The one thing I haven't heard anyone recommend is a "utility district". I don't know if they're legal in Michigan......my Mother 20 years ago tried to create a library district in Clare County and ran into legal roadblocks......but it's an idea worth considering. Out here in Washington, fire, water, sewer, libraries and other services are provided in many areas by "districts", that is defined legal areas that cross city and county lines with their own elected governing board to operate them. If it would be possible to turn the the whole mess into a water/sewer district run by a board elected by voters inside the district, it would cure any number of political problems.

As to OC [[or any other political entity) setting up their own water/sewer system, the costs would kill them. A couple of years ago, the little town I'm a councilman in completed a ground up sewer system to service all of 215 REU's at a cost of $7.5M. And that's when TARP funds were available to help pay for it. I've seen numbers on this thread of $200M. That might buy you 15 miles of pipe.