Ann Arbor officials planning to spend $100M-plus to rebuild 1930s-era wastewater treatment plant
An aerial view of the Ann Arbor Wastewater Treatment Plant located just east of the city limits in Ann Arbor Township along the Huron River.
Courtesy of City of Ann Arbor
The potentially $120 million facilities renovation project comes on the heels of another project nearing completion at the plant. That included replacing worn out and inefficient residual solids processing equipment and other upgrades at a cost of more than $50 million.
The Ann Arbor City Council is being asked Monday night to tentatively approve a $92.9 million construction contract with the Walsh Construction Co.
The council already took action on Jan. 23 to approve a $10.8 million contract with Malcolm Pirnie Inc. for engineering services to support construction. The firm has been under contract with the city since March 2005 to assist in designing the project.
Due to the aging and deteriorating facilities, the city is undertaking the renovations to ensure long-term treatment capacity and reliability.
Construction is expected to extend over five fiscal years, and it must be done without impeding the flow of wastewater to the plant.
The Ann Arbor Wastewater Treatment Plant takes in nearly 19 million gallons of wastewater per day from the city of Ann Arbor and Pittsfield, Scio and Ann Arbor townships.
The overall site actually consists of two plants — an older West Plant constructed in the 1930s and a newer East Plant constructed in the late 1970s.
The work about to get under way includes demolition and complete replacement of the older West Plant, improvements to newer East Plant and replacement of the plant electrical grid and stand-by generators. The Ann Arbor City Council recently approved a notice of intent to issue up to $120 million in sewage disposal system revenue bonds for the project.
Earl Kenzie, the city's wastewater treatment services manager, said it's more likely the project will come in somewhere between $100 million and $110 million.
Earl Kenzie
The renovations to the West Plant include rehabilitating existing flow control structures, complete demolition and replacement of primary and secondary treatment equipment, and construction of new buildings. Other improvements include installation of a new electrical distribution system and two new emergency power generators, utilities relocation, replacement of stormwater collection system equipment, installation of new roadways, and replacement of aeration systems with energy efficient blowers.
Kenzie said the opening of contractor bids on the project took place Jan. 11 and there were six proposals submitted.
Lakeshore TolTest Corp., with offices in Detroit, was the lowest bidder at $83.3 million. The highest bidder was Southfield-based Barton Malow at $102.9 million.
Other proposals came in from Granger Construction ($90 million), Walsh Construction ($92.9 million), Walbridge Aldinger ($95.4 million), and Hunt/Colasanti ($100 million).
The three lowest bidders were brought in for interviews in January and the city's staff recommended the council approve a contract with Walsh.
To put it in perspective, the work being done at the wastewater treatment plant will cost more than the combined total of two other large capital projects the city has taken on in recent years — the $50 million underground parking structure still being built on South Fifth Avenue downtown, and the nearly $50 million Ann Arbor Municipal Center project.
The wastewater treatment plant is located just east of the city limits and US-23, off Dixboro Road along the Huron River, mostly in Ann Arbor Township.
The West Plant portion of the facility is slated to be completely demolished and rebuilt during the project, which is expected to span five fiscal years.
Courtesy of City of Ann Arbor
The plant's permitted capacity is 29.5 million gallons per day, while the average daily flow is about 18.5 million gallons. The maximum hydraulic flow is 48 million gallons per day.
Amicangelo said the East Plant was built between 1977 and 1981 and has a permitted capacity of 20 million gallons per day. The older West Plant, which is being replaced, was built in 1936 and saw upgrades through 1964. It has a permitted capacity of 9.5 million gallons per day.
"The plant is in such poor condition at this point that it was taken offline in 2006, so that old West Plant is no longer operational," Amicangelo said.
An old photo from July 29, 1936, shows the original administration building for the West Plant, the same building that's still standing today, though it's structurally unsound now.
Based on the condition of the plant, Amicangelo said, the city developed a facilities master plan that was completed in January 2004. Recommendations that came out of the master plan included complete replacement of the West Plant and upgrades to the East Plant.
Amicangelo said it's been a long and complex process to come up with a design. The original contract with Malcolm Pirnie dates back to March 2005.
"One of the reasons why the project took so long is because of the regulatory requirements that we had to meet," Amicangelo said, tracing the preliminary site plan review back to 2009.
Another overhead shot of the Ann Arbor Wastewater Treatment Plant.
Courtesy of City of Ann Arbor
The city also needed approval of a stormwater management plan from Washtenaw County and Ann Arbor Township, a process that lasted from November 2009 to September 2010.
The city went through the final site plan review process with Ann Arbor Township from August 2010 to December 2010 and then sought a construction permit from the Michigan Department of Environmental Quality, which took from May 2011 to October 2011.
