By continuing to pay higher monthly rates for the next decade or so, the relatively small number of sewer customers in Dalton Township are literally helping the township avoid a possible “financial disaster,” according to officials.
That’s because customer sewer payments have not provided enough revenue to keep pace with costs over the years, and the township sewer fund was on a collision course with insolvency in the near future.
Insolvency would have led to an inability to make annual payments on the bond that was sold to finance the original $2.2 million sewer project, which in turn would have led to much bigger issues for the township.
This year the township will pay roughly $170,000 in principal and interest payments on the bond sale, and there are many other ongoing sewer costs, as well.
In response to the problem, the township board raised the sewer rate for customers by a whopping 60% in 2022, and plans to continue to increase it by 4% every year through 2035, when the bond is paid off.
The latest part of that plan was put in place Monday, June 10, when the Dalton Township board voted to approve the latest increase.
Beginning in July, the monthly sewer fee for residential and commercial customers will go from the current $41.60 per REU (residential equivalent unit) to $43.26. There are only about 135 customers hooked up to the township sewer system.
Without the continued sewer rate increases, it was determined that the township’s sewer fund would have been insolvent by 2026, according to Dalton Township Supervisor Jeff Martin.
That could have led to financial problems extending well beyond the sewer, Martin said.
The township financed the original sewer installation project in the early 2000s with a bond sale, and Muskegon County was the co-signer. That means that if the township ever fails to make payments on the bond, the county would have to pick up the tab.
If that occurred, the county would be free to claim Dalton Township’s annual state revenue sharing dollars, which comprise roughly half of the entire township budget, Martin said.
That could have led to a big budget deficit and massive spending cuts at the township level that could have interfered with all sorts of services.
“Such a path of decisions would lead to financial disaster that would negatively affect the operations of the township in substantial ways for years,” according to the official township board motion to raise sewer rates for the coming year.
As Martin summed it up, “It was going to be a huge disaster.”
The need to substantially raise revenue goes all the way back to 2006, when the township’s sewer mains, covering roughly 10 total miles along River Road and Whitehall Road, were installed.
The customer rates that were charged at that time were based on a lot of assumptions that did not come true, according to Martin.
One big assumption was that Michigan’s Adventure amusement park would immediately hook up to the sewer system and be a very large customer, along with one other large business and a large trailer park.
But the presumed large business customers did not hook up right away and the trailer park ceased to exist, meaning much less revenue was coming into the system than anticipated.
The sewer system was also installed based on the assumption that the section of Whitehall Road in Dalton Township would experience rapid commercial growth, which would have provided many more sewer customers, but that did not happen.
“The original financial plan assumed that everything would go well, and it did not,” Martin said. “A few things ended up going wrong. There was a big push to get Michigan’s Adventure connected, but they decided not to connect at that time. That was a massive financial loss. Duck Creek RV Park, which would have been the other big customer, did not connect, and we lost about 90 houses worth of revenue (when the old trailer park went out of business and did not hook up).”
In the meantime, there were various lawsuits involving the sewer system, and the township was lax about raising customer rates over the years, meaning hopes for maintaining a financially solvent sewer fund continued to deteriorate.
At one point Muskegon County and the company that owns Michigan’s Adventure kicked in about $700,000 to help the township keep its sewer fund solvent, Martin said, but that only helped for so long.
“There was no plan (to deal with the situation) when I came into office,” Martin said.
Martin and the current board started working on a strategy to address the issue when they were elected back in 2020.
The first part of that plan was to sell a bunch of property owned by the township and dedicate $500,000 of the proceeds to the sewer fund, to offset the pending rate increases a bit.
The board also commissioned a study of the sewer system’s finances to determine what actions were necessary to keep the sewer fund healthy enough to cover the annual bond payment, various other payments and maintenance and repair costs.
That resulted in the sewer rate increase plan. Officials believe that will provide enough revenue to pay off the bond in 2035 and maintain enough money in the fund for maintenance and repairs.
The township board approves the increases on an annual basis.
Martin said the idea of doing nothing at all about the pending financial disaster was actually presented to him as a legitimate option, but was quickly rejected.
“At one point I reached out to the lawyers at the Michigan Townships Association, and I was advised not to address (the money problem) and then handle it from there, asking for someone to bail us out,” Martin said. “I thought that was utterly ridiculous.”
Surprisingly, there has never been much public backlash against the rate increases, including the original 60% increase, according to Martin.
“I had a letter sent (about the original increase) to all of our customers, and I expected a bunch of kickback on that,” Martin said. “I had a few people respond and say they were not happy, but they understood the situation. I even had a couple of people come in and thank us for fixing it. That was very unexpected.”
