Lakeshore Global Low Bidder on PRV Vault Improvements Project, DWS-891

On December 23, 2014, Lakeshore Global  Corporation submitted the low bid for the project known as "Pressure Regulating Valve Vault Improvements," DWSD Contract DWS-891.  Lakeshore's bid was about 14% lower than the second bidder.

 The as-read bids are as follows:

1. Lakeshore Global . . . . . . . . . $1,849,500
2. Trojan Development . . . . . . $2,125,000
3. Tooles Contracting . . . . . . . $2,178,440
4. Lawrence M. Clarke, Inc. . . $2,190,000
5. Detroit Contracting, Inc. . . .$2,460,338
6. Weiss Construction . . . . . . . $2,596,000

The Scope of Work for Contract DWS-891 includes demolition and reconstruction of pressure regulating valve vaults in five different locations: at Sixth and Porter, Park and Elizabeth and Chane at Maple in the City of Detroit; Marquette and Inkster in Garden City; and South Boulevard at North Service Center in the City of Troy. 

The Scope of Work also includes removal and replacement of PRV and gate valves at all five locations, plus installation of ship ladders and sump pumps. 

For more about DWSD Update, click here.

Great Lakes Water Authority Seminar planned by Oakland County Bar Association

The Oakland County Bar Association is planning a lunch seminar on January 13, 2015 from 12:00 to 1:00 p.m. to discuss the Great Lakes Water Authority.

Hosted by the Energy, Sustainability and Environmental Law Committee, this event will feature speakers L. Brooks Patterson, Oakland County Executive, and J. Bryan Williams, who is the Oakland County representative on the current Board of Water Commissioners. 

For more details concerning this event, check out the OCBA's Facebook page here. The Oakland County Bar Association is located at 1760 S. Telegraph Rd., Ste 100, Bloomfield Hills, MI 48302-0181. 

For more about DWSD Update, click here.   

Wayne County Appoints Nardone to Great Lakes Water Authority

The Detroit News reported last Friday [12/19] that the Wayne County Commission voted unanimously to appoint Joseph Nardone as the County's representative to the Great Lakes Water Authority. Mr. Nardone currently serves as Director of Development for the Wayne County Airport Authority. 

Mr. Nardone's LinkedIn profile (here) doesn't reveal very much information about his education or background prior to his appointment to the Airport Authority in November, 2012. The Detroit News reports here that Mr. Nardone previously worked for the Wayne County Parks Division and is a 1985 graduate of Michigan State University. 

For more about DWSD Update, click here.

Great Lakes Water Authority Schedules First Public Meeting (UPDATED)

The Detroit Free Press reports this morning (here) that the Great Lakes Water Authority is scheduled to hold its first public meeting on Friday, December 12, 2014.  The meeting will  be held in the Water Board Building, 5th Floor Board Room and begin at 1:30 p.m.

Notice for the meeting, published on the DWSD website, describes the meeting as an organizational meeting. To date, only two members of the GLWA Board have been appointed -- Robert Daddow for Oakland County and Brian Baker for Macomb County --  which is not enough for a quorum.  

The GLWA Board consists of 6 members, one appointed by Oakland, Macomb and Wayne Counties; two appointed by the City of Detroit; and one by the State of Michigan. The remaining four board members have not been announced publicly. 

Comment: Presumably, the new authority would not be meeting unless the remaining board members had been selected privately. I anticipate a public announcement of the remaining four board members within the next 24 hours. There's no reason to delay things further. Time to get down to business.   

Update (12/12/14 - 8:45 a.m.): Mayor Duggan has reportedly appointed Gary Brown and Ike McKinnon to the Board, both of whom are members of the Mayor's Administration. Governor Snyder has reportedly appointed Edward Hood, a retired attorney from Ann Arbor. Mr. Hood previously practiced with Dykema Gossett. No word yet on who has been selected to represent Wayne County. 

For more about DWSD Update, click here.    

Peter Cavanaugh Appointed to Pure Oakland Water Board of Directors

On November 7, 2014, Attorney Peter Cavanaugh was appointed to the Board of Directors of Pure Oakland Water for a three-year term.

Pure Oakland Water is a Michigan not-for-profit organization dedicated to protecting Oakland County and regional water resources through public education, community organizing, environmental advocacy, and promotion of a sustainable future. 

Oakland County Water Resources Commissioner, Jim Nash, is Chairman of Pure Oakland Water. 