Amicangelo said there are a number of site limitations that prevent the plant from being able to expand beyond its existing footprint, as it's bordered to the north by the Norfolk Southern Railroad, to the west and south by the Huron River, and to the east by Fleming Creek.
"Everything we do within the facility — every upgrade, every equipment replacement — has to be done within that footprint," he said. "The site's fully utilized."
Adding to the logistical challenge is that utility connections to the East Plant pass through the area being demolished.
Another challenge has been the embankment separating the plant from the river. Although it has effectively provided flood protection to the plant for decades, it does not meet current FEMA standards and the plant is considered in a 100-year floodplain.
Without improvements there, the plant would be required to meet building standards that include flood proofing all new buildings to provide protection against damage from a 500-year flood, and that would add significant costs to the project.
The city instead petitioned FEMA to readjust its maps and move the floodplain lines south to remove the plant from the flood-prone zone.
The city had to agree to make improvements to the embankment to get FEMA to go along with the map revision. Those improvements to protect the plant from the Huron River and Fleming Creek floodwaters are now included in the facilities renovation project.
Due to the aging and deteriorating facilities, the city is undertaking the renovations to ensure long-term treatment capacity and reliability.
Courtesy of City of Ann Arbor
The newly constructed facilities are expected to include more-efficient, computer-controlled technology that will allow the city to treat wastewater using less energy while reducing phosphorus and nitrogen, according to project officials.
"When we're done with this project … there'll be areas for future use — future tanks and facilities — in case the plant ever has to expand its capacity," Porter said.
The city has been approved for a $109 million loan at 2.5 percent interest rate from a revolving fund managed by the DEQ.
By financing the project that way, the savings to the city over the 20-year life of the loan will be about $35 million, according to the city's consulting financial advisor.
Additionally, the city is able to receive $2.2 million in loan principal forgiveness for green project features, which essentially equates to grant money.
Englert said the city expects to save another $1.5 million from a sales tax exemption for contractor purchases on the project through the Michigan Department of Treasury.
The DEQ approved the project plan on Jan. 6. A final order of approval for the revolving fund loan is expected on March 12, with the loan closing on April 10.
Tom Crawford, the city's chief financial officer, said the fact that the city is embarking on such a major project is the reason why utility rates have steadily increased, and why the city's utility funds show surpluses year after year. That money is being stockpiled for projects like this.
Even while undertaking a nine-figure project, Crawford pointed out the rate increases have been kept to typically less than 5 percent over a number of years so there isn't a sudden rate shock to users. All of the city's utility funds — water, sewer and stormwater — are performing capital projects and need the funds in order to make improvements, he said.
"There's been a long ramp-up with the rates and our rate adjustments have been very modest when compared to other communities," Mayor John Hieftje said.
"And last time I looked at the DNR numbers, Ann Arbor was in the bottom 10 percent as far as our rates, and that's a good thing," he added. "That's some of the lowest rates in the state, and hopefully we'll be able to continue that even as this contract goes forward."
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's email newsletters.
Comments
bunnyabbot
Mon, Feb 6, 2012 : 7:20 p.m.
doesn't sound like they need to expand thier footprint but why can't they expand on the other side of the train tracks? couldn't they tunnel underneath?
Sparty
Mon, Feb 6, 2012 : 8:44 p.m.
What ARE you talking about now?
Dog Guy
Mon, Feb 6, 2012 : 5:21 p.m.
This sewer plant project may be expected to leak about 30% through a complex financing system, aka shell game. Borrowing the money for this unnecessary project allows the money already saved up for it to evaporate with little trace. Local political gangs love expensive and unnecessary projects--parking pits, ugly buildings and art, huge gifts to a university, busses and trains to nowhere, green vapor in the distance--because so much may be directed to their current and future friends without needing to show any benefit. The city of Ann Arbor will have immense debt, but our "public servants" will then be rich and elsewhere. Those who will not learn from the past are fated to pay Ann Arbor taxes and fees.
clownfish
Mon, Feb 6, 2012 : 6:42 p.m.
DO you have some links or data to show that the City of Ann Arbor Sewer Dept has financial links to the Chicago company?
Arboriginal
Mon, Feb 6, 2012 : 5:03 p.m.
Let us not forget that the Guvnor lives downstream & downwind from the stink factory. What is he giving us in return?
Mike Musil
Mon, Feb 6, 2012 : 4:44 p.m.
Interesting that a local Michigan government is going to award the contract to a company out of Chicago, Illinois. It seems to me that we all would be better served having this job go to a local Michigan contractor who employs our friends, neighbors, church members, you get the idea. There must be some political reason that the City of Ann Arbor has chosen someone out of the State. I bet if you took a poll of city residents, their preference would be a local contractor among the lowest three bidders.
