Proposed regional water authority could be a $50M boost for Detroit

**Vic01** · March-10-13, 05:10 AM

from the Free Press today

"A confidential plan is being pushed to break the Detroit Water and Sewerage Department free from the City of Detroit and create a regional authority, which could pump as much as $50 million a year back into the cash-strapped city's budget, the Free Press has learned.

A 15-page summary of the plan, titled "Proposal to Control Our Own Destiny," calls for the city to own the system but for an authority to operate it independently of city bureaucracy".

**corktownyuppie** · March-10-13, 07:10 AM

Originally Posted by Vic01

from the Free Press today

"A confidential plan is being pushed to break the Detroit Water and Sewerage Department free from the City of Detroit and create a regional authority, which could pump as much as $50 million a year back into the cash-strapped city's budget, the Free Press has learned.

A 15-page summary of the plan, titled "Proposal to Control Our Own Destiny," calls for the city to own the system but for an authority to operate it independently of city bureaucracy".

Key words:

- City of Detroit will own the system
- $50MM per year into the city budget.

**Honky Tonk** · March-10-13, 07:19 AM

Originally Posted by corktownyuppie

Key words:

- City of Detroit will own the system
- $50MM per year into the city budget.

Now all we need are some real accountants to keep track of it all.

**jt1** · March-10-13, 10:02 AM

Originally Posted by corktownyuppie

Key words:

- City of Detroit will own the system
- $50MM per year into the city budget.

Am I crazy to assume that the authority would take on all long term obligations. If so, the city should sign it immediately

**313WX** · March-10-13, 10:19 AM

Regionalizing the system is fine, just don't privatize it.

**313WX** · March-10-13, 10:20 AM

Originally Posted by jt1

Am I crazy to assume that the authority would take on all long term obligations. If so, the city should sign it immediately

Agreed as well.

**Hermod** · March-10-13, 10:27 AM

Originally Posted by jt1

Am I crazy to assume that the authority would take on all long term obligations. If so, the city should sign it immediately

Most of the DWSD bonds are "revenue bonds" with the revenue from the customers pledged to the payment of the bonds so their payment is already plugged into the system.

The City of Detroit "general obligation" bonds are the back breaker..

**Cliffy** · March-10-13, 10:28 AM

Originally Posted by 313WX

Regionalizing the system is fine, just don't privatize it.

Yes, its time. Too much theft going on but I don't want consultants taking over because they are the biggest thieves.

**313WX** · March-10-13, 10:32 AM

Originally Posted by Hermod

Most of the DWSD bonds are "revenue bonds" with the revenue from the customers pledged to the payment of the bonds so their payment is already plugged into the system.

The City of Detroit "general obligation" bonds are the back breaker..

I'm not sure if this still is in place [[it used to be), but if not I would be in favor of charging suburban customers a higher premium for the water than Detroit's customers.

You want to drink our water but not actually live within our municipality? Well fine, you pay double or triple the rates. Otherwise, you build your own water system [[unlikely to happen).

**313WX** · March-10-13, 10:33 AM

Originally Posted by Cliffy

Yes, its time. Too much theft going on but I don't want consultants taking over because they are the biggest thieves.

Yes. It should be set up to where we elect the regional board and they're only paid a modest stipend for the job [[$25K per year?).

**Hermod** · March-10-13, 10:33 AM

Originally Posted by 313WX

Regionalizing the system is fine, just don't privatize it.

There are privately-owned water and sewer utilities in the US which work quite well and which have very competitive rates with publicly-owned systems. There are also water companies which operate publicly-owned systems under contract and which work quite well.

**Novine** · March-10-13, 12:42 PM

Why should users of the system absorb $50 million in payments to the city of Detroit?

**Cliffy** · March-10-13, 12:43 PM

I actually don't even have a problem with them selling the water system because out of all the bills I get, the one that I think is the biggest ripoff is the water bill. Dte and Consumers is private and I have no issues with that.

**Vic01** · March-10-13, 04:53 PM

Originally Posted by 313WX

I'm not sure if this still is in place [[it used to be), but if not I would be in favor of charging suburban customers a higher premium for the water than Detroit's customers.

You want to drink our water but not actually live within our municipality? Well fine, you pay double or triple the rates. Otherwise, you build your own water system [[unlikely to happen).

If, and it's a big if, we are going to talk about "Regional" boards, authorities, or any other Regional concepts... we need to stop with the petty territorial outlooks. "Regional" means we are all equal, work as a team, and pay the same. What a concept!

**rb336** · March-10-13, 05:04 PM

Originally Posted by corktownyuppie

Key words:

- City of Detroit will own the system
- $50MM per year into the city budget.

with that, I'm OK with it. physical properties, infrastructure, etc., owned by the water department are worth billions of dollars

**Detroitnerd** · March-10-13, 07:03 PM

Ooooh, give up a system worth billions for $50 million a year. And then I'm sure the regional authority will be fair and not force those who live densely to subsidize those who want to live far, far away. Nice fairy tale ...

**Wesley Mouch** · March-10-13, 08:18 PM

Originally Posted by Novine

Why should users of the system absorb $50 million in payments to the city of Detroit?

I know nothing here, but it seems intuitive that the City of Detroit owns a large amount of infrastructure. They invested in the system. Built it up. Some else who uses that system would expect to pay for its use. Its a multi-billion dollar system. $50m a year seems cheap if anything.

Looking at it the other way, why should the residents of the City who have built up a system let their investment be used by others for free?

**Vic01** · March-10-13, 08:47 PM

Originally Posted by Detroitnerd

Ooooh, give up a system worth billions for $50 million a year. And then I'm sure the regional authority will be fair and not force those who live densely to subsidize those who want to live far, far away. Nice fairy tale ...

