Flint’s water war is intensifying, if that’s possible.
Genesee County officials backing the new Karegnondi Water Authority are using news reports to warn that Flint could “lose everything” if Mayor Karen Weaver and the City Council turn their public second guessing into a real effort to bolt from the city’s long-term contract with the authority.
“We did get a raw deal,” the mayor said in an interview on Mackinac Island. “We’re looking at everything legally possible. A lot of us weren’t there when all of the decisions were made. A lot of us don’t have the history of how we got where we are.”
Driving Weaver’s public reappraisal are the high costs associated with KWA; the prospect of rising water rates; the responsibility for a third of the authority’s $285 million debt with only a quarter of the representation on its 16-member board; public apprehension over yet another switch in the city’s water supply; and good ol’ politics.
“The mayor and various city officials seemed to be shocked by the $7 million yearly bond payment Flint has to make to KWA,” Genesee County Drain Commissioner Jeff Wright writes in Tuesday’s Detroit News, “but do not speak of the $13 million current-year cost that Flint has been paying to” Detroit Water and Sewerage Department “and will continue to pay if they do not honor their agreement with KWA.”
Weaver’s Hamlet routine — to stay in KWA or not stay in KWA — clearly 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, its bigger neighbor an hour to the south, and declare Chapter 9 bankruptcy. The costly move, which would require approval of the state Treasury Department, could enable Flint to use federal court to modify or reject its contract with KWA.
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 effectively would be complicit in jeopardizing a regional project it has championed.
A bankruptcy filing “would be a way out of that one issue, absolutely,” says Douglas Bernstein, managing partner of Bloomfield Hills-based Plunkett Cooney’s banking, bankruptcy and creditors’ rights practice group. “But Flint has additional problems. You solve one and you’ve got three other issues. No matter which way you turn there are no perfect solutions.”
He’s got that right. Engineering the bankruptcy of another major Michigan city is a risky gambit both the city and the state could ill-afford on top of the tainted-water crisis’s serial failures. The financial hits, the political turmoil and the likely damage to Flint’s image and ability to deliver basic services would not be insignificant.
Escalating rhetoric over Flint’s participation in KWA comes as 75 business leaders from four chambers of commerce — Detroit, Grand Rapids, Michigan and Flint — are set to gather Tuesday at the Flint Institute of Arts to learn how business can help accelerate the city’s recovery.
“The response has been amazing,” says Mark Davidoff, chairman of the Detroit Regional Chamber and Michigan managing partner of Deloitte LLP. After briefings on the impact of the water crisis, business leaders will be pressed for ideas to spur job creation and bolster economic development.
A City Hall slow-walking the KWA commitments won’t help. Would-be investors and Michigan business leaders in a position to help Flint don’t need uncertainty any more than the city’s whipsawed residents.
A cold reality of the water politics gripping Flint and its surrounding county is that whatever agreement they reached on KWA before the lead-tainted 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, and that the water will be treated and delivered by Flint’s own water department.
Reassuring it’s not. In her interview, Weaver did not react to suggestions that municipal bankruptcy could be an effective way to modify or reject Flint’s contract with KWA. The process, which the state quietly assessed a few years ago, could be pitched positively:
Namely, 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 its debt load 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? For a newly elected mayor and a newly elected council to wriggle out of commitments made by their predecessors because the politics have changed?
Not easy, that. Nor would being the next Michigan city to declare bankruptcy.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.