Late bid failed to avert Flint-Detroit water deal

Jim Lynch
The Detroit News

It was a last-chance meeting, an attempt to help two financially ailing cities reach a mutually beneficial water deal.

But the April 19, 2013, gathering of state, Flint and Detroit officials produced no new agreement and left Flint on a course toward disconnection from Michigan’s largest water system. It would eventually lead to a public health crisis whose effects are expected to be felt for years, if not decades.

Then-State Treasurer Andy Dillon issued his approval for Flint’s move after initially believing it didn’t make financial sense.

On April 17, 2013, Detroit’s Water and Sewerage Department sent Flint a notice of termination indicating the flow of water would stop in one year. It came on the heels of Flint officials announcing they had agreed to join a new regional authority based in Genesee County that would be completed in a few years.

Detroit water officials battled to keep Flint and Genesee County from breaking off, charging that the proposed regional body, the Karegnondi Water Authority, was flawed and too expensive. Flint area officials were convinced that Detroit’s estimates about building a new pipeline to Lake Huron and operating the regional authority were inflated.

Three years later, the question still vexes many of the major players who gathered that Friday in Detroit: How could two cities, both run by emergency managers appointed by Gov. Rick Snyder, fail to reach a deal that would keep Flint with the Detroit water system?

Failing that, why couldn’t they agree to keep Flint temporarily on the Detroit system until the new authority pipeline was built — instead of switching to the Flint River?

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“Personally, I’ve been trying to figure that out myself,” said Andy Dillon, Michigan’s former treasurer.

Nearly all the principal players in the fight over Flint’s water future came together at the state’s Cadillac Place offices in the New Center neighborhood. Snyder was there to oversee the debate.

In the prior month, Flint’s city council members had voted 7-1 to join a new regional provider rather than remain a customer with the Detroit system — as it had for decades. Three days earlier, Flint Emergency Manager Ed Kurtz had approved the deal as well.

The meeting included DWSD Director Sue McCormick and Detroit water system Chairman Jim Fausone; Dillon and Michigan Department of Environmental Quality Director Dan Wyant; and Flint Emergency Manager Ed Kurtz and Mayor Dayne Walling, Genesee County Drain Commissioner Jeff Wright, the governor’s office confirmed. Detroit Emergency Manager Kevyn Orr participated by phone, according to Snyder’s office.

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Since as early as November 2012, Dillon said he knew Kurtz and other local officials supported Flint’s move to a new regional water provider, but he was initially unconvinced.

“I was against it — I thought it didn’t make any sense to me ...,” he said. “How could you spend $400 million and have that be cheaper than (staying with) DWSD?”

By the April 19, 2013, meeting, Dillon had been persuaded the project made financial sense and issued his approval for Flint’s move a week before.

Genesee County officials argued during the meeting that estimates of a $440 million construction cost — made by an engineering firm assisting the Detroit water system — were $140 million too high. They would eventually persuade Dillon that leaving Detroit’s system “would be cheaper for Flint in the long term,” the former treasurer said.

During a break in the proceedings, Walling said he and Kurtz met privately with Snyder, who asked if they would listen to one more pitch about staying with the Detroit system.

“The governor just said ‘Thanks for meeting and taking so much time on this ...,’ ” Walling recalled. “ ‘Are you willing to consider one last, best offer (from Detroit)?’ Kurtz and I just looked at each other and said ‘We’ll listen.’ ”

On returning to the meeting, Walling said he remembered Snyder telling the group that Flint had agreed to hear one more pitch in the coming weeks. The governor urged both sides to refrain from making negative statements in the media — underscoring his administration’s theme of “relentless, positive action.”

The decisions on an interim water deal, then-DWSD Director Sue McCormick said, were made by the two emergency managers.

Animosity felt in Flint

Detroit officials returned with an immediate 48 percent rate reduction from $20 to $10.46 per 7,500 gallons and a 20 percent savings over the Karegnondi proposal in a 30-year period. Late last month, former Detroit water system Public Affairs Director Bill Johnson described the deal as giving Flint “everything they asked for.”

Wright, who helped spearhead the Karegnondi project, said the lack of rate guarantees beyond the first year made the offer worthless.

Animosity had built up among Flint residents and elected officials. The higher rates paid in the northern reaches of the Detroit water system’s service area, compared with those paid closer to Detroit, were a constant source of friction.

Wright remembers local anger growing during the Michigan blackout of 2003, when communities well north of Detroit like Flint were the first to see service stopped and the last to have it restored.

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The situation was particularly galling, the Genesee drain commissioner said, because Flint and other customers were collectively charged millions of dollars a few years earlier to provide emergency generator backups in anticipation of a possible Y2K blackout in 2000 that didn’t occur.

But McCormick, Detroit’s water system director since January 2012, said Flint ranked somewhere in the middle of the rates paid by individual communities.

