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Duggan tries to sell Detroit City Council on new regional water authority

Sep 17, 2014

Credit via detroitmi.gov

Detroit Mayor Mike Duggan pitched a proposal creating a new regional water authority to the Detroit City Council Wednesday.

Duggan has signed a memorandum of understanding moving day-to-day control over Detroit’s regional water system to a new Great Lakes Water Authority.

That Authority would be governed by a 6-member board, with representatives appointed by the city and Wayne, Oakland, and Macomb counties.

County leaders also signed the MOU, as did Governor Snyder. The Governor will appoint someone to represent the areas outside those counties served by the Detroit Water and Sewerage Department.

Detroit would retain the whole system’s assets, and continue running the water system within city limits. The GLWA would pay Detroit $50 million a year to fund infrastructure improvements there.

Some Council members worried that Detroit could lose control of those assets at some point in the course of a 40-year agreement.

But Duggan argued the GLWA is just like a tenant in a rental agreement, with very limited powers.

“You can’t take ownership of the building by virtue of the fact you rent,” Duggan said. “The owner has to agree to it. The owner here remains the city of Detroit.”

Detroit would, however, effectively become a wholesale customer of the GLWA. Officials say they haven’t yet worked out details, like the city's wholesale payment rate and its share of the department's debt load.

Council members also expressed concerns about potential future privatization of the system.

Duggan admitted the GLWA will make its own decisions about using a private operator to run its portion of the system. But he pointed out 5 out of 6 GLWA board votes are needed to approve such “major decisions”—and with 2 members on the board, Detroit has effective veto power.

In fact, Duggan argued that if he didn’t agree to some kind of regional authority, emergency manager Kevyn Orr would have turned the system over to a private operator anyway.

“You can imagine if we had a private company doing all the billing and collection, and shutting off water in the city of Detroit,” Duggan said, “with no allowance made for people with financial need, and no assurance for what would be done on the capital [improvement] side.”

The GLWA agreement includes a provision to dedicate 0.5% of all system revenues to a water affordability fund that would help people who struggle to pay their water bills.

Duggan also reassured Council members about the involvement of Veolia, a private multinational water company retained by the department. Duggan insisted the company’s role is restricted to doing a financial analysis to confirm the system can limit water rate increases to 4% a year over the next 10 years, as promised in the MOU.

The Council is set to vote on the issue Friday—and some Council members expressed concerns about having to approve the deal so quickly. The agreement was announced just last week.

But Duggan said the issue needs to be resolved quickly as part of Detroit’s effort to exit bankruptcy in the next several weeks. If approved, the authority will be included in the final iteration of Detroit’s plan of adjustment.

Under the terms of the MOU, elected leaders from Detroit and at least one of the counties party to the agreement need to approve the authority by October 10th for it to go forward.

However, Orr could use his powers as emergency manager to override the Detroit Council if they reject the plan.

Orr is expected to lose those powers and transition out of that role later this month.