CFO: Flint will run out of cash without water bill help

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Flint’s water fund could run out of cash by summer without $30 million in residential assistance from the state, and even then could be insolvent by the end of the year, according to the city’s chief financial officer.

“The city lacks the financial resources to provide any relief to customers on its own,” CFO Jody Lundquist said Wednesday in testimony before the House Appropriations Committee. “At the current rate of collections, the city’s water fund is projected to run out of cash by this summer.

The appropriations committee on Wednesday unanimously approved a supplemental spending bill, as requested by Gov. Rick Snyder, to provide bill credits for Flint residents who were charged for water they could not drink because of lead contamination and other issues.

Lundquist called the funding bill “a step in the right direction of a long journey,” noting the city faces multiple issues related to its water crisis, including the prospect of declining property tax revenue.

Lundquist and former City Manager Natasha Henderson have said that the Sewer and Water Fund could run out of cash by July. If that happens, it could drain the city’s general fund within a month. They’ve said the city needs closer to $90 million “for water that was billed” to stay solvent through the end of the year.

“This water has impacted us and we’re trying to take care of that,” Mayor Karen Weaver told The Detroit News. “It’s understandable when people don’t want to pay their water bills when you can’t use the water. In the meantime, we need help.”

Gov. Rick Snyder said Wednesday he is concerned about the financial health of Flint given the city’s high rate of delinquent water bills.

“We just got out of emergency manager status and I don’t want to see them go back into it,” Snyder said at a press conference in Flint announcing a water infrastructure study. “I want the city of Flint to be successful, particularly given this crisis.”

Snyder said the $30 million credit will both refund residents for water “they didn’t see value in and then helping the city with their financial issue, at least in the shorter term.”

If Flint’s water fund becomes insolvent, the general fund would likely run out of cash within a month, Lundquist told The News after her committee testimony.

The $30 million supplemental spending bill, already approved by the Senate and now heading to the House floor, would help the city’s water fund by providing residents and businesses with credits for past debts or future bills.

There are about 29,000 water customers in Flint, according to Treasurer Nick Khouri, and about 5,000 of those are in “arrears,” meaning they owe money that should have been paid earlier.

“The concept before you is relatively simply,” Khouri said. “Residents of Flint shouldn’t have to pay for water that they can’t drink.”

The state estimates the $30 million will cover the cost of water used for drinking, bathing and cooking between April 2014 and April 2016. The credits would not apply to the sewer portion of water bills, Khouri said, and would not cover other water usage.

Residents would receive credits for 65 percent of their water bills, and business credits would equal about 25 percent, said Khouri, who added the state arrived at those figures after analyzing broad water usage data from the Environmental Protection Agency.

Treasury is working with the city to determine the actual value of credits for each customer, Khouri said.

“If you’re in arrears right now, and you owe $1,000, the city of Flint will recalculate your bill and reduce it by 65 percent,” he explained.

Democrats, citing cost estimates from local officials, proposed an amendment to increase the water bill credit program from $30 million to $60 million, but the Republican majority rejected the change.

The committee also voted down a Democratic amendment to use state funds to expand nutritional access through the Women, Infants and Children Program. The U.S. Department of Agriculture on Jan. 30 rejected Michigan’s request to increase to increase WIC access for Flint children ages 5-10.

“It’s too bad the federal government has proven to be such a poor partner,” said Appropriations Chairman Al Pscholka, R-Stevensville, who voted against the amendment.

The $30 million spending bill is part of the governor’s latest round of funding proposals for Flint, as outlined last week in his executive budget presentation. Snyder is asking for $156 million in supplemental spending this year along with another $39 million in the 2017 fiscal year.

The Legislature has approved a total of $37.3 million in supplemental spending for Flint, including money that helped the city switch back to Detroit water in October and provided residents with free bottled water, filters and testing kits.

Freelancer Jacob Carah Livengood contributed