By Aaron Mitchell
Otsego City Manager
Telling customers that their water rates are going to increase is never a popular thing to do in a small town. Many will pull out their torches and pitchforks and head down to City Hall.
However, it is the truth, and the City of Otsego is not shying away from that.
We honestly don’t have time for hesitation or avoidance. We need to have an open and frank conversation about water rates.
The City of Otsego is in the midst of preparing for a significant water rate increase for the upcoming fiscal year beginning July 1. While we know times are tough and any increase will be felt across the community, we are also confident this is a necessary step to ensure the long-term stability of the Water Fund.
Let me provide as much information as possible to help everyone better understand how we got here and what this means going forward.
Please remember that this entire article is about water rates, not sewer rates. Sewer rates will only be increasing by 5%.
It is also important to remember that your utility bill is approximately three-quarters sewer and one-quarter water, meaning the water portion is significantly smaller than the sewer portion.
Below are a series of questions and answers intended to help explain the situation, followed by opportunities for residents to learn more about the proposed rate increases.
What have we historically done with rates?
The City of Otsego has always tried to keep water rates as low as possible.
While this approach was easier on the past “you,” your present and future “you” are now paying the price through the significant increase being proposed.
For years, we have only increased rates based on inflation. That approach gave us the sense that we were keeping up with current costs without being excessive — or so we thought.
Unfortunately, the cost of running the Water Department has grown beyond the rate of inflation. At the end of the day, that is what this comes down to.
Where are we at with balancing the Water Fund budget?
The Water Fund is currently deficit-spending just to cover operations.
This does not include future capital expenditures, such as replacing or upgrading water mains or maintaining well infrastructure.
This is a dangerous position. At the current pace, the Water Fund’s cash flow will reach a critically low level in less than two years—and that is unacceptable.
We must act now, before the problem becomes worse.
How do we know this is needed in 2026?
In 2025, the City hired a neutral third party, Bendzinski & Co., to review sewer rates due to upcoming costly repairs at the wastewater treatment plant.
As part of that study, they also reviewed Otsego’s water rates.
We knew an increase would be needed, but we did not know the severity until the analysis was completed.
Bendzinski’s review was comprehensive and conducted by experts in the field. Their findings made it clear that Otsego is simply not charging enough to sustain its water system.
In fact, our water rates are in the lowest five percent of the hundreds of systems they have analyzed statewide.
All available data points toward the need for a substantial increase.
Why is this increase needed?
Municipal water systems across Michigan are facing increasing demands and rising costs.
As your personal costs have increased, so have ours—including the cost of chemicals, which show no signs of decreasing.
In addition, there are unfunded mandates issued by EGLE requiring the replacement of all private water service lines made of lead or galvanized materials, all the way up to the home.
While the City has been steadily working to reduce this number, more than 600 service lines still need to be replaced.
At an estimated $3,000 per service, that equates to $1.8 million.
That alone justifies an increase, and there are other large capital projects on the horizon as well.
How much of a rate increase are we looking at?
Nothing has been finalized.
However, Bendzinski & Co. has provided recommendations that are currently being considered by the City Commission.
Water bills include both a ready-to-serve (RTS) fee and a commodity charge, and both would need to increase.
The recommendation is to raise the RTS fee from $23.37 to $42.01, and the commodity rate from $2.48 per 1,000 gallons to $3.59 per 1,000 gallons. These are quarterly rates.
These increases would stabilize the Water Fund and provide the revenue needed to continue delivering quality service.
Every household’s water usage is different, but the City typically illustrates cost impacts using a “typical” home that uses 13,500 gallons per quarter.
Under that model, the water portion of the bill would increase by just over $50 per quarter. Including the nominal sewer increase of approximately $9 per quarter, the total increase would be about $60 per quarter, or $20 per month.
Customers who use more than 13,500 gallons per quarter would see proportionally higher increases.
What are the next steps, and when can I get more information?
Residents will have at least three additional opportunities to learn more and ask questions at upcoming City Commission meetings, all held at City Hall at 7 p.m.
- February 16 – Bendzinski & Co. will request formal approval of its analysis. Data and rate options will be discussed.
- March 2 – The City Commission will discuss and decide on water rate increases effective July 1.
- April 20 – Water and Sewer Funds will be reviewed as part of the 2026–27 budget presentation, incorporating the approved rates.
Please understand that these decisions are not made lightly.
The City Commission and City Administration recognize the strain these increases place on household budgets that are already tight.
Our goal is to be as transparent as possible so residents can prepare rather than be surprised.
Thank you for your understanding.
