Oakland expects water dept. lease to be signed Friday

Chad Livengood and Candice Williams
Detroit News Lansing Bureau

A top aide to Oakland County Executive L. Brooks Patterson expects a lease by a new regional water authority for the Detroit Water and Sewerage Department’s sprawling utility system to be signed Friday, he told county commissioners Wednesday.

Oakland County Deputy Executive Bob Daddow told commissioners a critical piece in the discussions about the Great Lakes Water Authority was that the county would not provide funding to the city of Detroit that would go to areas outside the water department.

“That was one of the more significant pieces,” said Daddow, who was appointed to represent the county on the water authority’s board. “We would have never entered a lease agreement if we were expected to pay a lease payment to the city’s general fund.”

Daddow’s remarks came the same day a feasibility study was released that found that the Great Lakes Water Authority could sustain a $50 million annual lease payment to the city of Detroit plus contribute to city pensions and fund a water bill assistance program.

“I’m optimistic there’s a good team on that panel,” Commissioner Wade Fleming said following the meeting. “If they do agree, they got six months to work out the details. They’re coming together. They’re working hard.”

Officials hope to sign the lease on Friday. The lease agreement needs approval of Detroit Mayor Mike Duggan and a majority of the six-person regional water authority board.

Once a lease is signed, one of the next steps will be for communities to move their contracts from the DWSD to the authority, Daddow said. That issue is among a dozen or so conditional items that will be discussed further Friday, he said.

Plante Moran’s five-year forecast of the new regional water authority’s finances was released just days before the Sunday deadline for regional officials to finalize a lease of the utility system to the authority set up in Detroit’s historic bankruptcy.

The accounting firm said the regional authority can sustain the annual lease payment to Detroit while also contributing $45.4 million annually toward pensions of DWSD employees and $4.5 million to a fund to assist residential ratepayers with their unpaid bills.

To meet the lease payments, though, Plante Moran’s study said the water authority’s revenues will have to be “raised to the maximum 4 percent limitation each year,” which would likely result in customer rate increases “in excess of 4 percent” annually, beyond a promised annual rate hike cap.

“You just can’t take $50 million out of the system, give it to someone else and not affect operations and debt levels,” said Brian Baker, Macomb County representative on the Great Lakes Water Authority board and the budget director in Sterling Heights.

The proposed lease calls for $50 million in annual payments for 40 years; Detroit will be restricted to spending the money upgrading the aging water and sewer pipeline infrastructure.

The annual $45.4 million in pension payments for employees and retirees of DWSD will last eight years under Detroit’s debt-cutting bankruptcy reorganization plan.

Plante Moran’s report noted the water authority’s long-term financial plans do not yet account for how to pay for pensions after reductions to Detroit’s general retiree pensions could expire in eight years.

“If the payment stream does not fund the full amount of the pension obligation for water and sewer employees, then this would add another burden to the GLWA cost structure after 2023,” according to the report.

Worries of suburban water ratepayers subsidizing Detroit government operations and debt repayment had been a sticking point in the deal. Recently, news of the city of Highland Park’s unpaid water bills sparked concern.

The bad debts in Detroit will remain the responsibility of the city, Daddow said.

“What we can’t afford or won’t accept is the suburbs accepting the debt responsibility of the city of Detroit,” Fleming said. “That’s just not going to happen. I think we’re being protected. ... “We’re being fair, but yet we’re protecting the suburbs from being saddled with the debts and delinquencies of the DWSD.”

Daddow said the likely signing was a major accomplishment in regional cooperation.

"It's a phenomenally complex transaction," he said. ... "This is something that the city and the region had been talking about for 40 years in various forms or fashion. It would be singly one of the largest regional initiatives this region could do. Probably even transit wouldn't even come close to the size of this effort. This is a $925 to $950 million dollar-a-year operation. So it's huge."

Meanwhile, a state lawmaker is renewing his bid to have the Legislature hammer out the structure of a water authority instead of federal judges.

State Rep. Kurt Heise, R-Plymouth Township, said the Legislature needs to get involved after Macomb County Executive Mark Hackel and other commentators have decried the lack of transparency in the water authority negotiations.

“We need to bring this out in the open, warts and all,” Heise told The Detroit News.

Hackel has felt shut out of negotiations after publicly criticizing a gag order imposed by U.S. District Judge Sean Cox, the bankruptcy court-appointed mediator. Cox previously oversaw DWSD for pollution violations following 33 years of oversight by the late Judge John Feikens.

A couple of federal judges are not going to solve these problems behind closed doors,” said Heise, a former Wayne County environmental director. “We’ve given them a chance. It’s not working.”

Mediation negotiations continued Wednesday following weeks of behind-the-scenes talks and friction between Hackel and other regional leaders that spilled over at the Detroit Regional Chamber’s annual Mackinac Policy Conference last month.

DWSD’s Board of Water Commissioners approved a resolution Wednesday providing funding of up to $4.95 million for expenses incurred in creating the GLWA and the new city of Detroit retail water and sewer system, said Greg Eno, the department’s spokesman.

The vote was 6-0 in favor, with commissioner J. Bryan Williams, who represents Oakland County, abstaining, Eno said.

Staff Writer Charles E. Ramirez contributed.