County board considers regional water authority proposal
November 26, 2013
MACOMB COUNTY — The overall attitude was one of cautious skepticism as county officials discussed the possibility of forming a regional water authority with their neighbors in order to bypass the troubled Detroit Water and Sewerage Department (DWSD) and its skyrocketing rates.
The Board of Commissioners received an update about the ongoing negotiations from Richard Sulaka, deputy commissioner of the Macomb County Department of Public Works, at its Nov. 12 meeting. The proposal on the table is to establish a coalition between Macomb, Oakland, Wayne — and possibly Genesee — counties to take over the operation and management of DWSD and pay the city of Detroit an annual stipend in return. It is part of the continuing bankruptcy proceedings being led by Detroit’s emergency manager, Kevyn Orr.
Although many details of the proposal remain confidential at this time, Sulaka pointed out that Macomb County is taking a “three-pronged approach” by employing a legal analysis, a 10-year financial projection and input from an inter-county technical group made up of nine engineers.
“Essentially, what we have an opportunity to do at this point … is determine whether or not purchasing those assets, considering the lack of investment by Detroit in their (water and sewer) system, if it’s worth taking over that responsibility,” Sulaka told the board. “Our position at the Public Works office is to come back with a proposal that ensures Macomb County’s financial stability.”
Sulaka noted that DWSD currently has an outstanding debt of roughly $5.9 billion and depreciating assets totaling between $5 billion and $6 billion. The department provides water and sewer services for about 4.5 million people across southeast Michigan and has contracts with 87 other municipalities. Approximately 60 percent of its $900 million annual operating budget goes toward servicing suburban communities outside of Detroit.
The deputy commissioner further explained that Detroit has only a few different options that it can pursue with DWSD at this point: establishing a regional water authority, securing a deal with private equity firms, continuing the status quo or outright bankruptcy.
With Detroit teetering on such unstable financial ground, Commissioner Don Brown, R-Washington Township, was concerned about how the proposed authority would be structured.
“What binds Macomb County to participate in any agreement that you reach?” he said. “You could possibly bring back a settlement that could go before all three counties to see if they want it or not. But before you get there, you might want to check back with this board to see if you’re going in the right direction when it gets close. What if you bring back something that is going to cost our customers even more? … Please keep us in the loop.”
But Sulaka stated that his first priority as a Macomb County representative is to avoid any risky deals that could become a burden for taxpayers.
“I want to assure you that we’re not just happy to be there at the negotiation table,” Sulaka said. “We are trying to drive the best bargain for Macomb County, first and foremost, and if the deal doesn’t look good, then we will not come back with a recommendation to this board.”
Still, some commissioners were not convinced that the proposal on the table is a viable one for Macomb County. Commissioner Bob Smith, D-Clinton Township, argued that regional collaboration is not always the answer.
“It seems like we’re basically looking at buying the debt of an aging infrastructure,” he said. “And when we do that, really our only choice would then be to raise the (water and sewer) rates on everybody.”
Smith asked Sulaka if Macomb County has a “Plan B” in place for the negotiations. He suggested that it could be more fiscally responsible in the long run if the county were to create its own water and sewer department, rather than taking over an established one that already has a laundry list of problems. That way, he said, the county could raise the rates to its customers in order to establish new water and sewer infrastructure that would last another 100 years, rather than buying into an “antiquated” system that might need extensive repairs in the near future.
“I just hope that we wouldn’t get caught in the position of jumping into that (regional water authority) seriously when we find that we’re at a stalemate,” Smith said. “(DWSD) just seems to me kind of like that one person in your family that’s always getting in trouble, and you’re always bailing them out. And pretty soon, you wish that you’d just done something and drawn a line in the sand.”
But there is one major issue with Smith’s proposal to walk away from the deal if the discussions with Detroit should head south: a lack of Macomb County-owned water and sewer infrastructure.
“The reason that we have not brought that (option) to the table so far … is that we don’t have a realistic plan in place to go and say, ‘We can leave your system today,’” Sulaka said. “If these negotiations were to break down and there were to be a substantial increase in rates, then that is an option that we could explore at that time.”
The next challenge for all those involved in the negotiations will be the tight deadline imposed by Detroit’s bankruptcy judge. Sulaka indicated that Orr would like to have a principle agreement in place on the financial structure of the proposed water authority by the end of this year. He added that his team is working “aggressively” to bring the final 10-year financial report before the board by its final meeting in December.
“Right now, I’d rather under-promise and over-deliver, but that is our deadline,” Sulaka said. “Unfortunately, to create a regional authority of this size and scope would normally take two, three or four years. What we’re being asked to do is a gargantuan task in a very small amount of time. So our response is based on the most conservative estimates that we can make with the limited information and time that we have.”
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