Epengar
Mon, Feb 6, 2012 : 10:10 p.m.
Why does there need to be a political reason? Maybe the company they hired offered the best service for the money?
Tony Dearing
Mon, Feb 6, 2012 : 4:24 p.m.
A comment and a reply to that comment were removed because they were off-topic.
say it plain
Mon, Feb 6, 2012 : 3:46 p.m.
Wait, the city *knew* for years that they wanted/needed to rebuild the wastewater treatment facilities, and yet they chose to borrow half the massive cost of this project before formally working out the financing for it on.... no really!.... an underground parking lot by the downtown library?! seriously?! that alone should make the current mayor exempt from consideration for any further electability, shouldn't it?!
Swordsman
Mon, Feb 6, 2012 : 3:16 p.m.
Nice to read about a big-budget project that's actually needed, unlike the underground garage and new city hall.
knotch
Mon, Feb 6, 2012 : 2:47 p.m.
Planning on it...that is the key phrase. I'd bet the liberal Enviro'Mental Law Firms have been camping on the door step of their favorite judge too block this from ever happening.
Peter Baker
Mon, Feb 6, 2012 : 2:51 p.m.
Yes, because environmentalists are so anti-clean water.
blahblahblah
Mon, Feb 6, 2012 : 2:44 p.m.
Time for a reality check! Annual city debt service (principal and interest) - page 132 of annual report 2002 = $3,610,715 2012 = $8,712,317 An increase of approx. 141% over the last ten years. Add another $100 million at 2.5% and that's another $7.5 million of principal and interest paid annually. Unfortunately, this necessary $100 million capital outlay seems rather small in comparison to the city's other future liabilities: Employee's Retirement System Unfunded Actuarial Liability - page 90 of annual report 2006 $9,044,000 2102 $57,596,000 Retiree Health Care Benefits Plan Unfunded Actuarial Liability 2005 $121,568,000 2012 $169,637,000 Let's stop kidding ourselves into thinking we can continue to be all things to all people and it's business as usual for our city.
say it plain
Mon, Feb 6, 2012 : 5:38 p.m.
ouch....do our accountants allow us to just keep the unfunded liability stuff in it's own 'debt bucket' that we can default on separately?! hope so...
amlive
Mon, Feb 6, 2012 : 2:22 p.m.
To any who may complain about water rates, I have to wonder what city you are living in. In our house we have several leaky faucets, old fashioned high flow toilets, a shamefully old and inefficient washing machine, and we water a lot of garden space in the summer. On average through the year, I'd say our household water bill comes to around $35 a month. I don't know about you, but I certainly don't feel like we're getting ripped off.
hut hut
Mon, Feb 6, 2012 : 11:52 p.m.
I've never had a problem with my 1.6 gal flush Kohlers since I put them in myself over 8 years ago
Mick52
Mon, Feb 6, 2012 : 7:32 p.m.
Keep your high flow toilets. The Congressional three flush then clean toilets are a failure.
hut hut
Mon, Feb 6, 2012 : 2:38 p.m.
if people like you would fix their toilets and faucets and use other conservation measures the new facility might not need to be bigger or cost as much to fix.
racerx
Mon, Feb 6, 2012 : 2:16 p.m.
As a former water utility employee, and having worked with both Earl and Mike, these two indiviuals are very competent. This is how government should work for the better part of the community. By undertaking major projects that only government can provide with the goal of serving all residents within the community. Unlike other pet projects of some city employees (ahem...art projects) this is how I want my tax dollars spent. Good for the water utility staff for undertaking a major project as such. Hopefully no one on council will object due to the odors emitted.
thinker
Mon, Feb 6, 2012 : 1:59 p.m.
Is Walsh Construction a Michigan company, and does it employ Michigan workers?
MG
Mon, Feb 6, 2012 : 1:39 p.m.
OK Lifelong A2, since you seem to know so much about the A2 utilizes, then comment on this: - A few years ago it was reported that the city decided to put police protection into the water rates so they could basically raise the rates. - Many years ago the surpluses earmarked for water main upgrades were reallocated to other parts of the city budget and spent, thus leaving the city with no money to do necessary water main upgrades when the time came.
Mick52
Mon, Feb 6, 2012 : 7:30 p.m.
Before anyone responds to this I would like to ask you to post a source, like a news article or info from the city website.
Ed Verhamme
Mon, Feb 6, 2012 : 1:39 p.m.