Again, from the article...
Details of the plan "The plan appears tailored to avoid obstacles that have hampered previous discussions.

Detroit's charter calls for a vote of residents before any water infrastructure can be sold. But this plan doesn't sell any assets -- it leases them to the authority.

Michigan law prevents municipal water systems from charging more for water than the cost of production. But under this plan, the city wouldn't turn a profit on the sale of water -- it instead would receive money through a lease of assets.

The plan calls for the Water and Sewerage Department to become the Detroit Water and Sewage Authority, an independent group run by the current water board. It would operate the system with complete control over business decisions and would pay lease payments to a second new authority, known as the Detroit Water Authority.
The Detroit Water Authority would hold interim title to all water department assets and pay the city's general fund at least $50 million a year in what are known as payments in lieu of taxes. Department assets automatically would revert to the city if a payment was missed. The city could use that money for any purpose".
"The goal is to separate the department from the city, which has a municipal bond rating among the worst in the nation. The theory behind the deal is that with a better bond rating, the water department could refinance more than $6 billion in long-term debt at lower interest rates, saving money".

"The city's balance sheet potentially could improve under the deal, if it worked as proposed.
The city could move the water department's $6 billion in bonded debt off its books and have an additional $50 million or more annually to provide other services".

Sounds like there's no "giving up" of the system, just a lease with it clearly stated that "payments are to be on time" or everything reverts back to the city. Therefore, no risk, loss, or "taking" of anything. We can try a new way of looking at things [[strange concept around these parts, I know)... or keep on with the same old broken system for a little while longer.

**Wesley Mouch** · March-10-13, 08:58 PM

Citizens deserve good, well utility and services. Why does it matter if Detroit or Wayne Country or the State or some other authority runs the system?

All this concern about 'stealing' is so misguided that I don't know where to start. I expect properly run government. And I am just as happy with this being done by whatever entity -- so long as everyone is treated fairly.

If there's unfairness, let's discuss it. But who cares who owns this in the end? You can't drink a water system. You drink water.

Too many power struggles of no import.

**Richard** · March-10-13, 09:32 PM

Originally Posted by Novine

Why should users of the system absorb $50 million in payments to the city of Detroit?

It is like we will pay you 50 mil for this but we get the money back when we up the rate ,sounds good .

I thought from reading the bonding material on DWS it is already owned as a separate entity from the city and that was the only reason it was bond-able is because it was away from their prying fingers.

Which was the only way to scam it was to hook up which who was running it and divert the contracts,which is what happened anyways as some found out.

So is this a way to get around those requirements? But anyways it looks like the only thing left in Detroit is going to be the name.

The city is a shell with no bond-able assets left ,but I guess when you are broke $5 is alot of money,I still say give the city a chance with new management in place before selling the farm.

If there are no revenue assets left the only way for the city to expand services is increase taxes because it will be their only form of revenue,Detroit will be a shell company collecting taxes to pay all the little corps or a book-keeper.

I guess that will squash little things like facade improvement grants,neighborhood stabilization stuff,etc.

Or maybe they could hire an outside corporation and they could collect the fed dollars and bank it using the interest to match funds.Interesting concept.

Care full what you wish for when you work with short term gain for immediate results but long term mistakes.

**Honky Tonk** · March-11-13, 04:32 AM

If they raise taxes they're done, I don't think residents will pay more just for the "privilege" of living in Detroit. But then again, people buy 3 oranges for $2 @ Eastern Mark-Up and think they're getting a deal. Maybe the people in Mudtown will. They seem to buy into anything.

**Novine** · March-11-13, 06:05 AM

The reasons why this may be good for the city don't explain why it would benefit suburban rate payers to have to pay $50 million a year to the city of Detroit to use the system. I have no interest in gaining control of the system to pay more and that's the likely outcome of a regional takeover.

**Honky Tonk** · March-11-13, 07:29 AM

Originally Posted by Novine

The reasons why this may be good for the city don't explain why it would benefit suburban rate payers to have to pay $50 million a year to the city of Detroit to use the system. I have no interest in gaining control of the system to pay more and that's the likely outcome of a regional takeover.

Aren't the 'burbs paying inflated prices, [[as they claim, I'm not sure), for water already? Is this $50 mil charge in lieu of the current prices, or is this an additional charge? I was under the impression, with the proposed restructuring of DWSD, this would be a new price. As a whole, It might turn out to be less then what is being paid now.

**Eber Brock Ward** · March-11-13, 08:38 AM

Originally Posted by Novine

The reasons why this may be good for the city don't explain why it would benefit suburban rate payers to have to pay $50 million a year to the city of Detroit to use the system. I have no interest in gaining control of the system to pay more and that's the likely outcome of a regional takeover.

As a hypothetical:
- Suppose borrowing costs are $800 million dollars over a given period under the city's credit, which DWSD essentially uses now as an arm of the city.
- Now suppose that, were DWSD spun off, that borrowing costs would be $700 million dollars over a given period, as the debt is restructured [[city credit too bad forthat now) and lower interest rates are realized.

The new entity could cut a check to the city for $50 million per year and still save rate payers the remaining $50 million per year of the $100 million dollar savings. It's a pretty simple legal structure that benefits everyone if done correctly, and something that should have been done a long time ago [[and probably would have, were it not for our region's sick aversion to regionalism).

**renf** · March-11-13, 09:07 AM

When Pontiac got an EFM, do I recall that he sold Pontiac's water and sewage system to a adjoining governmental body and used the revenue to substantially reduce Pontiac's obligation to bond holders? If an EFM is
appointed for Detroit, I am unclear about how much authority he or she
has to sell city assets such as parks or the city's electrical system. Does
any one know?