May 29, 2014 at 9:41 pm

Nolan Finley

Oakland Co. exec Patterson feels water pressure from Gov. Snyder

Howes and Finley, Day 2
Howes and Finley, Day 2: Business columnist Daniel Howes and Editorial Page Editor Nolan Finley talk about Brooks Patterson's tiff with his own party and Kevyn Orr's tenure as Detroit EM, at the Mackinac Policy Conference.

Mackinac Island

Very quietly, behind the scenes here, Gov. Rick Snyder and L. Brooks Patterson had their first face-to-face meeting Thursday on the contentious issue of regionalizing the Detroit water department, as Republicans tried to defuse a stand-off that has split the party’s top elected officials and increasingly isolated the Oakland County executive.

The meeting in the Grand Hotel came on the second day of the Detroit Regional Chamber’s annual policy conference. Off-the-agenda discussions Thursday were almost entirely dominated by what it will take to get Patterson on board with the regionalization deal that is proposed in Detroit’s bankruptcy exit plan.

Although Snyder and Patterson profess great love and respect for the other, the rhetoric from the two camps leading up to the meeting was pretty testy and resentment was building. Despite that, “we had a very constructive meeting,” Snyder said.

Patterson also saw progress.

“We are looking for more give and take,” he said. “We aren’t going to go quietly into the night.”

Snyder and many business leaders gathered on the island are irritated that Patterson is pushing the story line that suburban customers of the Detroit Water and Sewerage Department will pay the cost of Detroit’s rescue because of the way a pension pay-back plan is structured. They’re worried Patterson’s argument could derail a vote in the Senate in support of the city’s $195 million state aid rescue package.

“They’ve (previously) not had a face-to-face meeting on this issue” says state Sen. Mike Kowall, R-White Lake Township, who helped arrange the Mackinac palaver. “We’re working with Brooks to get to a place where everyone is comfortable.”

Where that place is, and whether it’s ever possible to get there, is an energetic topic of the conference, which wraps up today.

Patterson remained skeptical Thursday, even in the face of a white paper from Snyder’s office and a point-by-point rebuttal of his claims by U.S. Bankruptcy Judge Steven Rhodes.

The dispute centers on how quickly the water department repays its pension debt. Most of the city pension obligation will be amortized over 30 years. But the plan of adjustment submitted by Detroit Emergency Manager Kevyn Orr calls for the water department obligation to be repaid over 10 years.

Patterson argues the shorter pay-back period, and subsequent higher payments, will be enough to cover the pension installments for the rest of its retirees, freeing up money for the general fund.

Snyder says Patterson’s calculations are off-target, and he and Rhodes insist water customers will be better off and face less severe rate hikes if the plan is adopted.

Resolving the issue is key to Senate passage of the Detroit bailout package. Kowall says Oakland and Macomb senators will likely stand with Patterson as he seeks a resolution of his concerns regarding the pension amortization included in the Detroit rescue bills. Macomb County Executive Mark Hackel shares Patterson’s position, while Wayne County Executive Robert Ficano favors Orr’s plan.

Patterson says changing the amortization is necessary if negotiations to create a regional water authority are to bear fruit. An emerging sentiment is that a water deal may not get done within the Detroit bankruptcy, which the governor and Orr hope will wrap up this fall.

One scenario is that the deal-making begins under the jurisdiction of the bankruptcy court — Detroit Chief U.S. District Judge Gerry Rosen is already holding mediation sessions — but finish outside the court after the bankruptcy is settled.

That’s the process advocated by Detroit Mayor Mike Duggan, who argues he has a better shot at striking a deal with the county executives than the negotiators hired by Orr.

But finishing within the bankruptcy proceedings has advantages. The judicial mediators have tools to speed the talks. That’s essential — while this deal doesn’t have to get done overnight, it can’t take as long as the negotiations to regionalize Cobo Center, an often tense four-year process.

The court can also nudge the state to sweeten the deal.

Snyder, in an interview with The Detroit News, dodged the question of whether there were any incentives the state could offer to bring Oakland and Macomb on board.

But the state does have cards it could play. For example, the water department general debt will have to be refinanced.

The department has a dismal bond rating, which means higher borrowing costs. The state could leverage its sterling credit to get a better refinancing interest rate, saving money that could be used to offset water bill increases — a primary concern of Patterson and Hackel.

One thing Patterson likely will have to come to grips with is that, in some fashion or another, the water department will be monetized for the benefit of Detroit. That will be a tough pill for him to swallow and highlights the tenuous road ahead for getting a deal done.

But at least the two principals in this logjam are finally talking.

Nolan Finley is editorial page editor of The Detroit News.

'We aren't going to go quietly into the night,' said L. Brooks Patterson. / John L. Russell / Special to The Detroit News