Regional water deal faces hurdles as deadline nears

Chad Livengood and Charles E. Ramirez
The Detroit News

Metro Detroit officials are racing to meet a deadline in less than three weeks to ink a deal creating a regional water authority — one of the incomplete parts of Detroit's historic bankruptcy reorganization.

The city's bankruptcy exit plan in December called for Detroit to lease its Water and Sewerage Department's assets to a new Great Lakes Water Authority within 200 days.

But Macomb County Executive Mark Hackel is indicating he may not go along with a rushed deal — adding tension to a long-simmering regional issue as business and political leaders descend on Mackinac Island this week for the Detroit Regional Chamber's annual policy conference.

Last year's policy conference was dominated by a political tug-of-war as Gov. Rick Snyder clashed with Hackel and Oakland County Executive L. Brooks Patterson, who were resisting then-Emergency Manager Kevyn Orr's plan to force suburban ratepayers to subsidize city government operations and debt repayment.

The clash triggered summer-long bankruptcy court mediation negotiations and eventually led to a deal in September for a new city-suburb authority that would lease Detroit's vast water and sewer infrastructure.

The tentative agreement stipulated that the authority's $50 million annual lease payments to Detroit could be used only for water and sewer infrastructure improvements, not propping up the city's budget as Orr originally proposed.

As the June 14 deadline rapidly approaches, city and suburban officials and a team of consultants are trying to finalize audits of the Detroit water system's finances and pension liabilities. They also are attempting to complete a financial feasibility study on the impact of the water authority making the annual lease payments to Detroit.

"I'm not about to participate in something or have someone agree to sign something with a bunch of amendments or addendums or if it depends on some future outcome," Hackel told The Detroit News. "In other words, they're going to have to push back that date if they're expecting any support from Macomb County."

Hackel's resistance to the bankruptcy deal comes as Mackinac Policy Conference planners prepare to highlight Detroit's Chapter 9 success with a panel discussion featuring Orr, retired U.S. Bankruptcy Judge Steven Rhodes, Ford Foundation President Darren Walker and Chief U.S. District Court Judge Gerald Rosen, who was the city's main bankruptcy mediator.

The Thursday panel of bankruptcy power players is dubbed "Detroit: Architects of Prosperity."

"The bankruptcy was rushed through, so it makes sense that there are a lot of loose ends to tie up," said Matt Fabian, who followed Detroit's bankruptcy as a partner at Municipal Market Analytics, a Concord, Massachusetts-based bond research firm.

'Process continues'

The Great Lakes Water Authority lease agreement needs approval of Detroit Mayor Mike Duggan and a majority of the six-person regional water authority board.

The water authority board consists of two Detroit appointees; three representatives from Macomb, Wayne and Oakland counties; and one appointee of the governor representing water customers outside the three-county region.

"We're cautious on its success," said Brian Baker, the Macomb County representative on the Great Lakes Water Authority board and the city budget director in Sterling Heights. "The process continues."

But Baker said a lease agreement to have the water authority assume operational control of the Detroit water system on July 1 may only be real on paper.

"It was always the plan to get this thing stood up by July 1 … (but) we may not get the thing stood up for another couple of months," Baker said. "There's a lot to figure out — what assets go where, what employees go where."

Because the June 14 deadline falls on a Sunday, officials hope to get a lease signed on the Friday before, said Bill Nowling, a former Orr spokesman who is now working on the water authority project.

"I think we're on target to get the lease signed by that date," Nowling said. "We hope everyone agrees to it. We need a majority of the parties to agree to it."

Under the plan, the Detroit Water and Sewerage Department will retain control of the city's water and sewer lines and become a retail-oriented city department focused on collecting bills, Nowling said.

Nowling said close to 150 local officials and consultants are working out details related to the pension liabilities of the Detroit water system and other long-term financial projections for the water authority, plus finite details of splitting the Detroit water department in half.

"It gets down in the detail of which trucks go to the Great Lakes Water Authority and which trucks stay with DSWD," Nowling said. "There's that much detail."

Wading through minutiae is a reflection of the tension between the city and the suburbs, Fabian said.

"Whenever things get really specific, it means the parties don't trust each other," he said.

'No information'

Information about the nature of lease negotiations has been hard to come by.

In February, a federal judge ordered the city and counties to hold confidential talks about the authority after county executives criticized the validity of the information the city provided on the water department. U.S. District Judge Sean Cox, the mediator, banned all parties from divulging information about the negotiations.

Lloyd Jackson, a spokesman for Wayne County Executive Warren Evans, said the executive couldn't answer questions about the water authority because of Cox's gag order.

Patterson's spokesman said county officials also would not comment because of the negotiations.

Chip Snider, Northville Township's manager, said he hasn't received any word on the authority's progress in months.

"There's been no information at all," Snider said. "We're all watching this and hoping to find that it has some fiscal benefit to our water and sewer funds."

David Flynn, chairman of the Macomb County Board of Commissioners, said he also hasn't heard a lot about any progress the regional water authority has made, other than officials are waiting for more financial information from the Detroit water system.

"The (authority's) board has been waiting on extremely important financial documents, such as an audit and a pension actuarial, which (it is) supposed to have by June 1," Flynn said. "A lot of the details in terms of how much cost-saving could be created in order to make the $50 million payment will be revealed at that time."

Flynn said the situation isn't ideal. "Obviously, we wanted as transparent a process as possible," he said.

Hackel has been especially irked by the process, blasting aspects of the mediation credited with helping Detroit get through bankruptcy court in 17 months.

"I've been suspicious of the forced mediation and the lack of transparency publicly from Day One," Hackel said. "I don't believe public officials should be prohibited from talking to the people they represent under any circumstances.

"I'm just frustrated with the way this has been controlled … and forced upon us through bankruptcy with the involvement of the courts, under a gag order and state involvement, which has never happened in a regional initiative in the past."

Mackinac conference

Among the topics being discussed at the Wednesday-Friday Detroit Regional Chamber's Mackinac Policy Conference:


Detroit coalition's plan to reform the city's school system

Gov. Rick Snyder's opening remarks

How to close Michigan's job skills gap

Mayor Mike Duggan on how to maintain Detroit's post-bankruptcy momentum


Key Detroit bankruptcy officials on the city's promise of prosperity

Historian Doris Kearns Goodwin on leadership

Michigan's need for regional transit systems

Interview with Ford Motor Executive Chairman Bill Ford

Detroit officials and Michigan's legislative leaders on their partnership


Michigan's congressional unity

Bridging the racial divide