Township Water & Sewer Rates and the Lawsuit

Bloomfield Township Water & Sewage (W&S) rates has become a hot topic as many residents have been shocked when they received their 4^th Quarter 2019 water bills and faced increases that were hundreds of dollars more than in the past. Residents are venting their anger over the past month particularly on Nextdoor.com. What residents may not be aware of is that the Township was hit with a class action lawsuit brought against the Township in 2016 for excessive W&S rates that are well beyond the cost to buy water and process sewage. The lawsuit alleged that the Township padded our water bills with an extra $21M in non-water fees from April 15, 2010 and January 31, 2018. This lawsuit has brought two judgements against the Township, totaling ~$9.1M; the first on September 5, 2018 (for $3.8M) and the second on March 18, 2019 (for $5.4M). 

At the April 22, 2019 Board of Trustees (BoT) meeting, significantly higher 2020 W&S rates were approved (which was 4 months before the August SAD vote failed). The new 2020 W&S rates were all significantly raised except ‘Water Usage” (this is the cost to buy water from the Southeast Oakland County Water Authority) which did not raise. The worst offenders were 25% increase for ‘Ready to Serve Water’, 23.7% increase for ‘Sewer Ready to Serve’, and 19.3%increase for ‘Water Debt’.  Other W&S rate increases were 7.7%, 7.1%, 4.8%, and 4.8%. For details of the rate increases, click here, page 60).  Keep in mind the Consumer Price Index increase for 2019 was only 1.7%. As you can expect, the only Board members voting against these rate increases were Trustees Buckley and Walsh. 

Below is a chart of our water rates for 1 unit (1000 gals) over the last 10 years, which constitutes a 708% increase. During this same period of time, our cost to buy 1 unit of water from Southeast Oakland County Water Authority (SOCWA) only went from $4.43 to $5.86 (36% increase) and our cost to treat 1 unit of sewage from Oakland County Water Resources Commission (WRC) only went from $4.75 to $8.37 (76% increase).  How does THAT HAPPEN?

During the April 22 BoT meeting, we also learned that the Township is continuing to incurring extensive legal fees due to the decision to contest the lawsuit judgement. We learned that:

• $336,280 in legal fees were paid out of our 2018 W&S revenue

• $100K in legal fees were built into our 2019 W&S rates

• $200K in legal fees are built into our 2020 W&S rates

• While only $100K is legal fees will be taken from the 2019 W&S revenue, the total fees for this year are approaching $350K so the rest will likely be taken from the general fund. 

• We can expect another $100K in our 2021 W&S rates as the litigation is expected to drag on into 2021. 

• From the time the lawsuit was filed until Sept 30, 2019 the total legal costs were $824K with at least $300Kmore to follow.

When questioned further by Trustee Buckley, it was stated by Supervisor Savoie and confirmed by Attorney Mark Roberts that the class action judgement award did NOT prohibit the Township from passing along the costs of the $9M judgement or any litigation defense fees to the residents! So, the Township was found guilty of overcharging residents W&S bills and the result is that we, the residents, have to pay the $9M judgement (if it holds up) and any litigation legal fees, which are running about $200K/year and will likely continue into 2021. As Mr. Roberts was quoted in Downtown News Magazine (March 22, 2019), “Either way, the taxpayers will be paying for this” and Supervisor Savoie agrees. As a contrast to the ‘Savoie way’, when Birmingham lost a similar suit for overcharging for W&S and settled for $2.9M, the award settlement was distributed amongst the Birmingham taxpayers.

When you dive into the W&S rate details (click here, page 73) you will see the revenue from our W&S bills funds 62 different expense accounts (including legal fees as just discussed). Many of these expense accounts make sense (such as postage for billing, printing & publishing, repair parts, insurance, training & conferences, etc.), but it is enlightening to know that our W&S bills also help fund expenses such as Retiree Health Savings and Health Care Plans (as discussed in Bulletin 2) and the Retirement Defined Contribution and Defined Benefits Plans (as discussed in Bulletin 3). Perhaps this was a factor in why the Township lost the class action suit for overbilling?  

Supervisor Savoie rejected a settlement offer of $4.5M and instead made a decision to appeal the $9.1M judgement and retained attorney Roger Young – all without a BoT discussion or vote! At the March 25, 2019 BoT meeting, Mr. Young stated the appeal is based on the overwhelming presumption in Michigan that W&S bills are correct, that W&S rates are very complex, and the trial judge was not equipped to review how the Township sets its rates. Mr. Young states that the worst-case scenario is that the Township will owe the $9.1M settlement plus interest (2%) plus attorney fees. As of March 25, the accumulated interest is $900K. 

At the August 26, 2019 BoT meeting Supervisor Savoie states that the Board turned down the Mr. Young’s offer to do the appeal on contingency. Per Mr. Savoie, Mr. Young told the Board that he would love to take the appeal on contingency where he would get $3M of the appeal winnings only if he wins. Mr. Young said that he has a 99% chance of winning. Based on Mr. Young’s confidence, Mr. Savoie chose to gamble with our money and pay legal fees by the hour. It is hard to trust Mr. Savoie’s judgement on this given that on June 28, 2017, he was quoted in the Oakland Press that he was “100 percent” sure the lawsuit will be dismissed.

Residents will end up paying much less if the appeal is won (~$700K legal fees) than if it is lost ($9.1M + interest + $700K legal fees). As Supervisor Savoie has made perfectly clear, we the residents will pay for this either way.  

The lawsuit has clearly NOT had the effect of cleaning up the non-W&S costs that the Township buries in our rates. Our W&S rates continue to go up, exceeding the Township’s cost of water and sewage treatment and vastly exceeding the rate of inflation. At the November 25, 2019 BoT meeting, there was a presentation of the Preliminary Budget for FYE March 31, 2021.  Of concern was the fact that the W&S budget was NOT included… again; with $28M in revenue from YOU the taxpayer and almost $26M in expenses and banking over $2M annually because of excess revenue…. WE SHOULD BE ABLE TO VIEW THIS BUDGET. When will it be reviewed publicly?  Will it be reviewed publicly? This W&S mess calls into question our leadership’s commitment to transparency as well as their judgement in how they create and set W&S rates, the decision not to negotiate a settlement, and the decision not to take the appeal on contingency.   

Do not enable elected officials to continue the pattern of opaque finances and unrestrained spending with the expectations that the taxpayers will foot the bill. It is time for Township residents to speak up and get the Board to stop acting in their own interest and face the fiscal facts that we can NO LONGER TAX OUR WAY OUT OF THESE SERIOUS PROBLEMS.  NO MARCH TAX. Vote NO on March 10^th.