Peter Cavanaugh is a Construction Attorney and Partner with the law firm of Cavanaugh & Quesada, PLC.

Detroit Bankruptcy Plan Approved

Well, that didn't take too long, did it? 

On Friday, November 7, 2014, just 16 months after filing the largest municipal bankruptcy in U.S. history, Judge Stephen Rhodes approved the City of Detroit's Plan of Adjustment. Crain's has the details here. 

For more about DWSD Update, click here.

DES Electric Submits Low Bid on Joy Road Pump Station Project, DWS-896

On October 23, 2014,  DES Electric, LLC submitted the low bid for the project known as "Joy Road Pumping Station - Replacement of Outdoor Plant Switchgear," DWSD Contract DWS-896. 

The as-read bids are as follows:  

1. DES Electric . . . . . . . . $668,300.00
2. Rotor Electric . . . . . . . $715,900.00
3. J. Ranck Electric . . . . $749,465.00
4. McGraw Electric . . . . $777,225.00
5. Shaw Electric. . . . . . .  $939,600.00
6. Lake Erie Electric . . .  $1,297,972.00

For more about DWSD Update, click here.

Wayne, Oakland, and Macomb Counties Approve New Regional Water Authority (UDPATED)

On  October 9, 2014, Macomb County joined Wayne and Oakland Counties in approving plans to join the new Great Lakes Water Authority, which will lease DWSD's water and sewerage assets for 40 years.

Update (10/16): Oakland County has appointed Robert Daddow, deputy county executive, to serve on the Board for the new Great Lakes Water Authority.  Daddow is quoted by the Detroit News: 

"I'll have two measuring sticks while serving on the board," Daddow said. "One will determine whether a matter before the board helps or harms ratepayers. The other will ascertain whether it makes monetary sense."

Update: (10/21): Macomb County has appointed Brian Baker, finance and budget director for the City of Sterling Heights, to serve as its representative on the new Authority. 

For more about DWSD Update, click here.    

Detroit Water Board Adopts Resolution Endorsing MOU, Great Lakes Water Authority (UPDATED)

On September 17, 2014, during a Special Meeting, the Board of Water Commissioners adopted a resolution endorsing the Memorandum of Understanding (MOU) and the formation of the Great Lakes Water Authority.  

The Detroit City Council is expected to vote on September 19th on a similar resolution. However, if the City Council fails to endorse the new authority, the Emergency Manager Kevyn Orr has the power to do so. 

Oakland and Macomb County Commissions are also in the process of reviewing and voting on adoption of the MOU and the Great Lakes Water Authority. 

Oakland County has a website here with much more information about the Great Lakes Water Authority, including draft Articles of Incorporation here.  Macomb County has posted information about the new authority here. 

Earlier this week, Crain's Detroit Business published two terrific articles here and here explaining the details of the new authority and how it will impact Detroit and the suburbs. 

Update (9/19): Detroit City Council voted 7-2 to approve the plan for a regional water authority. 

For more about DWSD Update, click here. 

Detroit, Suburbs Strike Deal to Create Regional Water Authority (UPDATED)

Earlier this morning at a joint press conference, county executives from Wayne, Oakland and Macomb County, and Detroit Mayor Mike Duggan announced their agreement to the creation of a regional authority, the Great Lakes Water Authority.  

This agreement was just announced. More details will details will follow. 

   MOU Regarding Formation of Great Lakes Water Authority

For more about DWSD Update, click here.

Board of Water Commissioners, Bankruptcy Court Approve Bond Exchange

On August 22, 2014, the Board of Water Commissioners approved a deal under which 28% of existing water and sewer bond holders agreed to tender back their bonds. The Water Board's decision came just a day after the deadline for bond holders to accept DWSD's tender offer, which expired August 21st at 5:00 p.m. (EDT).  

Earlier today [8/25], the Bankruptcy Court overseeing the City of Detroit's bankruptcy proceedings approved DWSD's decision to buy back and redeem $1.67 billion worth of water and sewer bonds.

According to DWSD's Chief Financial Officer, Nicolette Bateson, refinancing these bonds will save $11.4 million a year fro the first 19 years. Refinancing will also allow DWSD to raise $150 million for capital improvements to the sewerage system. 

The Detroit News explained on Friday [8/22] that acceptance of the tender offer would also remove bondholders from the bankruptcy process, "taking the wind out of ongoing litigation over the water and sewer bonds" and increase the likelihood that the City's plan of adjustment will be approved by Judge Rhodes. 

