Lawsuit challenges Detroit water rates for high-volume customers - Detroit News
Lawsuit challenges Detroit water rates for high-volume customers
Sarah Rahal
Detroit — An industrial water customer in Detroit has filed a class-action lawsuit in Wayne County Circuit Court challenging Detroit's water-rate charges for those that use it in mass quantities.
The lawsuit filed by Ajax Metal Processing Inc. on Nov. 27 alleges the city's water rates for commercial users are resulting in overcharges that are "arbitrary, capricious and unreasonable and therefore are unlawful under Michigan common-law."
In August 2022, Detroit's Water and Sewerage Department changed the structure of water rates where users pay different amounts for different consumption levels, referred to as a block rate. Meters measure the volume of water used in hundreds of centum cubic feet (CCF). One CCF of water equals 748 gallons.
Rates are charged for water being consumed and disposed of through separate rates.
For those using less than 4,500 gallons (six CCFs) per month, the Board of Water Commissioners approved a rate of $2.50 per CCF per month in 2022. In July 2023, the commission increased that rate by 8 cents to $2.58.
For high-volume customers, they charged an increase of 14 cents per CCF from $4.49 to $4.63 in July. The more water used, the higher the rate increases.
Sewerage rates have also increased per CCF from $5.40 in 2021, to $5.54 in 2022, and to $5.71 in 2023.
The drainage monthly rate has increased slightly depending on how much acreage the land is — from $677 in 2021, to $678.28 in 2022, and $695.23 in 2023.
"The city's use of the block rates results in high-volume water users, almost all of which are commercial and industrial users, being charged amounts far in excess of the amount the city actually incurs to service those users," according to the lawsuit. "The block rate overcharges allow the city to charge residential water customers much less than the amount the city actually incurs to service those users, even though there is no meaningful per-gallon difference in the cost of servicing each class of users."
The change in water rates started in August 2022 after the city announced its first income-based water affordability program called the Lifeline Plan last summer. The Detroit Water and Sewerage Department announced new standards to charge low-income residents 1.8% of their average monthly household income — about $18 a month for low-income residents, and up to $56 a month for residents that have moderate income.
“We have received the Ajax complaint and we are reviewing it with outside counsel," said Bryan Peckinpaugh, spokesman for DWSD. "The inclining block rate for water usage was created by the Detroit Water and Sewerage Department effective August 2022, as approved by the Board of Water Commissioners, based on a Detroit water, sewerage and drainage rate study performed by a nationally recognized ratemaking firm. The inclining block rate was not developed for the DWSD Lifeline Plan. Other than this statement, the department does not comment on pending litigation.”
The lawsuit claims the block rates violate the Detroit City Charter, which requires all water rates to be "equitable."
"The two 'tiers' adopted by the City bear no reasonable relationship to a difference in costs associated with servicing the two 'tiers' but instead have been carefully crafted to move the financial burden of paying the City's costs of providing water service off of residential customers and on to commercial and industrial users," the lawsuit alleges. "In essence, the City's use of the Block Rates discriminates against the disfavored significant users by forcing them to subsidize the City's cost of servicing the favored residential users."
The lawsuit seeks overcharges to be refunded and is requesting an injunction prohibiting the city from utilizing block rates in the future.
Ajax Metal Processing opened in 1967, developing specialized metal-processing services including plating, locking and sealing metals, according to its website. The company, located on Gratiot in Detroit's east side, could not be reached for comment.
Ajax Metal is represented by Kickham Hanley law firm based in Royal Oak. Attorneys could not be reached for comment.
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