Howes: Regional water wars ebb to spirit of cooperation
Not too long ago Detroit and the suburbs were at war over water.
With the city in bankruptcy, Emergency Manager Kevyn Orr explored ways to extract cash — if not outright sell — a Detroit Water and Sewerage Department that served roughly 4 million people in the southeast corner of Michigan. And soon a federal judge began mediating a dispute that had cleaved the region for decades.
That was then. Nine months into life as the Great Lakes Water Authority, the city and the suburbs are working together to streamline operations, to reduce costs and to improve the system’s financial management. They’re sharing the historic Water Board Building at 735 Randolph and continuing to make repairs to an aging system that sometime next week expects to sell $1.4 billion in bonds to investors.
The people paid to discern whether municipal water systems are doing what they say they’ll do are watching. And they’re giving the Glee-Wa, as insiders call it, high marks for delivering on promises to restructure the system and put Chapter 9 bankruptcy permanently in the rear-view mirror.
“Financial results have stabilized and improved over the last few years from previously poor levels,” Fitch Ratings said in a recent upgrade. “On the expense front, management continues to implement its organizational optimization, which has entailed cutting the number of job classifications in recent years and reducing the organization’s workforce by nearly 40 percent from 2011 to 2015...”
In a ratings upgrade that pegged GLWA’s outlook as “stable,” Moody’s Investors Service said it expects “key financial metrics will remain sound despite economic weaknesses in the service area and significant capital needs.” It said further labor market expansion, population growth and improved financial performance could justify further upgrades.
Why does any of this matter? Because if this region’s war over water and the long-running Flint Water Crisis have proven anything, it’s that competent and fiscally responsible management of arguably Michigan’s greatest resource — clean, fresh water — should be a bedrock role of government. It’s also critical to help ensure public health.
Creation of the regional water system fundamentally does at least four things for the way government works around here: First, the new, cooperative structure injects transparency and generally accepted operating standards into a system that serves pretty much everyone in the three-county area (and some parts beyond) not on a private well.
Second, the creation of GLWA enabled the city to shed roughly $5.2 billion in debt from its balance sheet, even as the city continues to own the underlying assets of the sprawling water system. Under terms of the agreement, the authority leases its portion of the system for 40 years — and will automatically renew the lease so long as the system carries outstanding debt.
Third, $50 million annual payments to the city from GLWA ensure money for capital improvements to the aging system, money that cannot be siphoned into Detroit’s general fund. The payments also ensure that dollars contributed by, say, Oakland County, are directed to improvements in Oakland County.
And, finally, the new structure spreads the responsibilities of governance and oversight more equitably across the base of ratepayers. Put more colloquially, if you pay in Wayne, Oakland, Macomb or Detroit, your representatives have a say. If you live in Flint, Genesee, Washtenaw or Lapeer counties, your interests are represented by more than bureaucrats in Detroit.
Bob Daddow, deputy Oakland County executive and chairman of the GLWA board, says the successful launch of the new entity is “a huge” victory for regionalism: “When you see the savings coming out of this bond issue” next week, “it’s going to be substantial. We’re not done here by any stretch of the imagination. Every month, we’re inculcating business practices that hadn’t been there for years.”
They include: new policies for financing, financial management and purchasing; restructured benefits packages for employees, including a move to defined-contribution retirement plans from defined-benefit pensions; and a massive reduction in headcount.
In addition to co-located office space, shared-service agreements between the city and the authority for information technology, fleet management and maintenance and laboratory services are helping to restrain operating costs and reduce duplication.
“If you had to own your own and deliver your own, it would be significant investment,” says Sue McCormick, CEO of the GLWA. “These ratings (upgrades) really validate the benefit of the authority.”
They also signal that one of the region’s biggest chronic headaches may finally be receding, and that’s worth noticing.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.