@amlive - Although i'm not involved with the project, it is very common for property owners to pay for a more precise survey than was originally used to develop the FEMA floodplain maps many decades ago. All the City was doing here was updating topographic maps in the vicinity of the new project to show that the FEMA maps didn't reflect local topography very well. This is very routine, but must follow a set of predefined steps as outlined by FEMA. Technology has grown substantially in the last few decades and residents should be very proud that this project has been planned so well. I am very confident that this new wastewater treatment plant will be a state of the art facility and will meet or exceed all legal requirements. This project is especially timely as the western basin of Lake Erie is experiencing some of the worst algal blooms in recent history and reductions in loadings of nutrients from point sources is a step in the right direction. Now if we could only get the nonpoint source community to invest as much in the future as the City of Ann Arbor then things just might change for Lake Erie.
say it plain
Mon, Feb 6, 2012 : 5:48 p.m.
I hope that Ryan (or someone who knows the details as they exist in this case) answers @amlive's question, Because I agree that if they are going to conduct this rebuild, (which I believe is a much better use of money than the underground garage and yes yes it's coming from water funds surplus in part and so on and forth) it shouldn't involve trying to save (what counts as 'considerable additional cost'; does the city tell us?!) costs to skirt new FEMA regs on floodplains and construction standards. I don't have a problem with the city doing all it can to provide sound wastewater treatment for the city and townships and to plan out into the future for growth of services. I do find the taking on of more and more debt to be troubling, and surely wish the city hadn't taken on some of the very questionable debt and 'expenses' (does the percent-for-art extend to water projects too?! I forget now, given recent attempts by some saner councilpeople to roll that whole thing back a bit!) they have been doing so much of lately. But sure thing all the old water treatment plants and all the old and new "stuff" in our water has got to be dealt with for the health of waters near and far, yikes! I feel like it would be lovely if we had a more coordinated and serious effort on that from all levels of government, but that position often gets counted as 'socialism' I think these days. While apparently letting lobbyists for polluters and toxic-consumer-products-makers decide policy is preferable.
amlive
Mon, Feb 6, 2012 : 2:18 p.m.
Thank you - I hadn't considered the possibility that the previous flood maps may simply have been inadequate. That's a very good, and hopefully correct explanation.
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 1:25 p.m.
@LifelongA2: The June 2010 annual audited financial statement of the city of Ann Arbor (CAFR) indicates on page 30, that there are cash resources available to the water and sewerage systems of the city of $82.7 million and that they are running an annual surplus of $9.5 million (see page 32). So, 2 years later by the time this project starts, it will have accumulated $100 million of the funds required. The Mayor repeatedly asserts that the reason why the city has accumulated over $250 million in cash resources overall and $100 million in unrestricted funds (though a lot of this is restricted by *city council* edict that can be undone as earmarks for specific pet projects) is to pay for this project. My post does not assert that property taxes pay for the sewer and water systems at all as you incorrectly assert. I state that taxpayers fund this and they do, from the charges (taxes) they pay for their taxpayer provided services. Please inform me where I am incorrect or have been proven to be incorrect in ANY of my posts on financial matters of the city, as I'm not aware of any apologies that I've issued in the past and I am very willing to learn new facts and be educated. I'll be expecting that apology right away, thanks! ;-)
Mick52
Mon, Feb 6, 2012 : 7:28 p.m.
@Stephen Ranzini, So much nonsense if correct. Fees are not taxes. You can control how much you pay by cutting your water use. Also you can avoid paying it by living in an area with a well and septic system. In an urban area, water utilities are necessary because of dense population. It is not a monopoly because it is not a private business, which another person suggested here by privatizing, but some services are best delivered by the local govt.
so much nonsense
Mon, Feb 6, 2012 : 5:24 p.m.
@ Stephen Ranzini A fee is NOT a tax. It is not semantics, but rather quite accurate to describe these monies as fees. If you don't want to pay the fees, don't use any water. The fee you pay to the city is not only for the product, but also for the service. A fee is a payment made for a special service. The money is part of a special transaction. A Tax is a demand by government for support of its services levied upon incomes, property, sales, etc.. Only users of water and sewage pay the fee. A tax would make everyone regardless of usage or volume contribute to the upkeep or service. Since only user fees are paying for the service, current maintenance and future upgrades it is a FEE. *source for definitions is dictionary.com However, the government could actually tax "fees for services" if they wanted to. In fact the last couple of years I think the state government tried to implement a tax on some service fees (hair salons, accountants, etc) that would have been similar to a sales tax. Regardless of such a tax, the fee stays the same and the tax would have been on top of the fee.
DonBee
Mon, Feb 6, 2012 : 5:21 p.m.
