The secret regional water authority talks

July 1, 2015

Cooperation across the region is usually something we applaud. However, the recent news that the Great Lakes Water Authority had signed a lease to take over the Detroit Water and Sewerage Department's (DWSD) utility, including all of its debts and unfunded liabilities, as well as a water bill assistance program, has not only left us perplexed but also greatly disturbed at the secrecy in which the entire process had been shrouded.

To provide some context, there have been talks for years about creating an alliance or some way of sharing in the decision-making at the (DWSD), from where a majority of Oakland County residents receive their water. Regional leaders have felt that the DWSD has not been well run, nor has its infrastructure been maintained, and they have sought through a number of state legislative efforts to gain a voice at the table for services their residents receive. Detroit consistently fought outside involvement and control, and in 2014, during the Detroit bankruptcy proceedings, federal Judge Sean Cox was appointed as mediator to help Oakland, Wayne, and Macomb counties and the state of Michigan hash out issues with the city. Cox immediately instituted a gag order upon all parties, preventing any word of how the four entities were reconciling their differences from becoming public, or if there would be a regional authority to provide water and sewer to residents and businesses, and how we would all be billed. 

Frankly, we're appalled this mediation was permitted to continue for so long, and we're disappointed that Oakland County executive government representatives, such as L. Brooks Patterson, Bob Daddow and Water Resources Commissioner Jim Nash, willingly participated and did not walk away from dealings that, while not illicit, did not pass the smell test. This was a bad example of how government should operate. Doing the active work of government completely in secret is simply bad public policy. 

On June 12, after fits and starts, a new water authority was formalized by a vote of 5-1, with only Macomb County voting against it. Under the deal, Oakland, Wayne and Macomb counties will lease the city of Detroit's water system for 40 years for $50 million a year. The water department provides water to Detroit along with 127 communities, and sewer services to Detroit and 76 communities.

Now that the deal has been voted on, information has been revealed that water department officials released a feasibility study indicating that a new water authority could sustain $50 million annual lease payments to Detroit, along with contributing about another $50 million a year to city pensions and funding a water bill assistance program for those unable to pay their water bills. The city of Highland Park, which has a $25 million debt to the the DWSD, may also be included in the deal. To meet those payments, Plante Moran, which conducted the study, said the water authority revenues would need to be raised beyond the maximum four percent at which we all were led to believe would be the annual cap – at least until the talks were made secret. Expect to pay much more for water and sewer in the years to come, quite possibly as high as 10 percent, but then who knows – we were all shut out from the decision process.

There are a few conditions that still must be met before this is a complete deal, such as customer communities agreeing to assign their DWSD contracts to the new authority; agreement between Detroit and the Detroit General Retirement System to manage pension obligations; the authority must get at least 51 percent of bondholders to agree to the transfer of the regional asset and bond obligation from DWSD; bond rating agencies have to confirm ratings on the bonds it’s assuming; and a bond ordinance is needed to mirror the existing bond ordinance. Failing that, then the whole agreement will be moot.

Macomb voted against the deal because county executive Mark Hackel said studies appear to show lease costs of closer to $90 million a year – which will be passed on to residents. Hackel said he believes the deal is a bad deal, with potential 10 percent annual increases, and we agree with him. To his credit, Hackel refused to be part of secret talks about a clearly public issue like a regional water authority. 

Come January 1, when the new authority is slated to come into full effect, not only will the cost of transporting water to local communities go up – significantly – under this deal, but we all will be paying long term for the debt and unfunded liabilities incurred by DWSD over decades. Was this the best deal our government leaders could come up with? Perhaps. But we, citizens of Oakland County, will never really know, because the lack of transparency in the process prevented us from seeing, and understanding, how the sausage was being made.

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