For more about DWSD Update, click here.

Tracking DWSD's Bond Tender (UPDATED)

If you're interested in tracking DWSD's bond tender offer, there's a website that's providing real time coverage of the bonds and amounts that have been tendered back so far -- 

https://www.bondcompro.com/dashTNA0/1/dashTickerTNA.asp

As of 1:00 p.m. EDT, 27.21% of the outstanding bond debt has been tendered back. The tender offer expires on Thursday, August 21, 2014 at 5:00 p.m. EDT. 

For more about the DWSD tender offer, Crain's Detroit Business had a terrific article this morning, click here.Fitch Ratings also has a good discussion here. 

Update (8/21): As of 5:00 p.m. EDT today, 28.35% of bonds had been tendered back.

Update (8/22): Its unclear whether the 28% of bonds that were tendered back by yesterday's deadline is enough.  The Board of Water Commissioners is scheduled to meet today in a Special Meeting at 1:00 p.m. EDT to discuss the matter and vote on a resolution either accepting or rejecting the tender. Click here to see the Agenda for today's special meeting.     

For more about DWSD Update, click here. 

Deal for Creating Regional Water Authority May Be Near, Detroit News Reports

Nolan Finley, columnist with the Detroit News, reports this morning that the City of Detroit and its suburban customers are close to a deal that would see the formation of a regional water authority. The City would reportedly be paid $50 million per year over 40 years as part of the deal being negotiated with Judge Sean Cox. 

Specific details are not available due to a gag order issued for the talks, however, Mr. Finley reports the following outline: 

A six-member board would be formed, with two appointments coming from the city of Detroit, one each from Wayne, Oakland and Macomb counties, as well as one from the state. Currently, the authority that runs the city-owned water system has four members appointed by Detroit and three by the suburbs.

All major decisions by the new authority, including contract awards, rate increases and construction projects, would require five votes.

That’s similar to the protocol at the Cobo Center authority, which requires a unanimous vote on major issues, a stipulation demanded by Oakland County Executive L. Brooks Patterson. In exchange for acquisition of the water system and its assets, the authority would pay the city $50 million a year for 40 years. That premium was the major sticking point of the talks.

Stay tuned for more details. 

For more about DWSD Update, click here. 

Oakland Macomb Interceptor Drain, RFP Issued for Segment 4 Repair Program, OMID Contract 5

Last week, the Oakland Macomb Interceptor Drain Drainage District issued a request for bids for the Segment 4 Repair, Contract No. 5.

A mandatory Pre-Bid Meeting will be held on August 13, 2014 at the Macomb Intermediate School District (MISD) Educational Service Center located at 44001 Garfield, Clinton Township, Michigan, 48038. Registration begins at 9:30 a.m. The Pre-Bid Meeting will begin at 10:00 a.m.

Bids will be opened on September 11, 2014 at 11:00 a.m. Office of the Oakland County Water Resources Commissioner, Building 95 West, One Public Works Drive, Waterford, Michigan 48328-1907. Only bids received from registered contractors in attendance at the Pre-Bid meeting will be opened. All other bids will be rejected as non-responsive.

Scope of Work
Contract 5 repair work is located along the Oakland Arm Interceptor in PCI-9 and PCI-10A/B extending mostly along Utica Road in the cities of Sterling Heights and Utica and the Township of Shelby. PCI-10A/B reaches of sewer extend through the southern and northern parts (respectively) of a nature preserve, now comprised of Riverbends Park and Holland Ponds Park. In order to facilitate financing, Contract 5 work will be split into two separate Contracts, hereafter referred to as Contract 5 Phase 5A and Phase 5B, both to be awarded based on a single combined bid from a Contractor who is the lowest responsible and responsive bidder for both combined phases.

Phase 5B will be awarded and executed only if and when Federal Financing is obtained.

Work items for both phases of Contract No. 5 include the following:

Phase 5A
- Construction of permanent gravel roadways.
- Construction of temporary crossings.

Phase 5B
- Construction of 2 access shafts.
- Repair hole in the PCI-9 interceptor.
- Repair visible reinforcement and where reinforcement outline is visible.
- Inject cementitious grout (from in tunnel) in areas with suspected voids surrounding the interceptor; seal running and gushing leaks with chemical grout.
- Access manholes modification/restoration.
- Repair localized crack/fracture using chemical grout.
- Interceptor lining of selected locations.
- Interceptor lining at meter tap locations.
- Perform CCTV inspection after completion of repairs.
- Sewage flow management.           

