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Could bankruptcy change the flow of Flint water?

Jun 18, 2016

 

Flint’s water war is intensifying, if that’s possible.

Genesee County officials backing the new Karegnondi Water Authority are warning that Flint could “lose everything”  -- if Mayor Karen Weaver turns her public second guessing into action and bolts from the city’s long-term contract with KWA.

The mayor says Flint got, Quote, “a raw deal.” She says “a lot of us weren’t there when all of the decisions were made.”

Daniel Howes, Columnist, The Detroit News

Maybe not. Driving Weaver’s public reappraisal are the high costs associated with KWA. There’s the prospect of rising water rates. There’s responsibility for a third of the authority’s $220 million debt, but only a quarter of the seats on its board.  There’s public apprehension over yet another switch in the city’s water supply. There are state and federal investigations into the water crisis. And, of course, there’s good ol’ politics.

Weaver’s Hamlet routine is pushing county officials to remind Weaver and whoever else will listen that the contract is on their side. That her version of events is her version. And that the mayor’s dithering is driving KWA borrowing costs higher -- at least temporarily.

There is another way. Flint could emulate Detroit and declare Chapter 9 bankruptcy. The state Treasury would have to approve that costly move. But it could enable Flint to use federal court to alter its contract with KWA, among other things.

It also would financially imperil a new regional water system that has been a decade in the making. Without Flint and its rate-paying residents, the authority’s financial structure would be undermined. And the state would be complicit in jeopardizing a regional project it has championed.

Bankruptcy expert Doug Bernstein says a bankruptcy filing “would be a way out of that one issue, absolutely. But Flint has additional problems. No matter which way you turn there are no perfect solutions.”

He’s got that right. Engineering the bankruptcy of another Michigan city is a risky gambit.  The financial hits, the political turmoil and the likely damage to Flint’s image would not be insignificant.

  The cold truths of water politics are gripping Flint and surrounding Genesee County. Whatever agreement they reached on KWA before the water crisis erupted is being swamped by the reality that followed. Imagine the rush of anxiety -- and the political pressure -- when residents are told the city will be switching its water source yet again.

Reassuring it’s not.

Bankruptcy is a tool that could be pitched positively. The city would be facing its legacy problems.  It could use municipal bankruptcy to modify contracts with labor unions, creditors and KWA.  It could adjust debt and reshape financial commitments. It could use the fresh start to attract new investment.

But bankruptcy would be disruptive. It would be politically charged. It would be far more expensive than a cash-strapped city like Flint could afford - and to what end? So a newly elected mayor and a newly elected council can wriggle out of commitments made by their predecessors because the politics have changed?

That’s not easy. Nor is being the next Michigan city to declare bankruptcy. 

Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.