Despite it being called into question at last week’s Leelanau Township’s regular board meeting, the Northport-Leelanau Township Utility Authority (NLTUA) can enforce municipal sewer rate increases, even if the majority of one of the constituent municipalities does not approve of the cost.
Earlier this month, the Northport Village Council unanimously approved the NLTUA’s annual rate increase as well as an additional loan request of $190,000 for capital improvements. The village approved the rate increase after the NLTUA conducted a comprehensive utility rate study that highlighted three options as to how to move forward in an already “cash critical” state, going with “scenario one” of three options, which proposed the 8% annual increase over the next four years.
The report also noted that “inflation and capital costs are increasing at unprecedented rates and the projection should be updated every year with the budget process to ensure the findings in this report are on track.” According to the utility study proposed rate design and impacts at 8%, the operations and maintenance charge will increase to $276.48 in 2025, which is a quarterly increase of $20.48. In 2026, users are expected to be charged $298.60, then $322.49 in 2027, and $348.29 in 2028.
While the village gave their approval of the rate increase and loan request, the same resolution was shot down in a 4-1 vote at last week’s Leelanau Township regular board meeting. Mike McMillan, Leelanau Township supervisor, said the confirmation of rates set is clearly stated in the NLTUAs bylaws and follows precedent from last year’s system user rate increase of 45%, which was not voted on by the township board.
In January, the NLTUA approved an increase and its biggest hike yet of operations and maintenance sewer rate fees to $256 per quarter for system users, up $80 from the rate in 2022 of $176 per quarter. He also noted how the village had to take a vote on the resolution because it included the capital improvements loan to support the operating maintenance budget.
“The township vote will be recorded as an ‘advisory’ vote, but not binding to the NLTUA,” McMillan said. “...The Leelanau Township board discussion was designed to put the rate study into the public record. In hindsight we did not need to vote on the proposal.”
Over the last week, NLTUA board members have sought advice from legal counsel regarding who can make sewer operating and maintenance decisions. NLTUA member and Northport Village Council trustee Will Harper explained that if attorneys say the (utility) authority can set rates for operations and maintenance separate from debt retirement and connection fees, this would “render the township vote meaningless, as the 8% year over year increases are for operations.”
According to the NLTUA’s rules and regulations/articles of incorporation, in order to assure safe transportation and treatment of sewage discharged into the system, the system must receive sufficient total annual revenue to ensure its proper operation and maintenance, its development and perpetuation of the system, and its preservation of the financial integrity of the system. In addition, the authority determined that the system will be self-sustaining and will be supported solely by the revenues of the system (rates, fees, and charges) and special assessments.
“The purpose of sewer rates is to produce sufficient revenues each year to pay the costs of service,” the NLTUA rules and regulation states. “The authority shall develop the costs of service based on 5-year projections of cash needs, adjusted for inflation, and shall base rates each year on the estimated needs for those 5-year periods, adjusted annually. The costs of service to be paid from revenues shall include all of the following: (1) operation and maintenance expenses, (2) debt service expenses, and (3) capital expenses not funded from bonded indebtedness.”
Northport Village Council President Chris McCann went on to further discuss the role NLTUA plays based on its articles of incorporation at the utility authority meeting on Tuesday. Also highlighting the NLTUA regulations, McCann added that the annual audit helps the group make sure their projections are being followed and that they are staying on course.
“In our articles of incorporation, it talks about how we’re supposed to supply the municipalities with the budget 60 days prior to the proposal, but it does say the budget is adopted by the authority board,” McCann said at the NLTUA’s Tuesday meeting. “The budget shall be adopted unless approved by at least a simple majority of the members of the authority board — so we do have some stuff there I think outlines what our duties are in terms of the sewer rates and the budget.”
