August 18, 2014 at 10:20 pm

Federal judge: Detroit water authority deal not imminent

The federal judge overseeing negotiations involving the Detroit Water and Sewage Department on Monday said a deal to create a regional water authority is not imminent and that discussions don’t include payments to the city’s general fund.

U.S. District Judge Sean Cox responded to a Detroit News report Monday in which two sources close to the negotiations said a deal could be finished within two weeks. The sources detailed terms of the proposed agreement, under which the authority would pay $50 million a year for 40 years in exchange for acquisition of the water system and its assets.

A third source familiar with the talks on Monday confirmed the details in the report.

“As the court’s mediator in this matter, I wish to state that parties to mediation have not reached any definitive agreements, although it is fair to say all parties are demonstrating good faith and responsible leadership,” Cox said in a statement.

“Although this issue is still subject to confidential mediation,” Cox said, “I will definitively state that these discussions do not contemplate a proposal for the transfer of any funds to the city’s general fund.”

The statement didn’t specify where the funds for a transfer might go. The general fund pays for the overall governmental operations of the city.

The News’ story did not specify where the proceeds from the transfer would go.

The report comes at a sensitive point in the bankruptcy negotiations, because Detroit recently proposed a refinance of water department debt. Some fear that bondholders may now be hesitant to move forward.

Cox that even if a deal is reached, it would require an OK from several municipal and legislative bodies and take “substantial time.”

In the deal under consideration, sources said, the authority would consist of a six-member board with two appointments coming from the city of Detroit, one each from Wayne, Oakland and Macomb counties, as well as one from the state, according to the source. Currently, the authority that runs the city-owned water system has four members appointed by Detroit and three by the suburbs.

Detroit and suburban officials were ordered into closed-door mediation in April by U.S. Bankruptcy Judge Steven Rhodes over spinning off the water department into an authority. All sides are under a gag order not to talk publicly about negotiations.

Detroit Mayor Mike Duggan on Monday said there have been no conversations about taking money from the water department and putting it into the city’s general fund to pay debt.

“I've said from the beginning that I did not believe money should be taken out of the water system and put into the general fund,” Duggan said. “The ratepayers in this city are paying high enough rates. Of course Oakland and Macomb counties have taken exactly the same position. There has been no conversation about a payment to the city in any of these meetings.”

Duggan reiterated that on all other issues, he remains bound by the gag order.

Progress on the formation of a regional authority appears to mesh with the city of Detroit bankruptcy proceedings and Duggan‘s expanded management roles, said Rep. Kurt Heise, R-Plymouth, a proponent of a regionalized water authority.

“There is a greater sense of urgency because the judges would like to see this thing wrapped up along with the bankruptcy,” Heise said. “I think they want to get it wrapped up before Duggan would take over all elements of the control over DWSD.”

Suburban officials also declined further comment Monday.

“We have and continue to honor the gag order to keep the discussions confidential,” said June West, spokeswoman for Wayne County Executive Robert Ficano.

Macomb County Commission chairman David Flynn said in a statement: “I signed a confidentiality agreement so I cannot comment on current discussions. However, from the onset I have supported the concept of a regional authority in order to control the destiny of Macomb County ratepayers' future.”