Detroit City Council Rejects DWSD Contract, Ferguson Bid

For the second time in less than a month, Detroit's City Council has rejected a contract bid submitted by Ferguson Enterprises and approved by the Detroit Water and Sewerage Department.

The Detroit Free Press reports (here) -- On March 24, 2009, City Council voted 4-3 to reject a $2.2 million contract bid submitted by Ferguson Enterprises. Earlier this month, City Council voted to reject a $284,000 contract bid by the same company. That the FBI served a search warrant on Ferguson Enterprises and an affiliated company, Xcel Construction, on January 15, 2009 may have influenced the Council's vote. Bobby Ferguson is also widely reported to have had close ties with former Mayor Kwame Kilpatrick.

DWSD Director Responds to Report about Water Main Leaks

DWSD Interim Director Pam Turner responded today (here) in a Letter to the Editor in the Detroit Press to earlier reports about Detroit's trouble water mains --

In response to the March 2 article "Water mains are a ticking time bomb": For starters, the $23-million cost for unaccounted water is erroneous. The cost to ratepayers for the issue referenced by the article is perhaps 10% of that figure, or less than 1% of the total revenue of the DWSD water system.

Further, the article stated that most of the region's water problems are tied to Detroit's aging water system. Of the 12,500 miles of water infrastructure in southeast Michigan, only 3,500 miles of pipe -- most of which is in the city of Detroit -- are owned and maintained by DWSD. The remainder is local infrastructure owned and maintained by individual communities.

Detroit residents and businesses alone are responsible for the cost of maintaining their local distribution system. This cost of $25 million-$30 million a year for water line replacement comes solely from Detroit retail water rates and is not a cost charged to any suburban wholesale customer community. Wholesale rates are a separate structure and cannot be used to finance work being done solely for retail customers in Detroit.

The primary reasons for annual water and sewer rate increases are the cost of capital improvement projects, many of which are federally mandated. These mandates -- on the wastewater side -- have no associated federal grant or loan dollars, and the costs are borne by the communities served. Additionally, the recent financial crisis in the bond market has significantly raised the cost of debt service for the bonds financing our capital improvements. The impact of these factors on our rates is outlined in Web-posted presentations and related material shared with the wholesale customer communities and available on the 2009-10 rate season schedule found at www.dwsd.org.

"Unaccounted-for water" is a term with differing meanings in its application to rate-making. The water industry has been moving to more precise terminology in recent years and has used "non-revenue water" to refer to such situations as hydrant use, inaccurate metering and inaccurate pumping figures. "Lost water" has been used to describe water lost as the result of water main breaks and transmission loss in the water system. Based on an ongoing study of the DWSD system, the figure for lost water is more accurately reflected at 9% of total system production, as recently reported to the Board of Water Commissioners at its February business meeting.

DWSD remains committed to providing its 4.3 million customers with safe, reliable drinking water and responsible wastewater collection and treatment at affordable costs that place it as the third lowest of the nation's 20 largest municipal systems for water rates and eighth lowest for combined water and sewer rates.

Pamela Turner
Interim Director,
Detroit Water and Sewerage Department

DWSD, Detroit Seek to Remarket Debt

The Bond Buyer reports (here) "Detroit today [March 17, 2009] will begin to remarket $120 million of variable-rate, A-rated water revenue debt into a fixed-rate structure - the first time the city has entered the market since all three rating agencies downgraded its general obligation debt into junk-bond territory. "


The City will begin remarketing another $300 million of varible-rate sewer debt into fixed-rate debt within two weeks.


The article notes that most of the bonds are bank bonds, and that Detroit enters the market under a certain amount of "liquidity pressure." Detroit must remarket these bonds before April 1, 2009 or face the start of an accelerated five-year amortization.

DWSD, Genesee County Discuss Sharing Cost of Water System Improvements

Reprinted with Permission from Michigan Construction News

Dragline - Editorial Comment & News Analysis
March 13, 2009
By Guy Snyder

Keeping Things Fair

Good drinking water at a reasonable price has been fundamental for civilization for thousands of years. Arguably water, sewage control, and roads were the underpinnings of the Roman Empire. Unfortunately for the Detroit Water & Sewerage Department there are signs its regional system is beginning to crumble. This week in Flint its representatives worked hard to patch things up but we suspect the numbers aren’t in their favor.

* * *

Drops in the Barrel

Meetings were held this week between Genesee County Drain Commissioner Jeff Wright and officials from the Detroit Water & Sewerage Department. They focused on the future of the county’s drinking water, as well as the city of Flint’s. There’s been considerable displeasure expressed about DW&SD water and sewage rates, especially for its outlying communities. If you recall, even Mr. Wright complained last fall about a then newly instituted 15% price hike.

This time around the DW&SD has come up with a deal. If Genesee County will pay part of the construction cost of additional water supply lines, it will be given “special status.” This would qualify it for a major price cut — possibly as much as 50% — for water.

Yesterday the drain commissioner’s office reported it was still crunching the deal’s numbers. Even if they add up to Genesee County’s favor today, we still think the DW&SD’s critics have been making valid arguments. In the long run it may well be in the county’s best interest to opt out and build a modern water supply system of its own.

