Tannery Closure/Rate Implications Addressed

by MICHAEL YOUNG,
Rockford City Manager

youngtannerySince Wolverine World Wide’s (WWW) recent announcement that it is closing its downtown tannery facility, the City of Rockford has been working to identify all of the issues related to this decision and its ultimate impact on our residents and ratepayers.

As you can imagine, the issues are numerous and complex and include analyzing financial implications on the sewer fund, an analysis of lost tax revenue, engineering issues related to the decommissioning of the treatment plant, and planning and zoning issues related to the eventual redevelopment of the tannery property. We have stayed in very close communication with WWW and are working to identify a time frame to address all of these issues.

As I have interacted with residents and ratepayers, I have been comforted but not surprised by the community’s response to this announcement. Rockford has always been an example of a community that pulls together during tough times to work toward a positive solution. Thank you to those who have taken the time to provide your support and input. I have also received a handful of questions regarding the impact of the tannery’s closing on sewer rates and the new PARCC Side Wastewater Treatment Plant and since others may have similar questions, I would like to answer them publicly.

The short answer to this question is simple. The City’s share of financing and operting the new treatment plant today is $90,000 less per year than the cost of signing the new City of Grand Rapids Wastewater Treatment Plant contract. In addition, the City has saved $2.4 million over the last ten (10) years by not signing the proposed new Grand Rapids contract when it was presented in the winter of 1998.

This savings over the last ten (10) years has allowed us to keep our sewer rates stable. That said, as I wrote in an earlier article, the tannery closing will impact rates likely resulting in an increase of approximately $10 per month for the average residential customer. While we understand that this is a difficult time for a rate increase, the tannery closing would have increased rates even higher if Rockford had signed the Grand Rapids contract ten (10) years ago and not built the PARCC Side Wastewater Treatment Plant.

One of the main reasons for this is that the five (5) constituent communities of the North Kent Sewer Authority entered into a new cost-sharing model in 2005. This cost sharing model dramatically changed the way costs are allocated between the constituent communities of the Authority. The model treats much of the collection system (sewer pipes) as a true Authority, whereby specific pipes are jointly owned by the Authority and costs are shared accordingly. This change in the model alone saved the City $200,000. The model itself is admittedly complicated but the results are simple – Rockford residents save money now and in the future as a result of building the new treatment plant. Much of our costs associated with the collection system and wastewater treatment plant are fixed principal and interest costs associated with financing. The cost model changes the relative percentage of principal and interest that each community is responsible for.

Since Rockford is a smaller and more densely developed community than our partner townships, it is expected that our relative percentage of ongoing costs will also decrease simply because the townships will grow at a faster pace than the City.

While PARCC Side Wastewater Treatment Plant has and will continue to save Rockford money, it does not change the reality that rates will increase once the tannery is fully decommissioned.

Discussions regarding rate increases is very preliminary and we will continue to work with WWW and our partners in the North Kent Sewer Authority to explore to minimize any rate increase. I would like to again thank everyone for your support and input as we work through this transition.

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