Performance audit of Lorain Utilities Department highlights rate burden on low-income customers, costs of utility service

LORAIN — A performance audit from the state suggested water and sewer rates in the city are a burden to residents, but may not cover all future expenses. State Auditor Keith Faber's office completed the performance audit of the city's Utilities Department, examining costs, revenue and staffing levels in response to a request from the city last year. Mayor Jack Bradley said the findings, released Thursday, will have to be reviewed by City Council and the newly created Sewer and Water Advisory Board at its June 16 meeting. Water and sewer rates for customers in Lorain have been a point of contention for several years. A hike in the flat readiness-to-serve charge went into effect in 2017. The report notes flat and variable charges have been on the rise in Lorain and elsewhere since 2000, but the sharp increase in 2017 created a moderate-to-high burden on the city's lowest income households. The 2017 increase came in part from U.S. Environmental Protection Agency mandated improvements to the city's infrastructure. In 2020, Council lowered the sewer flat-rate back to 2017 levels, citing an $18 million cash surplus in the water fund. Similarly, former Safety/Service Director Max Upton lowered the flat-rate charges for water service back to 2017 levels that spring. The fund had a $21 million cash balance at the time. The audit gave no hard directive to the administration or Council, but instead was intended to inform decisions moving forward. The performance audit recognized the rates, even after the readiness-to-serve charge was lowered to 2017 levels, could still cause a burden to customers. Using 2018 census data, the audit compared residents' median household income with an estimated usage of 7,8000 gallons of water and wastewater per month and compared it with peer cities' rates. It estimates Lorain residents spent about $803 a year on water bills, or 2.26 percent of their annual income. Residents in similar cities spent about 0.82 percent of their annual income in the same period. Similarly, wastewater charges cost Lorain residents about $904 per year, or 2.54 of their annual income. Customers in similar cities average about 1.38 percent of their annual income on sewer costs. Many of the city's ratepayers are below 200 percent of the federal poverty line, and the city could face an increase in the costs it incurs to provide utilities over the next 18 years. The report said the city needed to balance covering those costs with the impact that doing so would have on residents, especially those at the lowest income level. "Compared to our peers, (the rates) would really not be high, but because of the moderate-to-low income families that we have, they would be high no matter what," Bradley said. "… We did take the steps to reduce the rates and some of that reduction was taken into account and some of it wasn't because of the period of time (the auditors) were covering." He added later, "These are all things we want to review with the Sewer and Water Advisory Board. We have to maintain our payments on debt and we also have to make sure we're able to do all the repairs and other things required by the EPA to make sure we don't have a problem with wastewater overflows." The city's water and sewer revenue outpace its operational and maintenance expenses, leading in part to the high cash balance, but it may not be sufficient to cover all costs associated with providing utility service in the future, according to the report. Projections show the 2017 rate increase was appropriate in covering the full cost of water and sewer operations, while 2019 rates eventually fall short. It suggested the city look at creating a capital improvement plan for the more than $91 million in planned projects through 2023 and beyond. It also suggested assessing the city's billing system to allow for better management, and looking at staffing levels in the Water and Sewer departments. Auditors estimate the city could save about $1 million total by reducing the water treatment and distribution staff by the equivalent of 6½ full-time employees and the wastewater treatment staff by the equivalent of 7½ full-time employees based on the average workload for each employee. Bradley said in talking to the auditor, the comments regarding staffing did not take into account the age of the city's water and wastewater treatment facilities when compared to neighboring similar cities. Portions of its main water treatment plant date to 1906, meaning the systems in place require manpower to shift valves and levers rather than making changes via a computer or app. A 2019 study from Cornwell Engineering Group estimated a new water treatment plant could cost around $47 million. Bradley hoped the performance audit could restart some of those discussions, as well as visions to move the main wastewater treatment plant farther down the Black River. The performance audit originally cost the city $70,000. Bradley said the state is reducing that cost by about $14,000 as either a refund or credit due to how well the city worked with its audit team. Contact Carissa Woytach at (440) 329-7245 or cwoytach@chroniclet.com.