In a budget meeting and special session on Monday night, Ann Arbor City Council discussed incorporating a new customer classification for water rates, implementing a capital financing strategy to address issues such as street lighting and a compensation increase for the City Administrator.

During the budget meeting, City of Ann Arbor Public Services proposed plans to create a new addition to the customer classification system used to address affordability in Ann Arbor water rates. Water rates were previously classified among three categories: Residential, non-residential and water only. With the new public services model, the rates would reflect a fourth category; multifamily, which, according to Public Services Administrator Craig Hupy, is a class of customers that is easier to serve.

“We identified it as a class that is easier to serve,” Hupy said in response to a question fielded by City Council regarding each individual’s ability to pay these rates. “We can only look at that, we can’t look at what they can pay.”

If the new classification goes through, about 2,500 accounts will be reclassified. During the public comment, several Ann Arbor residents including Leon Bryson expressed their concern regarding this new water rate plan.

“The resolution is to increase the rate so that the residents are actually paying what it costs,” Bryson said. “If we use this model for water rates we are setting a model. I’m concerned that if we do this, we have to do it for all areas of government.  We can’t just apply it to water. I think there needs to be a bit more discussion for structuring the tiers based on how we use the services.”

Explaining their reasoning behind this new classification and the rate increase, Andrew Burnham, vice president and practice leader at Stantec, argued their proposal was common and meets the needs of the data from water use.

“We now have a way to serve to customer classes and we are reflecting that in our rate system,” Burnham said. “Now we have identified how much we use for each customer. Then what rate structure fits each customer. These are directly proportional rates based on the demand per cubic feet that these place on the system peak demands.”

In addition to discussing water rates, Hupy told the council they are currently interviewing four vendors for the Solid Waste Resource Management Plan.

Amid discussions of higher water rates, Tom Crawford, chief financial officer of Ann Arbor, discussed capital financing.

Crawford explained the capital financing policy as “(a) sinking fund based on prioritization of need.”

Financial Services explained that a new capital financing policy would allow the expenditure to follow a steady rate rather than causing the budget to go through harsh spikes in expenditure through wear and tear.

Councilmember Jane Lumm, I-Ward 2, expressed concern regarding the capital financing policy.

“Conceptually this makes sense, but its obviously expensive up front to prefund all of this,” Lumm said.  “Where will this money come from?”

During the budget proposal, Financial Services also discussed increasing expenditure for street lighting.  Following the capital financing policy, they proposed increasing the street lighting budget by $295,000 to $595,000.  With this new budget, City Council could install about 30 new streetlights a year.

Financial Services also proposed using proceeds from the mental health millage for pedestrian safety — including street lighting and electronic speed limit signs near schools — as well as climate action and affordable housing.

While the budget addressed issues with city hall security, street lighting, and police transparency, Crawford also addressed future issues for the city such as medical marijuana, increasing parking meter enforcement hours, the Solid Waste Fund, as well as the financial needs of a community policing board.

During the special session, which followed the budget meeting, City Council passed an improved contract of compensation for City Administrator Howard Lazarus, following a positive performance review. The council agreed to a 4 percent raise to Lazarus’ current salary of $215,000 to an annual salary of $223,600, effective Jan. 1, 2018.

Several councilmembers including Councilmember Jack Eaton, D-Ward 4, expressed concern regarding the increase in overhead funding.

“Each increase in staffing has an overall impact on our general fund,” Eaton said. “We are shifting our focus from serving our residents to staffing our overhead which is alarming.”

The councilmembers also expressed concern regarding hiring an assistant for the administrator. Sumi Kailasapathy, D-Ward 1, argued that in light of other pressing expenses such as road construction, she did not think it was the right time to increase overhead costs.

“I’m not sure this is the time to be hiring a deputy at this time,” Kailasapathy said. “Just of the cost of this overhead going up. I am not sure having an assistant and a 4 percent raise is the right combination at this time. I will be voting against it.”

Despite some pushback from several councilmembers, City Council moved forward with the pay increase. Councilmember Zachary Ackerman, D-Ward 3, explained Lazarus has been exceeding the council’s expectations.

“I will be glad to support this,” Ackerman said. “Even those who don’t want this raise are doing nothing but singing his praises.”

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