Cable, telephone (fixed line), gas and electricity are monopolies as well. you can change how much you pay by changing how much you use. You can go off the system (get disconnected) by choosing not to use the system - 1 million homes are off the electric grid in the US today. Millions more do not take cable, and even more don't use natural gas. Many people have dropped fixed line phones. I know some homes that use composting toilets and haul their own water. You can choose not to pay, it just takes work on your part. Water, electricity, natural gas all are tariffs. Not fees, not taxes. Laws require regulators to keep the rates as low as economically feasible, while maintaining the health of the overall system.
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 4:16 p.m.
@So Much Nonsense: Of course, 3/13ths of the fees (taxes) are being paid by taxpayers and residents outside of Ann Arbor if Ann Arbor taxpayers and residents are paying 10/13ths. Paying the sewer and water fees are mandatory because it is a MONOPOLY. I don't buy into the semantic crap some politicians throw at us that a "fee" is not a "tax", especially when you cannot opt to not pay it. Just try NOT paying your sewer and water fees to the city and see what happens to your property! When city council raises sewer and water "fees", they are raising the taxes on the citizens, and every citizen resident in Ann Arbor uses sewer and water services.
so much nonsense
Mon, Feb 6, 2012 : 2:51 p.m.
@Stephen Ranzini You're wrong. I read and interpreted your comments exactly how Lifelong did. You did imply that Ann Arbor residents are subsidizing the townships. You said that the "ann arbor citizens" will be paying 10/13th of the costs...you did not say users of the system. When you use the word residents instead of saying users you give a different impression. Many non- ann arbor residents use the system, pay into it and will pay for future improvements also.
DonBee
Mon, Feb 6, 2012 : 1:40 p.m.
Please see my post to your first post. All of the cost for this project, water and sewer main repair/replacement, drinking water treatment plants, etc. come from the rates you pay on the water you use. Studies prove that the township water users, on average, return less in the way of sewage than city users. So on average, they pay more per gallon for sewage treatment than city users do. As to the $100 million in capital in the budget, it would be interesting to see how it is allocated. Since there are water/sewer mains that need to be replaced (not including the capital project anticipating the Fuller Road Station - which drained a big chunk of the capital in the water fund). Also the status of the drinking water plant and any improvements needs to be reviewed. Given the increasing amount of drugs and other impurities in the input water. Eventually rules will be issued to remove these impurities too. That will be expensive. What we don't know is when and how much.
RUKiddingMe
Mon, Feb 6, 2012 : 1:14 p.m.
"Tom Crawford, the city's chief financial officer, said the fact that the city is embarking on such a major project is the reason why utility rates have steadily increased, and why the city's utility funds show surpluses year after year. That money is being stockpiled for projects like this." So I will NOT be seeing another increase in my rates, right? Since you've been stockpiling the money from previous increases? And, it seems obvious, but I hope this construction company includes some kind of guarantee of their work. Would hate to see West Park repeated. Would also hate for the "contingency" quote, which I typically don't see included in the bid price, to be used at its max. Would also hate for this project to go as woefully overbudget as city hall, or over schedule as the big dig. And I hope we're not spending more on "green" features than we save because of them. And I hope when they see a chane to save money, they actually save it, instead of looking to spend it on something else, as with the dam improvements. ..I guess I would just like to avoid all of the mismanagement we've seen so far, since this is an important project.
InsideTheHall
Mon, Feb 6, 2012 : 1:08 p.m.
This plant sould be turned over to a private sector operator who then in turn can make the capital investment if it warranted. Mr. Ranzini: Pittsfield is under YUCCA with the exception of the "enclave" which is a tiny fraction of the Township.
Peter Baker
Mon, Feb 6, 2012 : 2:54 p.m.
Why exactly should this be a private sector operation? So they can find ways to make a profit on providing clean water? You think that'd end up costing us any less?
hut hut
Mon, Feb 6, 2012 : 2:34 p.m.
Then the private sector operator can charge us whatever they like and use the profits to buy corporate jets. Hostages to the need for ever higher corporate profits anyone?
Kai Petainen
Mon, Feb 6, 2012 : 12:56 p.m.
my viewpoint might not be popular... but i''m quite happy that they're going to fix this place. awesome stuff.
manbearpig
Mon, Feb 6, 2012 : 12:55 p.m.
This better not end up putting 1% (1 million) in the art fund. If we save that million maybe we can keep are rates the same
manbearpig
Mon, Feb 6, 2012 : 3:13 p.m.
our
justcurious
Mon, Feb 6, 2012 : 12:44 p.m.
The Arts Commission will like this.
amlive
Mon, Feb 6, 2012 : 12:38 p.m.
