WUOMFM

Detroit, suburbs reach breakthrough deal on regional water authority

Sep 9, 2014

Credit Kate Boicourt / IAN

After months of tense mediation in bankruptcy court, Detroit and suburban leaders have finally reached a deal on the city’s water system.

The 40-year agreement between the city and Wayne, Oakland, and Macomb counties will create the Great Lakes Water Authority.

Under the deal, Detroit will retain ownership of the whole system, and control over city operations.

The GLWA will lease and operate Detroit water system assets outside city limits. And it will pay Detroit $50 million a year to improve water infrastructure inside the city.

Detroit Mayor Mike Duggan says it’s a good deal all around—even if Detroit’s bankruptcy case forced everyone’s hand.

“This is an agreement that I would not have hesitated to make even if we weren’t under the pressure of bankruptcy,” said Duggan. “I think it’s a good deal for the city, I think it’s a good deal for the suburbs.”

Oakland County Executive L. Brooks Patterson said that from a suburban perspective, the agreement isn’t perfect. But he insisted that reaching a deal before Judge Steven Rhodes could impose one “makes perfect sense.”

“The bankruptcy court could have imposed what they call a cramdown. He could cram down our throats his settlement of this issue,” said Patterson. “And this was always looming over our head like the sword of Damacles.”

The GLWA board would have 6 members: 2 appointed by the Detroit mayor, 1 from each of the three counties, and 1 appointed by the Governor from the service area outside the 3 counties. If a county opts not to participate, the Governor will appoint a board member for them.

5 out of 6 board votes will be needed to approve any “major” decisions involving rates, budgets, contracting, and choosing management.

The agreement also stipulates that rate increases be limited to no more than 4% per year over 10 years—for a maximum 48% total increase at the end of that period.

A global water firm, Veolia, has already been retained to verify that level of rate increase is feasible. If not, the parties have a right to opt out of the deal.

The plan also includes provides for a water affordability fund. Starting with a $4.5 million base in the first year, the fund will dedicate 0.5% of the system’s total operating revenues to both city and suburban customers who struggle to pay their water bills.

Duggan, the county leaders and Governor Snyder have all signed a formal memorandum of understanding. Elected leaders from Detroit and just one of the counties need to approve the deal by October 10th for it to move forward—something officials say should happen within 200 days.

The deal resolves the fate of the Detroit water department, which had been a major stumbling block in the city’s ongoing bankruptcy case (all 3 counties had filed objections to the plan over water system concerns). If approved, the authority would then become part of the city’s official bankruptcy restructuring plan.