In our November 18, 2008, Dragline, we discussed Mr. Wright partnering with John P. McCulloch, water resources commissioner for Oakland County, to create a regional water planning group called the Karegnondi Water Authority. Its mission has been to investigate another water system that would not also serve Genesee and Oakland counties, along with the city of Flint, but Macomb and Lapeer counties as well.

A consultant was hired last fall but not named. It still hasn’t been named. The mystery firm was supposed to have delivered a report a couple of months ago. But we haven’t seen it. Our latest research indicates a final draft is slated for release next week. Okay, we’ll look for it. Surprisingly, the Karengnondi Water Authority has yet to establish a web site. (Does it even have a staff?) Must be the final draft is to appear on Mr. Wright’s web site. Or would it be Mr. McCulloch’s?

Don’t you love governmental transparency?

Even so, back in November the general news media was broadcasting a project estimate of $350 million for the new water supply system. The comments came anonymously from the usual “government sources.” The figure was supposed to cover a water treatment plant, 60 miles of water transmission tunnel and main, and related support facilities. The system would be designed to draw as much as 150 million gallons per day.

Genesee County had already purchased a 230 acre site with a 700 foot long shoreline on Lake Huron, north of Fisher Road, in Sanilac County. The properly had formerly been owned by Detroit Edison.

This week no money has been mentioned about what Genesee County would pay for the DW&SD’s new water supply lines. Still, the cost of the entire proposed system has been pegged at $750 million. Presumably the county would have to pay for the portion that traverses Genesee County. It wouldn’t surprise us, though, if it turned out to be a capital investment close to the entire price of a new, independent system.

If it is, participation by Mr. Wright would require a deeper plunge into Genesee County’s pocket. That’s because the cost of the Karengnondi Water Authority system mentioned above would be split by a minimum of four counties. Perhaps even five ways, if the city of Flint is included.

The decision’s not up to us. But even without looking at the DW&SD’s “offer,” if we were the Genesee County Drain Commissioner we’d be strongly motivated to reject it.

The manner in which the deal’s being presented by the general news media arouses suspicion. What may seem a favorable break on water rates today could disappear after the new DW&SD water lines are finally in the ground. We also suspect Mr. Wright and the city of Flint will find greater respect for their concerns from the Karegnondi Water Authority than they currently do from the Detroit Board of Water Commissioners.

We mentioned last fall’s 15% increase. In late January of this year the water commissioners approved wholesale rate increases averaging 8.9% for water and 2.4% for sewage for its suburban customers, including Mr. Wright. The increases are to take effect on July 1^st if they win the approval of the Detroit City Council. The council was supposed to take them up yesterday but our deadline for this column closed before we could find out if it did.

In case you missed our explanation last fall, Karegnondi was the name the Petan Indians gave to Lake Huron. It was used in the first known comprehensive map of Michigan and its Great Lakes, drawn in 1656 by Nicholas Sanson, the royal geographer of France.

Michigan Construction News is published by Guy Snyder (Snytco, Inc.) every Tuesday and Friday, and provides news about upcoming construction projects, and an editorial called the "Dragline." A summary of each edition is also available to those who subscribe. Michigan Construction News is supported by advertisers and by "Friends of Michigan Construction News." I look forward to reading Guy Snyder's twice-weekly newsletter, and encourage you to read and support this valuable news resource. Click here for more information about becoming a supporter of Michigan Construction News. - Peter Cavanaugh

Another Water Main Break Along I-96

The Detroit Free Press reports here, and the Detroit News reports here that a 48" water main broke along the I-96 service drive in Redford Township on Saturday [March 7, 2009], and flooded a 2-mile stretch of the freeway.

George Ellenwood, a spokesman for the Detroit Water and Sewage Department (DWSD), said I-96 was reopened by noon, but Schoolcraft will remain closed between Beech Daly and Inkster until repairs are completed early this week. Excavating crews were at the scene and expected to work throughout the weekend.

The immediate cause of the break was not known, although it cold be part of a pattern of breaks related to DWSD's aging infrastructure. In July, 2007, portions of the same water main that broke Saturday broke near Livonia, and flooded I-96.

Saturday's water main break also comes less than a week after the Detroit Free Press published an article (here) breathlessly entitled that "Water Mains are a Ticking Time Bomb" which noted that --

"Brittle and badly aging water pipes are lurking beneath many metro Detroit communities and will cost taxpayers billions of dollars to repair or replace over the next decade."

Genesee County Considering Alternatives to DWSD Water Supply

The Flint News reports today that Genesee County is still studying alternatives to buying water from the Detroit Water and Sewerage Department (DWSD), even as County officials continue negotiations on a possible new 30 year contract. The principal alternative would be the construction of a separate water treatment plant, which would include placing miles of new pipeline to Lake Huron.

"County Drain Commissioner Jeff Wright and a spokesman for the Detroit Water and Sewerage Department confirmed Friday they have been and will continue talking March 10 about renewing what's been an unhappy marriage -- even as the idea of water independence gets all the attention."

"A decision has to be made by August as far as I'm concerned," said Wright, who said there's at least a 50-50 chance the county will break from Detroit and build the water line at a cost of more than $300 million.

Genesee County is one of a number of counties which are studying alternatives to buying their drinking water from the City of Detroit. Meanwhile, DWSD is proceeding with plans to add capacity to its system. The Flint Loop and North Oakland Transmission System (NOTS), would add miles of additional water main and redundancy to DWSD's drinking water transmission system.