News photo by Torianna Marasco. The Alpena water tower is seen Wednesday. The city is suing the municipality for failing to pay water rates set by the city for the period from 2018 to 2024.

ALPENA – Alpena has filed another lawsuit against Alpena Township.

The city is suing the municipality for non-payment of water fees set by the city for the period 2018 to 2024.

The new lawsuit comes as both municipalities prepare for trial over fees charged by the city from 2014 to 2017.

City Attorney Bill Pfeifer says the new case is on hold for now until 26th District Court Judge Ed Black rules on proposed rates and a methodology for the previous case after a hearing scheduled for Sept. 12 and 13.

In April, the two governments fought in court over water rates for the years 2014 through 2017. At the end of the trial, Black ruled that Alpena had charged the municipality of Alpena unfair and unreasonable fees for water services and that the municipality was a wholesale customer, which the city has claimed for years.

Black also ordered that both sides return to the negotiating table to determine specific fees and ruled that the city can only charge the municipality for operation and maintenance costs for the portion of the water and sewer system that benefits the municipality. That means the municipality does not have to contribute to the cost of capital improvements for parts of the system it does not use.

Experts who testified during the trial in April said the only way to calculate fair rates is to use a hydraulic water model to determine what share of the city’s water infrastructure the municipality uses to receive water from the city.

The city had a hydraulic model built ahead of a 2018 trial in Alpena County District Court under then-Judge Michael Mack. Mack did not admit the model as evidence during the trial, but the city hopes Black will admit it as evidence next month.

At a hearing Tuesday, Black denied a request from the township to exclude the model from evidence, but reserved the right to argue its relevance during court dates in September. Black also ordered that any underlying data or information supporting the hydraulic water model not presented to the township by Aug. 20 will not be considered at trial next month.

The township says in its motion that the city missed a court-imposed deadline to provide the township’s attorney with the results and data from the model. Court documents show the township received the information on July 18.

The municipality claims the city delayed forwarding the required materials, leaving the municipality little time to analyze the information before the trial next month.

The municipality added that the model may be out of date because there have been changes to the city’s infrastructure that may not have been taken into account in the calculations.

“The municipality has sent several requests to the city seeking information that might be helpful in attempting to resolve any outstanding issues between the parties,” the motion states. “The city has not responded to the municipality’s rate methodology and has not provided any additional information despite promising to do so.”

In his response to the town’s motion, Pfeifer said the town intends to obtain testimony about the water model analysis in court during the trial. He told the court that in April, two witnesses testified that a hydraulic water model was the only real way to determine how much of the town’s system benefits the township. He said that information is critical for Black to determine whether a rate is fair and reasonable.

However, Black cannot set a course.

“As the court and the community know, courts are ill-prepared to address the mathematical and technical components of a rate structure,” Pfeifer said in his court filing. “As previously stated, this court does not have the authority to delve into the details and develop a rate based on a mathematical formula.”

Pfeifer said the city intends to impose modified rates on Black during the upcoming trial. He said the outcome of the case will depend on his decision and the willingness of both parties to accept it.

“The judge will decide whether the verdicts are fair and reasonable,” he said. “Both sides have the right to appeal if they are dissatisfied.”

The legal dispute between the two governments over water prices began in 2014. The two parties continued to negotiate alongside each other but made little or no progress over the years.

Both sides have spent millions of dollars on legal and consulting fees.

In 2017, the district court, under Mack’s leadership, ordered mediation for both sides, but it lasted only one day because city officials did not see sufficient progress to move forward.

However, an agreement seemed likely in early 2018, when both boards voted in favor of the “fundamental terms” of an agreement. That vote was not about reaching agreement on tariffs, but rather about finding a tariff-setting process that could end the dispute.

After further negotiations failed to reach an agreement, the local court essentially ordered both sides to abide by the terms they had agreed to earlier this year.

Shortly thereafter, the municipality appealed part of the ruling to the Michigan State Court of Appeals, and the city appealed. The appeals court also ordered mediation, which again failed to produce a settlement.

The appeals court then ruled that the proposed agreement was not binding. The municipality appealed to the state Supreme Court. The state’s highest court declined to hear the case and remanded it to the district court in Alpena.

During the first hearing in district court, Mack ordered the opening of an escrow account in the names of both governments. Mack required the municipality to deposit into this account the difference between the old fees the municipality had been paying and the higher fees the city set for all of its customers.

The municipality’s most recent audit shows that there was $3.6 million in this account as of March 31, 2023.

In recent years, the two municipalities have worked together to establish a new authority to oversee the water and sewerage services of both governments.

In early 2022, both sides agreed on a draft agreement for a water and wastewater authority. However, that plan failed, setting the stage for the trial in April and September.

Despite Black’s decision, the municipality is considered a wholesale customer and is not responsible for paying maintenance costs for the parts of the system it does not use. The city still bills the municipality the same rates as its other customers.

Pfeifer said it will stay that way at least until Black issues a final ruling.

Reach Steve Schulwitz at 989-358-5689 or [email protected]. Follow him on Twitter @ss_alpenanews.com.

Latest news and more in your inbox