News Photo by Steve Schulwitz 26th Circuit Court Judge Ed Black, left, and Alpena City Attorney Bill Pfeifer conduct business on Friday, the third day of testimony during a trial over how much Alpena Township should pay Alpena for water and sewer services.

ALPENA — Judge Ed Black, from the 26th Circuit Court in Alpena, ruled that the water and sewer rates Alpena charged Alpena Township for water and sewer services from 2014 through 2017 were unreasonable and excessive.

Black ordered both municipalities back to the bargaining table to come up with new rates. Because he lacks the power to set rates, he provided them guidance on what needs to be included when new rates are proposed.

The ruling will add more time and money into litigation that has lasted over a decade.

Black ordered the municipalities to set new rates for the years in question but to work toward a long-standing method of rate-making that can be used moving forward.

Alpena Township Supervisor Nathan Skibbe said he is pleased with some of Black’s rulings and hopes the township can join the city and find rates that are fair for all and put an end to the decade-long litigation.

“The Court’s ruling, today, will allow the Township and the City to move forward and resolve their differences regarding this 10-year long rate dispute,” Skibbe said in an email. “The Township is pleased to have the Court find that the Township is a wholesale customer, and the City cannot charge the Township the same as the in-City retail ratepayers. The Township looks forward to working with the City in light of the Court’s ruling to establish reasonable rates for the Township as the parties move forward and consider next steps in light of the Court’s ruling.”

City officials had no comment after Black issued his ruling.

He added he believes the city is entitled to a higher rate than what the township was paying prior to 2014 and ordered that the estimated $3.6 million in an escrow account remain there until he signs off on new rates he deems fair and reasonable and decides how best to divvy up the money in savings.

In the rates established in 2014, the Alpena Municipal Council approved higher rates for all of its customers and added a charge to the township for projects in the city’s water and sewer system, which didn’t benefit the township or its own customers.

The township purchases water from Alpena and resells it to its own residents.

Black said the new rates should only include operations and maintenance costs for portions of the systems that township customers benefit from.

For years, the township was charged a fee that helped the city cover the cost of new water meters that were installed in city customers’ homes and businesses, but not in those of township customers.

“The township should not be paying for capital that is only a benefit for the city only,” he said.

Black said he will keep jurisdiction of the case and a status conference was scheduled for July 9 at 8:30 a.m. where the city and township will offer an update on any progress toward setting new rates.

During his oral ruling, Black also denied the claims by each party that the other had breached a contract with one another dating back to 1977 and was amended in 1987. The amendment in question was made to Paragraph 5 which contained more details about ratemaking in the original contract, but after amended became more clouded and confusing.

Black said there was no way, from the language in the update to the original contract, to accurately rule if either the township or city breached the deal.

The township claimed the city didn’t follow the steps for ratemaking that were included in the pre-amended version, while the city claimed the township not paying the full amount of the bill with the higher rates violated the contract.

Black said when local officials in the township and Alpena made the amendment, it removed key components from the original that made it impossible to determine if either party violated any of its terms.

The judge said the legal aspects of Paragraph 5 are clear, but the lack of details and context left the language so murky he couldn’t rule one way or another.

“Literally, the entirety of Paragraph 5, while not ambiguous under the court of law, because the terms can be defined, but figuring out what the Hell it means is damn near impossible,” Black said. “It’s not ambiguous by its terms, but I don’t have any of the information that would tell me how to interpret what it all means.”

Litigation began in 2014 and as the litigation moved forward, the two parties continued to bargain on the side but made little to no progress over the years.

The two sides have spent millions of dollars on attorney and consultant fees.

In 2017, the circuit court, under Judge Michael Mack, ordered the two sides into mediation. That lasted only one day, however, as city officials didn’t see enough progress to continue.

A settlement appeared likely early in 2018, however, both governing boards voted to approve “principle terms” for an agreement. That vote wasn’t for a deal on rates, but on seeking a process for establishing rates that could end the dispute.

After continuing negotiations failed to yield a deal, the local court essentially ordered the two sides to adhere to the terms they’d reached earlier in the year.

Shortly after, the township appealed a portion of that ruling to the Michigan Court of Appeals, and the city filed a cross-appeal. The appellate court also ordered mediation, which again yielded no agreement.

The appeals court then ruled that the proposed agreement was non-binding, which the township appealed to the state Supreme Court. The state’s highest court declined to hear the case and sent it back to the circuit court in Alpena.

During the initial hearing in circuit court, then-judge Michael Mack ordered the opening of an escrow account in the name of both governments. Mack required the township to deposit into that account the difference between the old rates the township had paid and the higher rates the city set for all of its customers.

The township’s latest audit shows $3.6 million in that account as of March 31, 2023.

The audit says Alpena wants the township to pay about $13.5 million in late fees.

Over the last few years, the two municipalities have worked together toward establishing a new authority that would oversee water and sewer operations for both governments.

The two sides reached a draft agreement on a water and sewer authority early in 2022. However, in July, that plan fell apart, setting the stage for the trial.