A Rate in Review
With one of the world’s foremost universities in the adjoining city, Ann Arbor Township thrives on the migration of highly educated, well-to-do individuals out of the metropolis and into its sprawling open spaces and rolling hills.
And with the educated masses comes sound management of the community. The ordinances are strong and the finances are in good order, so the township knew how to position itself to handle the demands coming its way.
With a solid financial strategy behind its utility rates, a stable tax base and a healthy budget— the Township has maintained a solid fund balance. When the introduction of a new development from the University of Michigan spurred a review of their water and sewer rates to ensure the fund’s health would continue, the Township called in WHG.
With the SAW Grant as financial aid to the local communities of Michigan, Ann Arbor Township availed itself of the state funding and WHG’s resources to conduct an in-depth analysis of its utility rates and connection fees to determine the best possible model going forward for maintaining their system’s footprint.
The problem was the volatility. With rates jumping from the city and infrastructure needs going gang-busters, the township residents could be subject to volatile fluctuations in utility rates from one year to the next.
The WoodHill Group Solution
Building a customized utility rate model, WHG was able to simulate various engineering and ordinance parameters to meet the needs of the system; and the Utility committee opted to smooth the rates over a moving, multi-year average, while maintaining the fund balance targets desired.
The Utility Director and finance team now have a Township-owned rate model to simulate the changing scenarios of the growing community. Township management will be able to re-evaluate its utility rates and connection fees based on altering current and future-state project estimates. The ultimate result:
A self-sustaining finance model
Low volatility in rates for township customers