Leaders Celebrate Detroit Water Deal

After a long, fierce, fight over the ownership and operation of the Detroit Water and Sewerage Department (DWSD), a compromise is nearly at hand. For more than a decade, the Detroit Mayor and City Council set wholesale water and sewer rates for the city and suburban communities, while suburban communities would tack on retail costs to get the water to consumers. While water main breaks have increased, and the idea of taking away control of the system from the city had been floated, it was something Detroit did not want to see. Tuesday’s deal is designed to solve all of those issues. Under the deal, Detroit will retain ownership of the System and will remain in charge of the water and sewer infrastructure serving city customers. However, the new Great Lakes Water Authority will have a suburban dominated board, control operations for regional infrastructure and set rates for the overall system, leasing Detroit’s infrastructure at $50 million annually for 40 years.

The payments to the city will be used to finance $500 to $800 million in bonds to upgrade the aging infrastructure in the city, but also to upgrade infrastructure under the authority’s control. Under the deal, the new authority will have two mayoral appointees, one representative from Macomb, Oakland, and Wayne counties, and one by the Governor to represent the service area outside the three counties. Major decisions will require a supermajority of five-sixths in order to pass. The proposed Memorandum of Understanding limits rate increases to no more than 4 percent for 10 years. However there will be an independent study to determine the economic viability of this limit, and there is an out clause in case it does not work. Union agreements will be honored, with 500 DWSD employees staying and 900 employees moving to the new authority. $4.5 million will be set aside to assist indigent ratepayers in order to avoid water shutoffs.

In order to proceed, the agreement needs approval from Detroit and one of the county boards of commissioners. In the event that the Detroit City Council rejects the proposed Memorandum of Understanding, the Detroit Emergency Manager could approve it on behalf of the city. If no counties act prior to the October 10 deadline, Governor Snyder will appoint the representative for that county. Officials expect that U.S. Bankruptcy Judge Steve Rhodes will see the new authority as part of closing out Detroit’s bankruptcy case.

posted by PAA Online , Friday, September 12, 2014 12:58 PM
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