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State board approves $3.5M loan for Flint test pipeline

Michael Gerstein
The Detroit News

Lansing — A state board unanimously voted Monday to give a $3.5 million loan to Flint to help build a federally required parallel pipeline to a new pipe that will eventually supply Flint with Lake Huron water.

The U.S. Environmental Protection Agency is requiring Flint to build a parallel 5.5-mile pipeline that will cost $7.5 million to test that water from the new Karegnondi Water Authority. The parallel pipe project will be partially funded by the loan from the Michigan Strategic Fund after the board’s Monday vote as well as a $4.2 million grant from Michigan’s Department of Environmental Quality, according to a memo from the Michigan Economic Development Corporation.

The city currently draws its water from Detroit’s water system, which also comes from Lake Huron. The new pipeline will eventually allow Flint to cancel its services with Detroit’s more expensive municipal water service and is ultimately supposed to be cheaper for city residents.

But Flint would have to repay the Michigan Strategic Fund for the money with a 2 percent interest rate for the loan beginning in October 2018, according to the MEDC memo.

Flint would have a maximum of 15 years to pay off the debt, “but would be payable in full at any time,” the memo notes.

Flint’s pursuit of the Karegnondi water service led it temporarily to switch from the Detroit water system to the Flint River.

But the river water was not treated with anti-corrosion chemicals and ended up causing the leaching of lead into the city’s water system. The city continues to replace lead pipes while residents still are advised to drink filtered or bottled water.

A contingent of state officials recommended that the state board approve the state aid, according to that memo. Those discussions involved officials in the Department of Treasury, the state’s Attorney General’s office and Flint.

Officials said they expect the city will get additional state funding to repay the loan and may even be able to use some of the $234 million the Legislature appropriated to Flint in the wake of the lead contamination crisis to repay the loan.

Flint Mayor Karen Weaver and Gov. Rick Snyder announced last month the city still plans to join the KWA system after switching back to Detroit’s system in October following the discovery of high levels of lead in Flint’s water and the bloodstreams of young residents.

mgerstein@detroitnews.com