Great Lakes Water Authority OKs lease of Detroit system

An historic new regional water authority serving more than 4 million customers in southeast Michigan was formalized this morning.

The Great Lakes Water Authority board voted 5-1 in favor of a resolution approving long-term leases of sewer and water assets owned by the Detroit Water and Sewerage Department at its meeting this morning.

Approval of the 40-year leases gives the authority control over a system that has been city-run for 180 years. The authority was created last year as part of Detroit's bankruptcy restructuring. Today's vote came days before a deadline to finalize the deal. A no vote today would have dissolved the regional authority.

Getting to this point had been contentious at times. Early on, Oakland, Wayne and Macomb counties voiced concern over the amount of information they were receiving as to how the arrangement would work, among other issue. However, Macomb County had been the mainstay vocal opponent to the deal.

Brian Baker, Macomb County's representative on the board, voted against approving the lease.

Baker raised concerns about costs associated with Detroit's unpaid water bills and whether the new regional operation will end up saving the suburbs money.

"At the end of the day, the certainties are only negative. We're paying more with too little say," he said. "A bad deal does not help the region."

Gary Brown, one of Detroit's two board members, said he disagreed with Baker's assessment.

"There was never any intent to shift costs to any community and I think this lease has done an outstanding job in ensuring every community, including Detroit, will be responsible for collections and pulling their own weight," Brown said.

Mayor Mike Duggan's office issued a statement on his behalf just after the vote was taken.

"This is an historic step forward in resolving decades of conflict between Detroit and our suburban neighbors. Detroit will have the resources we need to rebuild our city's crumbling water and sewer pipes," Duggan said in a news release.

The vote was held at Waterworks Park because it could accommodate more people than a board room at the water department building downtown. Five out of six votes on the authority's board were required for the lease to be approved.

Under the deal, suburban leaders expect to have a stronger voice in setting water rates for their residents. The city of Detroit will receive $50 million annual lease payments to help fix its aging infrastructure. In addition, a water assistance fund, expected to be about $4 million the first year, will be created to help those who are struggling to pay for water regionwide.

Here is what ratepayers throughout the region need to know about the new water authority:

Question: How will rates be affected?

Answer: Water system officials have promised to keep revenue increases to 4% or less annually, though rates can rise faster than that as usage declines. The switch is expected to slow future rate increases.

Q: What happens to DWSD?

A: It remains a department of the city with responsibility for managing water and sewage sales to Detroit residents and businesses. The DWSD's work force will shrink from about 1,400 employees to about 500, with 900 shifting to the regional authority, according to Detroit Mayor Mike Duggan's office.

Q: Why is this happening?

A: The deal gives Detroit an annual lease payment of $50 million and the suburbs, where about 75% of the system customers live, will have more say in the management of the system, including setting rates. The authority was created to help ease the cost of debt and operating the water system as part of Detroit's bankruptcy restructuring.

Q:Why was the deal negotiated in private?

A: As part of Detroit's bankruptcy, the process was handled in mediation, a court-monitored negotiation process. U.S. District Judge Sean Cox placed a gag order on the proceedings to promote candid discussions.

Q: What will Detroit do with the $50 million annual payments?

A: The money must be used on water and sewer system improvements within the city limits such as fixing leaking pipes and upgrading plants, including those which serve the entire system. The money cannot be diverted to the city's general fund for things like police, fire and ambulance service.

Q: How do the suburbs have a stronger voice in water operations?

A: Wayne, Oakland and Macomb counties each have a seat on the six-member board that will run the Great Lakes Water Authority. A fourth member appointed by the governor represents other counties that use the system like Genesee, Washtenaw and Monroe. Major decisions, such as setting the budget and issuing debt, require five out of six votes on the board.

Q: What is the advantage to the GLWA over the DWSD?

A: By separating from the cash-strapped city, the new authority expects to earn a better bond rating, which translates into lower borrowing costs. The regional approach could reduce disputes over rates.

Q: What happens to Highland Park's $25-million debt to the DWSD?

A: As of right now, the debt will likely be spread out over all suburban communities. The system is suing to collect. That case is pending.

Q: How does this affect Detroit's water shutoffs?

A: Probably not much. The city will continue to be responsible for any unpaid bills within the city limits and will likely use shutoffs as a way to force payment. The creation of the regional water assistance fund, however, should help some avoid shutoffs.