residential water customers comes under his authority.
The move to turn off the water is controversial on several levels. Delinquent commercial and industrial customers are apparently not being targeted for cut-offs. Residents claim their bills are excessive and state assistance isn't forthcoming with any assistance. Community organizations have appealed to the United Nations. The U.N. recognizes access to water as a basic human right and holds that it is a violation of human rights to cut off people who legitimately cannot pay. The Detroit authorities claim that many residents intentionally don't pay water bills, thus contributing to the crisis, a claim that citizen-advocacy groups deny. There are rumors that the municipal-owned utility might be sold to a private company, raising suspicions that this has been the plan all along. The water shut-off policy has lead to angry street protests.
To understand Detroit's situation it is helpful to step back first and look more broadly at water utilities here and abroad.
Water Utility Rates are on the Rise
An article last year by Brett Walton at the "Circle of Blue" reported that: "Water prices in 30 major U.S. cities again grew at a pace faster than inflation, according to Circle of Blue's annual survey of water rates for single-family residential customers. Water prices increased an average of 6.7 percent in these metropolitan areas, a slower rate than in recent years but well above the 2.1 percent increase in the U.S. Bureau of Labor Statistics' Consumer Price Index for 2012. The median increase in water prices was 6.2 percent."
A 2000 survey by the U.S. Census Bureau found that, "The average annual cost of water and waste water for a household that pays directly for service is $476 per year, ranging from $334 in Nebraska to $721 in Hawaii." That figure works out to about $40 per month while an EPA website says: "American household spends, on average, only $523 per year on water and wastewater charges... " That works out to a U.S. average of $43.58 per month for water and sewer.
In a recent USA TODAY article entitled "Nation's water costs rushing higher" it was reported that:
"While most Americans worry about gas and heating oil prices, water rates have surged in the past dozen years, according to a USA TODAY study of 100 municipalities. Prices at least doubled in more than a quarter of the locations and even tripled in a few.[snip] Monthly costs topped $50 for consumers in Atlanta, Seattle and San Diego who used 1,000 cubic feet of water, a typical residential consumption level in many areas.
There is also a water and sewer industry report prepared in 2012/2013 by Black and Veatch, a private firm. This report says the cost of water in Seattle, for example, was $8.19 per 1.000 gallons, not including the sewer charges. The combined monthly bill for sewer and water in Seattle was $177.93 per month for residential customers using 7,500 gallons, according to this report.
Meanwhile in Detroit, according to the Black and Veatch report, the monthly water and combined sewer and water rates for residential customers using 7500 gallons per month was $24.12 and 70.89 respectively. So which figures are correct?
It turns out that water and sewer utility prices are deceptively difficult to understand or to compare from city to city. There are different units of measurement, different seasonal schedules, peak and off-peak metering and different rate structures. Also, in cities especially, water and sewer rates are separately billed but inseparable because water use is the measure of sewer use in most cases. Billing is combined. Sewer rates are generally higher, often double the water rates. Comparing water pricing without including sewer pricing can be very misleading. Finally, to get a full picture of a municipal utility overall, it is important to compare the rates for commercial water/sewer uses and the wholesale rates the utility charges industries.
An Apples-to-Apples Comparison