It's good to see projects undertaken before their need has come past due (Stadium bridge anyone?). An expensive one, yes, but far more necessary a service maintenance than the money pit on Fifth or the already architecturally dated silver brick two blocks north. What I'm not clear on Ryan, is FEMA's redrawing of the flood plain. This redrawing of the lines, does this mean that the landscape will be modified to truly affect the flood plain and protect from sewage overflow in a 500 year flood, or is this just fancy pencil-and-erasor work to accommodate budget? Are we skirting requirements for new construction by updating the old, or will the project actually be fully up to current standards when done?
Lifelong A2
Mon, Feb 6, 2012 : 12:24 p.m.
As usual, Mr. Ranzini's comments demonstrate that he doesn't understand the City's finances. The township residents who utilize the city's water/sewer system aren't being subsidized by City taxpayers. Those township residents pay for the water/sewer, just like those of us in the City pay for it. Those water/sewer fees are the system's primary source of revenue; the system is *not* subsidized by property taxes paid by City residents. Mr. Ranzini also implies that the City has accumulated enough surpluses in its utility funds to pay cash for this project, thus avoiding the need for the 2.5% loan. Mr. Ranzini is wrong. The surpluses in the utility funds are by no means sufficient to pay cash for the project, but they are enough to pay the principal and interest on the bond payments. This demonstrates sound financial planning: many other cities that undertake such projects fail to plan in advance, and are therefore required to dramatically increase utility rates. People who comment about City finances should first understand what they're talking about.
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 8:49 p.m.
@Lifelong A2: The City's CFO, Tom Crawford also disagrees with you: "Mayor John Hieftje asked Ann Arbor's CFO and interim city administrator Tom Crawford to respond to comments by Stephen Ranzini during public commentary about $103 million being in a rainy day fund. Crawford suggested that Ranzini was referring to the aggregated fund balance. For some of that amount, it's not appropriate to use it for the general fund, he said, because it comes from ratepayers for utilities. A lot of that $103 million is reserved for construction of the new wastewater treatment plant, Crawford said." see: <a href="http://annarborchronicle.com/2011/05/19/ann-arbor-council-delays-budget-vote/" rel='nofollow'>http://annarborchronicle.com/2011/05/19/ann-arbor-council-delays-budget-vote/</a> The June 2010 annual audited financial statement of the city of Ann Arbor (CAFR) indicates on page 30, that there are cash resources available to the water and sewerage systems of the city of $82.7 million and that they are running an annual surplus of $9.5 million (see page 32). So, 2 years later by the time this project starts, it will have accumulated $100 million of the funds required. The Mayor repeatedly asserts that the reason why the city has accumulated over $250 million in cash resources overall and $100 million in unrestricted funds (though a lot of this is restricted by *city council* edict that can be undone as earmarks for specific pet projects) is to pay for this project. My post does not assert that property taxes pay for the sewer and water systems at all as you incorrectly assert. I state that taxpayers fund this and they do, from the charges (taxes) they pay for their taxpayer provided services. Please inform me where I am incorrect or have been proven to be incorrect in ANY of my posts on financial matters of the city, as I'm not aware of any apologies that I've issued in the past and I am very willing to learn new facts and be educated. I'll be expecting that apology right away, thanks! ;-)
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 8:39 p.m.
@Lifelong A2 stated incorrectly: "Mr. Ranzini also implies that the City has accumulated enough surpluses in its utility funds to pay cash for this project, thus avoiding the need for the 2.5% loan. Mr. Ranzini is wrong. The surpluses in the utility funds are by no means sufficient to pay cash for the project..." In addition to the city's audited financial statement (page 30) which I cited in my posts on this story, Mayor Hiefje disagrees with you, perhaps you should get his opinion? "Hieftje told residents the increases [in sewer and water rates] have helped build up money so the city can pay for necessary upgrades to the city's sewage treatment plant. "Our sewage treatment plant, a whole section of it, was built in the 1930s with stimulus money during the Great Depression," he said. "It's sort of ironic that we're fixing it now again, but that's a $140 million overall project when you combine it with some sewer mains and things like that. But we have been paying for that already and we already have quite a bit of that money — over half of it — assembled in the account so that we can move forward and get the work done." See: <a href="http://www.annarbor.com/news/ann-arbor-mayor-john-hieftje-finds-widespread-support-for-campaign-in-his-opponents-neighborhood/">http://www.annarbor.com/news/ann-arbor-mayor-john-hieftje-finds-widespread-support-for-campaign-in-his-opponents-neighborhood/</a>
so much nonsense
Mon, Feb 6, 2012 : 7:13 p.m.
@JCJ The gas tax is a tax. If it was a fee, all the dollars would go to pay for the product and to the service of supplying the gas (production costs, upkeep of refineries etc). We pay a certain amount of money for the gas to the company that produced it (fee) and a small percentage of the purchase price to the government (tax). It is a tax because the government takes the tax money and uses it for other things in the government such as roads. Same applies to alcohol and cigarettes.
jcj
Mon, Feb 6, 2012 : 6:26 p.m.
so much nonsense So why do we call it a gas tax? If I don't use any gas I don't pay any gas tax!
so much nonsense
Mon, Feb 6, 2012 : 5:26 p.m.