Staff members had briefed her on the tenor of talks for a long-term contract renewal.

“They were of the belief that some of those conversations were not in earnest — from Flint and Genesee,” she said of her staff’s assessment. “They believed there had already been a predetermination of their interest (in joining Karegnondi) ...

“We never really could advance the negotiations.”

“ ... Every time there was a discussion with DWSD, the rate was going up,” said Dayne Walling, then Flint’s mayor.

Flint River option

After Flint rejected Detroit’s last offer, the conversation shifted to where Flint-area communities would get their water while the Karegnondi project was built. Many saw remaining with the Detroit system as the easiest, cheapest solution for Flint.

McCormick said the three-paragraph shut-off notice issued in April 2013 was not meant to end discussions on a short-term water contract.

“That certainly wasn’t the case,” she said. “And I don’t believe they believed that was the case.”

Losing Flint’s business, she added, meant a loss of $10 million to $12 million annually.

But the industrial city had the Flint River, its longtime backup source, as an option.

On March 25, 2013, when Flint’s City Council debated final approval of the Karegnondi project, members discussed the potential use of the river as a supplemental source that might reduce costs for residents. They seemed supportive of using the river after the regional pipeline was completed.

“Is it feasible that we can take maybe 3 million gallons of the Flint River water, as well as the 15 million gallons from the KWA if we decided to go that way?” asked then-Councilman Sheldon Neeley, now a Democratic state representative for the city. “The letter from DEQ says that we can do that and there’s not issue with that ...”

In early 2014, with the shutoff looming, Detroit prepared a rate proposal for continuing to provide Flint’s water for the first two months after the shutoff.

But the proposed rate was more than 10 percent higher than what Flint then paid.

“It was par for the course, and par for the course was every time there was a discussion with DWSD, the rate was going up,” said Walling, then Flint’s mayor.

Detroit’s McCormick said the proposed rate hike resulted from Flint’s no longer being a long-term, locked-in customer.

“Each water utility system, even though we’re a not-for-profit ... has to have a rate of return in order to have funds to invest in capital,” she said. “ ... Those customers get that rate of return, a modest rate of return, in exchange for having a long-term commitment to us.”

The ultimate decisions on an interim water deal, McCormick said, were made by the two emergency managers — Orr and Darnell Earley, who followed Kurtz and Michael Brown as Flint’s emergency manager in October 2013. Orr declined to comment. Earley could not be reached for comment.

On March 7, 2014, Earley wrote McCormick rejecting the interim offer.

“We expect that the Flint Water Treatment Plant will be fully operational and capable of treating Flint River water prior to the date of termination,” he wrote. “In that case, there will be no need for Flint to continue purchasing water to serve its residents and businesses after April 17, 2014.”

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Corrosion controls lacking

Experts such as Virginia Tech’s Marc Edwards have said Flint’s switch to the river water was not itself catastrophic. If treated properly, Edwards said, the water should have been safe to use while the city waited for Karegnondi to come online.

The Michigan Department of Environmental Quality’s failure to require the addition of corrosion controls is believed to have resulted in lead leaching from old pipes and fittings into the water. The result was elevated lead levels in the water and in the blood of some of Flint’s children.

It all made sense at the time, Walling said. But in hindsight, the former Flint mayor wishes the two sides had reached an agreement.

There are plenty of opinions on why it didn’t happen.

“Even the (Flint) emergency managers realized that Flint customers were paying an extraordinary bill for their water,” Walling said. “And the emergency managers were reluctant to further raise rates. So, in the absence of any state assistance, they looked for any way to save money in the water department.”

McCormick says the answer may be more elusive.

“I don’t know that there is an easy answer,” she said, “and if there is, I can’t give you one. The final negotiations were EM to EM.”

A spokeswoman for Earley referred The Detroit News to a commentary he wrote in October.

“The fact is that the river has served and been used as the back-up supply for decades, and this was the rationale given to me by staff and Mayor Walling, who also serves as chairperson of the KWA board,” he wrote. “Contrary to reports in the media and rhetoric being espoused by individuals, the decision was made at the local level, by local civic leaders.”

Wright said he sensed that miscommunication contributed to the standoff between Flint-area and Detroit water officials.

“My assumption was the City of Flint would stay on the DWSD system like we were until (Karegnondi) was complete,” Wright said. “ ... But when they got that termination notice, it opened the door for community leaders and officials to push for a different outcome.”

Although Snyder was involved in the April 2013 meeting, the governor’s office said it is focused on fixing Flint’s water problems and leaves it to others to judge what went wrong.

“Right now, there is an independent, bipartisan Flint Water Task Force that is reviewing all city, state and federal actions concerning all aspects of the Flint water situation,” Snyder’s office said in a statement, “and it would be inappropriate to get in front of the task force’s work.”

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