Contract for Detroit water shutoffs doubles in one year

A contract to disconnect water to delinquent Detroiters has ballooned to $12.7 million in three years without City Council approval, documents obtained by The Detroit News show.

A two-year contract with Homrich Wrecking Inc. signed in 2013 for $5.6 million — and receiving four extensions since then — was supposed to resolve the city’s backlog of chronic delinquencies in two years by forcing customers into payment plans. The shutoffs that began months later, in 2014, have led to disconnections of more than 70,000 homes, the equivalent of every household in Grand Rapids.

As critics question the cost of the contract, the campaign, which made national headlines in 2014, shows few signs of slowing. The latest extension, signed in late August, calls for shutoffs to continue at an average of 540 per week during non-winter months, according to records obtained through the Freedom of Information Act.

“This is much more challenging than anyone expected two to three years ago,” said Gary Brown, who this year became director of the city’s Water and Sewerage Department.

Water officials acknowledge they don’t keep track of how much money the shutoffs have generated. The News asked for dollar amounts on residential collections. Water officials said the request was impossible to fill, blaming a billing system they say doesn’t allow for such calculations.

“Why are we paying these people when there isn’t any fiscal impact or analysis of shutting off the water? Is it even cost-effective?” asked Lila Cabbil, who is president emeritus of the Raymond and Rosa Parks Institute for Self Development and a critic of the shutoffs.

Records show Homrich has billed the city $8.2 million for shutoffs since 2014. Since then, overall collections — which includes money from non-residential accounts and other revenues — increased $15 million to $310 million for the fiscal year that ended in June, city records show.

Brown characterized the rate of return as “adequate.”

“We are trying to change the culture here and get people on payment plans,” he said. “When I don’t have shutoffs going on, our customer service centers are empty.”

The city shuts water on residential accounts that are $150 and 60 days overdue. Despite outreach and assistance programs, shutoffs are on track to number about 22,000 this year, nearly the same as last year. That’s down from 33,000 in 2014 — the first full year of the crackdown — but more than initial projections.

Brown said the program is working, pointing to 44,000 residents who are now on payment plans and increases in overall collection rates from 76 percent in the 2013-14 fiscal year to 87 percent in the 2015-16 fiscal year.

The rate improved in part because of payment plans but also because the program disconnected service to a substantial but unknown number of abandoned homes that were still getting bills. Also, Brown said many homes have been shut off multiple times because of missed payments, adding that about 125,000 of the city’s 175,000 residential accounts regularly make payments on time.

Block-level data analyzed by The News has found the shutoffs are spread throughout the city and particularly acute in densely populated neighborhoods on the northeast and west sides.

Under $5M threshold

Cabbil and other activists protested the first increase to the Homrich contract in May 2015, when it jumped $1 million to $6.6 million.

The contract extensions didn’t go before the Detroit City Council because they were less than the $5 million threshold required for consideration. In an Oct. 6 memo to the council, the panel’s research director, David Whitaker, argued the contract should have gone to the council because of the nature of the work.

“It seems like they keep on making change orders so it’s below what’s required for our approval,” said Councilwoman Mary Sheffield.

This year, the contract increased by $1.8 million in February and another $4.3 million in August, an extension that also extended the work at least through next June.

Water officials said there was no intent to bypass the council and the increase amounts are coincidental. The contract changes were approved by both the city’s Board of Water Commissioners and the Financial Review Board, which was created to monitor finances after Detroit emerged from bankruptcy in 2014.

Sheffield said the volume of shutoffs shows assistance programs “clearly are not working.” She is among those who have instead called for making water bills more affordable in a town pegged as the nation’s poorest big city by 2014 Census numbers. The average water and sewer bill is about $75 per month — about 10 percent of the total monthly income for individuals living solely on Supplemental Security Income.

Tying bills to income was an approach rejected this year by a panel convened by Brown that examined water costs.

Homrich officials didn’t return phone calls seeking comment. The company also is one of the contractors the city uses for its housing demolition program, whose costs are under investigation by federal authorities.

‘It’s insane’

The shutoffs forced Roberta Ralston in August to use water she collected in buckets and a kiddie pool.

“The only good thing was I knew it was coming, so I could stock up and save water,” said Ralston, who lives in southwest Detroit and lives on Social Security. “But it still wasn’t a cakewalk.”

The disconnection culminated a fight over a disputed $2,000 bill that she calls a “two-year Kafka nightmare.” Almost all that tab was for one week in 2014, Ralston said, when heavy rains flooded her basement, damaging pipes and causing water to run for days.

She disputed the bill and lost. So she got on a payment plan that doubled her monthly bill. When Ralston couldn’t keep up with the payments, she was disconnected for eight days. A charity donated money to restore her service.

“It’s insane the things I’ve been through,” Ralston said. “I never wanted free water. I just want to pay an honest amount.”

Water officials contend Ralston never informed them of the flooding. Billing records indicate the city gave her nearly $550 in credits and other relief and shut her water after she missed multiple payments.

Brown acknowledged that “shutoffs are now a fact of life” but he hopes water department workers will eventually perform the job rather than Homrich.

“I can see the light at the end of the tunnel,” Brown predicted. “Next year, there will be fewer shutoffs.”

Contract increases

Here’s a look at the evolution of the DWSD’s contract to Homrich Wrecking of Detroit for residential water shutoffs.

June 2013: Contract starts for $5.6 million for up to 70,000 shutoffs through June 2, 2015.

March 2015: Duration of contract extended to Dec. 21, 2016.

May 2015: Contract increases $1 million to $6.6 million to “assist DWSD in further reducing delinquent accounts.”

February 2016: Contract increases $1.8 million to $8.4 million.

August 2016: Contract increases $4.3 million to $12.7 million and is extended through June 2017.

Source: City of Detroit

For help

Here’s a look at assistance programs for residents who have trouble paying water bills:

WRAP Program: Offers up to $1,000 per household per year, home energy audits, housing repairs and other programs. Help also is available to suburban residents. It is limited to low-income families. More information at waynemetro.org/wrap or (313) 386-9727.

10/30/50 Plan: Delinquent Detroit customers can get water service reconnected if they pay 10 percent of their bill. If they miss one payment, a 30 percent downpayment is required. If they miss another payment, they must pay 50 percent of the bill.

Relief groups: Nonprofits deliver bottled water to those without service and/or help with deposits to reconnect service. More information at detroitwaterbrigade.org, wethepeopleofdetroit.com and detroitwaterproject.org.