Original Story: theoaklandpress.com
A new regional authority was formalized Friday to take over operations of Detroit’s water and sewer system but already is off to a controversial start.
In a 5-1 vote, a board representing Detroit, its surrounding counties and the state signed off Friday on the Great Lakes Water Authority and its lease of the city’s water system for 40 years. A Hartford municipal lawyer is following the details of this case.
“I fully support the historic steps we are taking in forming the Great Lakes Water Authority, which moved forward today with the forty year lease agreement adopted between GLWA and the City of Detroit,” said Oakland County Water Resources Commissioner Jim Nash. “My staff has worked hard on these efforts over the past year which demonstrates historic regional cooperation and will lead to more regional control, more transparency, and more efficiency.”
The tally was expected, with Macomb County’s representative opposing the deal because of unanswered questions and skepticism that promised limits on water rate increases can be achieved.
Wayne County Executive Warren Evans also supported the deal, because it give a voice to county residents in how the system is managed.
“Though the end result is far from perfect, I am satisfied that the due diligence that has been done provides a well-negotiated deal that paves the way for us to move the water and sewer systems forward together,” Evans concluded.
Following approval of the historic agreement and the vote against it by Brian Baker, budget director for the city of Sterling Heights, authority members removed Baker from a newly formed committee that will search for a new director. A Salt Lake City municipal lawyer is following this story closely.
Baker said that upon his arrival Friday morning at Water Works Park in Detroit for the formal decision on the $50 million-a-year lease, he was told he would be kicked off the search panel.
“I had no idea that was going to happen today,” Baker said. “I heard some grumbling that even though they approved me, it might not be fair to have just me on there” representing the suburbs.
Earlier this month, a member of the South Oakland County Water Authority suggested that one of the board members of the GLWA be directly involved in the nationwide search for a new water and sewer system director. Baker volunteered when nobody else did.
“Search is always an important first step. I thought transparency would be an important part of that. I felt more comfortable with another set of eyes overseeing the process,” said Baker, adding that the selection of a chief executive to run the water and sewer system in Detroit ultimately would rest with the board that oversees the new authority.
“If they had a problem with only Macomb on the committee, they could have appointed additional reps,” Baker said.
Asked whether he felt his removal from the search team was retaliation for his vote against the lease, he replied: “I don’t know. I’ll let the vote speak for itself. I’m more concerned with trying to lower water and sewer rates for taxpayers. That’s the main focus.”
But Macomb County Executive Mark Hackel criticized the removal of Baker.
“It was punitive. No question about it,” Hackel said. “There is not an explanation other than retaliation.
“Because we had a dissenting opinion (from other authority board members), now we’re punished for it.”
The search panel will be composed of Richard Baird, a political consultant to Gov. Rick Snyder, and Eric Rothstein, who works for the Detroit Water and Sewerage Department and hired to assist in the formation of the regional water authority.
Hackel pointed out that Baird and Rothstein are from Chicago. The county executive believes a search committee would be more effective and better serve stakeholders if the hunt for a permanent director to oversee the massive Detroit water and sewer system included a committee member representing Macomb, Oakland or Wayne counties.
Hackel said he’s concerned that the committee’s work will be done in private before names of potential new directors are provided to the GLWA board.
In recent months, the Macomb executive has expressed concern that a gag order imposed by a judge prevented officials directly involved in the lease negotiations between authority members and the city of Detroit, prevented them from discussing details with mayor and township supervisors in the county. Still, Hackel insists he’s not angry.
“The word I have is, ‘extremely disappointed,” he added.
Detroit’s water system serves about 700,000 city residents and 4 million people in southeastern Michigan. Under plans for the Great Lakes Water Authority, the suburbs will pay Detroit $50 million a year for 40 years and get a say in how the system is run. A Detroit zoning, planning and land use lawyer provides professional legal counsel and extensive experience in many aspects of zoning, planning and land use law.
Detroit Mayor Mike Duggan called the lease approve a “historic step forward in resolving decades of conflict between Detroit and our suburban neighbors.”
Detroit’s plan to emerge from bankruptcy approved last year called for the deal to be in place by Sunday. Detroit retains ownership of the system.
Approval of the lease required “yes” votes from five of the authority’s six board members. The board includes two representatives from Detroit, one from each of the three counties and one appointed by the governor.
Earl Edward Hood, who represents the state of Michigan on the board, said he expected the lease deal would be OK’d.
The GLWA board would have had two options if the lease had been rejected. It could have changed the memorandum of understanding that created the authority last September by extending the deadline and asking Judge Sean Cox to approve it, or the board could have done nothing and made a motion to dissolve the authority.
Under the deal, Macomb, Oakland and Wayne counties agreed to negotiate a 40-year, $50 million annual lease of the city’s water and sewer system. Detroit’s water department provides water to Detroit and 127 suburban communities. It also provides sewer service to the city and 76 neighboring communities.
Detroit’s bankruptcy exit plan, approved in December, called for the city to lease its water and sewer department’s assets to the authority by June 14.
The memorandum of understanding that created the authority also requires the city to use the $50 million annual payments for water and sewer infrastructure improvements.
Baker’s vote in opposition of the lease was anticipated. The Sterling Heights budget director previously said he would oppose the lease because customers will pay close to $90 million more under the deal. That would result in water rate hikes annually of 10 percent.
However, most authority officials have said rate increases will be capped at 4 percent over the next 10 years. In addition, the authority will service the estimated 3 million customers in the suburbs while the city’s water department will provide maintenance and service to customers in Detroit.
“I’m absolutely surprised they’re sticking to that and making those comments. It’s not feasible,” Hackel said Friday. “I hope I’m proven wrong.”
On Wednesday, Detroit water department officials released a feasibility study that said the authority could sustain a $50 million annual lease payment to the city, plus contribute to city pensions and fund a water bill assistance program.
Plante Moran said the authority also could contribute $45.4 million annually toward pensions of Detroit water department employees and $4.5 million to a fund to assist residential ratepayers with their unpaid bills.
To meet the lease payments, though, Plante Moran’s study said the water authority’s revenues will have to be “raised to the maximum 4 percent limitation each year,” which would likely result in customer rate increases “in excess of 4 percent” annually, beyond a promised annual rate hike cap.
Hood, the state’s representative on the water authority board, said he thinks the region’s rate payers will benefit from the deal.
“I don’t think the authority would have wanted to be stood up if that wasn’t ultimately going to be case,” he said. “But there’s an awful lot that has to be done before that can happen.”
Officials say that following the signing of the lease, it will take several months for the water department’s assets to be transferred to the authority and make it operational. Baker said he fears that government officials and individual communities will use the transfers as leverage in an effort to negotiate better water and sewer agreements for their own local residents, prolonging the process.
“We’re going to work toward bettering the system for all rate payers,” he added.
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