@ Stephen Ranzini A fee is NOT a tax. It is not semantics, but rather quite accurate to describe these monies as fees. If you don't want to pay the fees, don't use any water. The fee you pay to the city is not only for the product, but also for the service. A fee is a payment made for a special service. The money is part of a special transaction. A Tax is a demand by government for support of its services levied upon incomes, property, sales, etc.. *source for definitions is dictionary.com Only users of water and sewage pay the fee. A tax would make everyone regardless of usage or volume contribute to the upkeep or service. Since only user fees are paying for the service, current maintenance and future upgrades it is a FEE. However, the government could actually tax "fees for services" if they wanted to. In fact the last couple of years I think the state government tried to implement a tax on some service fees (hair salons, accountants, etc) that would have been similar to a sales tax. Regardless of such a tax, the fee stays the same and the tax would have been on top of the fee.
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 4:01 p.m.
@So Much Nonsense: Paying the sewer and water fees are mandatory because it is a MONOPOLY. I don't buy into the semantic crap some politicians throw at us that a fee is not a tax. Just try NOT paying your sewer and water fees to the city and see what happens to your property! When city council raises sewer and water "fees", they are raising the taxes on the citizens, and every citizen resident in Ann Arbor uses sewer and water services.
so much nonsense
Mon, Feb 6, 2012 : 2:47 p.m.
@Stephen Ranzini You're wrong. I read and interpreted your comments exactly how Lifelong did. You did imply that Ann Arbor residents are subsidizing the townships. You said that the "ann arbor citizens" will be paying 10/13th of the costs...you did not say users of the system. When you use the word residents instead of saying users you give a different impression. Many non- ann arbor residents use the system, pay into it and will pay for future improvements also.
getmoney
Mon, Feb 6, 2012 : 1:56 p.m.
Man, I was hoping one of them started by saying, "Jane, you ignorant slut..."
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 1:40 p.m.
@drewk is quite correct and @LifelongA2 is not. Please see my post below. Thanks! P.S. In addition to what I wrote, another erroneous assertion by @LifelongA2 is that I wrote that Ann Arbor taxpayers pay more of the fees charged for services by the sewer and water systems. I did not write in my post anything other than that AnnArbor citizens are paying 10/13ths of the cost, being 100,000 of the 130,000 people served. Hey, @LifelongA2, I'll take that apology now, please! ;-)
drewk
Mon, Feb 6, 2012 : 1:06 p.m.
After re-reading your argument with Ranzini I found nowhere did he imply that city taxes were being used to pay for this as you suggest. But, we as taxpayers have been told repeatedly that our water and sewer rates are being raised dramatically to cover the costs involved with this project. So, where is all that money now? Hmmm
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 11:35 a.m.
While on the surface this project sounds very reasonable and necessary, perhaps some deeper thought needs to be considered. If the existing plant is operating well every day at 92.5% of permitted capacity, why do we need to expand it? Where is the growth going to come from since Ann Arbor is land locked and not expected to grow its population very much over the next 20 years? The answer comes from the fact that the plant serves not just the city of Ann Arbor but 30,000 people "in portions of Ann Arbor, Pittsfield and Scio townships". So, basically, Ann Arbor tax payers are bearing 10/13ths of the cost of future expansion of the suburban sprawl in those townships and will receive very little benefit for this project! Ouch! Secondly, we've been told for years that the accumulation of $100 million in cash is to pay for this project, yet the city now plans to borrow $109 million to fund it because we can borrow cheaply at 2.5% for 20 years. What's the point of that? So the city can invest the extra cash and try to earn a spread over 2.5%? Is the city running a hedge fund speculating on it's ability to invest wisely when safe investments yield 1% to 2%? Or, is the $100 million now to be used for some other purpose yet to be revealed?
John Q
Tue, Feb 7, 2012 : 4:29 a.m.
"So, basically, Ann Arbor tax payers are bearing 10/13ths of the cost of future expansion of the suburban sprawl in those townships and will receive very little benefit for this project!" Show us a tax bill where you are paying for this expansion.
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 8:24 p.m.
@manbearpig: the west and east facilities have a combined permitted capacity of 29.5 million gallons per day, however as the article notes, the west facility has been out of service since 2006, and the east facility that is currently being used has a permitted capacity of 20.0 million gallons per day. The article notes that average daily flow is 18.5 million gallons per day. 18.5/20 = 92.5%
snark12
Mon, Feb 6, 2012 : 5:49 p.m.
