Notice of Intent from Douglas to Sell Wastewater Treatment Plant Capacity to Saugatuck Township

City Council Agenda Item Report FROM:

Ryan Cummins, City Manager

MEETING DATE:

November 19, 2025

SUBJECT:

Notice of Intent from Douglas to Sell Wastewater Treatment Plant Capacity to Saugatuck Township

DESCRIPTION: The City of the Village of Douglas (“Douglas”) has provided the attached notice of its intent to sell wastewater treatment plant capacity to Saugatuck Township. The sale amounts to 55,000 gallons per day at a cost of $252,340. Background In 2008, Douglas sued the City seeking a determination of its rights to consent to the sale of capacity by the City to Laketown Township. That litigation was resolved with a commitment by both Douglas and the City to update the sewer operations agreement to require express consent to sell capacity. The current sewer operations agreement states the following under 9.e: In the event Douglas decides to sell, transfer, or convey any of its designated and allocated capacity in the Wastewater Treatment Plant to a purchaser other than Saugatuck City, the capacity to be sold, transferred, or conveyed shall first, as a condition precedent to such sale, transfer or conveyance, be offered by Douglas for purchase by Saugatuck City on the same terms and conditions. In turn, Saugatuck City shall have (1) up to sixty (60) days from the date of receipt of the offer by Douglas to deliver to Douglas its duly authorized written election to purchase such capacity; and (2) up to ninety (90) days after the date of delivery to Douglas of the duly authorized written election to tender to Douglas the purchase price and otherwise perform its obligations to complete the purchase of the capacity from Douglas. This right of first refusal is important because it helps protect long-term capacity needs and financial interests of the community that built and funded the system.

Recommendation As part of the ongoing water-sewer agreement updates and recent lease of capacity to the Township, staff and engineering have evaluated our capacity usage and needs. The City Engineer at F&V has reviewed the notice of intent: •

F&V noted the excellent sale price for the capacity. o For comparison, F&V advised they are constructing a new standalone plant in SW Michigan with a capacity of 250,000 gallons for $19 million. o While expanding the existing plant may not cost as much as building new, it still would be substantial. In other words, if the City needed additional sewer capacity, we would pay substantially more than the current offer. F&V advised the City will not need “additional capacity in the reasonably near future”.

While the City may not need the sewer capacity in the near future and there are several benefits to the Township in acquiring additional capacity, it is still important for the City to consider its future interests. I recommend that if sewer capacity limits remain in an updated water-sewer agreement and Douglas and Saugatuck Township are agreeable to maintaining the right of first refusal language, that the City not exercise our right to purchase the sewer capacity. If they are not agreeable to this, the City Council should revisit whether to purchase now at the current price. BUDGET ACTION REQUIRED: The purchase of the sewer capacity would require a budget amendment and transfer from the general fund to cover the cost. LEGAL REVIEW: The City Attorney has reviewed and will be at your meeting if you have any questions. SAMPLE MOTION: To be drafted after workshop meeting.

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