With regards to the $109 in bonds: I doubt the point is to invest the $100 million and make money beyond the interest on the bonds. The point is that it is almost certain interest rates will be higher at some point in the future when we need more money for other projects. So we could spent the cash on hand now and borrow at a later date, at a higher interest rate, or borrow now while rates are cheap.
manbearpig
Mon, Feb 6, 2012 : 5:06 p.m.
where does 92.5% come from? The only number's i see in the article is "The plant's permitted capacity is 29.5 million gallons per day, while the average daily flow is about 18.5 million gallons. The maximum hydraulic flow is 48 million gallons per day." Im not arguing, I am just wondering
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 4:31 p.m.
A2pilot: That's an interesting thought and perhaps you've hit the nail on the head. Perhaps this expenditure is for improving the lifestyle of fish and wildlife and the ecology of our region? If so, I think that is wonderful, however we ought to have a discussion about the benefit versus the cost. Do you have any specific *data* on the incremental benefit to the environment that this project would result in? I'd really appreciate it!
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 2:53 p.m.
@pbehjatnia: Thanks very much for your very kind thought. Running for political office is a very big undertaking, and requires a lot of help. If you REALLY are serious about wanting me to run for political office, please email me at ranzini@university-bank.com and tell me some details of how you would able to help such an effort. Perhaps if enough people do so, I would begin to seriously consider it. Or, tell me why I would be wiser to stick to focusing on my day job as the CEO at University Bank. Whether you decide to email me or not, thanks for your generous sentiments.
Stephen Lange Ranzini
Mon, Feb 6, 2012 : 2:36 p.m.
@amlive: SEMCOG provides the city with it's official population growth forecasts for planning purposes. What SEMCOG projects for growth to 2040 is as follows: "For the county, the initial forecast shows the population growing from 344,791 in 2010 to 352,616 in 2020 – a 2.2% increase. By 2040, the county's population is expected to reach 384,735, an increase of about 40,000 people from 2010. The population in Ann Arbor is projected to stay essentially flat, while some of the county's townships – including the townships of Augusta, Lima, Manchester, Saline and Superior – are expected to see double-digit growth." see: <a href="http://annarborchronicle.com/2012/01/12/city-planners-preview-semcog-forecast/" rel='nofollow'>http://annarborchronicle.com/2012/01/12/city-planners-preview-semcog-forecast/</a> So, for the next 28 years Ann Arbor's population is not expected to grow and for the next 8 years the entire county population is expected to grow just 2.2%. None of the townships served by the plant are expected to see even 10% growth over the next 28 years. Is it urgent to make this huge investment when no growth is forecast of an amount required to use the new plant? I would like someone to explain why the investment is required at this time, or even for the next few years, or is it another boondoggle?
a2pilot
Mon, Feb 6, 2012 : 2:25 p.m.
92.5% sounds like plenty of room to grow but that's not the issue. A few days of heavy rain and the plant can't treat the water coming in(a majority of the water treated is runoff water)and guess where the overflow goes? It can go right into the Huron.
DonBee
Mon, Feb 6, 2012 : 1:31 p.m.
Mr. Ranzini - In this case, your charge for water, no matter where you live includes the cost of sewage treatment, most township locations actually return a lower percentage of water as sewage than most city users, but they pay the same amount per gallon of clean drinking water. The plant meets current requirments for water quality, but will not meet projected requirements, so it will have to be rebuilt in the near future anyway. Most of the township users are in the area that can be incorporated into the city proper via annexation, so if Ann Arbor really wants to it can annex most of these people. Of the projects that the city has undertaken, this one probably makes the most sense for the future of the city and the Huron River.
amlive
Mon, Feb 6, 2012 : 12:27 p.m.
I do agree with you about the peculiarity of saving for a project, then keeping that saved money in reserve and instead borrowing for the project we've supposedly been saving for. I'm not quite clear on this, but then again there are a lot of things in city finance I've never been able to make sense of. As to this point however - "If the existing plant is operating well every day at 92.5% of permitted capacity, why do we need to expand it?" - I don't know about you, but to me 92.5% capacity (reference?) seems pretty close to the edge. If improvements take several years to complete, just how narrow of a buffer do you think we need to keep before beginning a large project like this? Even if our city is growing at a snail's pace, I don't think it would be wise to wait until we are at 97-99% capacity before beginning a five year project. An expensive project, yes, but it seems one of the more necessary and worthwhile ones our city has decided to undertake. I'd rather see it done now then wait until it becomes an emergency.
pbehjatnia
Mon, Feb 6, 2012 : 11:48 a.m.
Would you consider running for mayor? Seriously. Please consider it.