The project will be funded under the Stormwater, Asset Managment, and Wastewater  Program. Click here for more information about the SAW program.

For more information about this project, contact Abdulnasser Almadhoun, P.E. at NTH Consultants - 313-237-3942 or by e-mail: aalmadhoun@nthconsultants.com

For more about DWSD Update, click here.  

Ric-Man Submits Low Bid on Middlebelt Tunnel Project for Oakland County WRC

Earlier today, Ric-Man submitted a low bid of $28,179,498 for the project known as "Middlebelt Transport and Storage Tunnel." Ric-Man's bid was one of 9 bids received by the Oakland County Water Resources Commissioner, who is the Owner for this project. 

1. Ric-Man Construction . . . . . $28,179,498
2. Jay Dee Contractors . . . . . . . $31,679,620
3. Triad Midwest Mole JV . . . . $33,020,000
4. SAK Construction . . . . . . . . .$35,383,320
5. Super Excavators . . . . . . . . . $35,943,000
6. S. J. Lewis . . . . . . . . . . . . . . . $37,668,000
7. Guy F. Atkinson . . . . . . . . . .$42,473,660
8. Kenny Construction . . . . . . .$44,931,200
9. McNally . . . . . . . . . . . . . . . .  $62,562,000

The Project involves the construction of approximately 7,600 linear feet of 108 inch diameter storage and transport tunnel with primary and secondary liner, two diversion chambers, six tunnel structures and other related Work. The tunnel runs along Middlebelt Road between 11 1/2 Mile and 13 Mile in Farmington Hills, Michigan. The Engineer's Estimate for the Project was $32.2 million.

For more about DWSD Update, click here.

DWSD Water and Sewer Bond Rating Nears Bottom (UPDATE)

Detroit's water and sewer bond rating isn't at the bottom of Fitch's credit rating scale, but its getting very close. 

As reported earlier this week by Bond Buyer and today by the Detroit Free Press, the Fitch Ratings is warning that DWSD's $5.7 billion water and sewer debt could fall to "D" rating if the bankruptcy court approves the Emergency Manager's current plan of adjustment. 

Under the Fitch bond rating scale, there is nothing below a "D" rating. That's as low as it is. 

Comment: In my view, the negotiations concerning a regional water authority should be coming to a head very soon. With Governor Snyder poised to participate in the process, if his staff isn't already involved in the secret settlement talks, and the pressure from Wall Street beginning to build, I anticipate a tentative deal to be announced very soon. I think there is still much work to be done before any deal regarding the new authority can be finalized, but I think the outline of a deal is taking shape. 

Update (6/16): Earlier today, Fitch Ratings withdrew its "D" bond rating of Detroit's water and sewer debt. If I'm reading Fitch's ratings definitions correctly, Fitch is no longer providing a rating for DWSD's bonds. I think this is the equivalent of a stock being delisted by one of the stock exchanges. In other words, not good.     

For more about DWSD Update, click here. 

Mirza Rabbaig, PE: Reflections of a Colleague

Reflections of a Colleague

By: John McGrail, PE
Retired Head Engineer DWSD WWCG

A colleague dies and we reflect on his passing. We think of his wife and his children and how the loss will affect them. We secretly, I suppose think, "There but for the grace of God go I." We think back upon the years spent in close professional contact with our colleague and reflect on the ups and downs of that relationship and willingly, perhaps out of respect to the fallen colleague, extend to him the benefit of any doubt and remember all the good he did and we did together.

I did not know Mirza Rabbaig in the sense that he was a personal friend.  The department in which he and I spent over thirty years of our lives did not encourage the development of intimate friendships. Our department was not the kind of organization that saw such things as important. Perhaps such knowledge was not important. So I can speak only to what Mirza meant to me professionally.

Mirza was the sort of man who understood what needed to be done and then did it regardless of the obstacles placed before him. Mirza was the first and only leader of the department’s CSO program.  He became group leader of the CSO group around 1994 and from that time to the present day oversaw the development of a program that added more than 17 new facilities to the department’s infrastructure at a cost of nearly $500 million. In the 20 or so years from 1994 until the present day no group leader was more consistently and reliably productive than Mirza.

Here I must state my own admiration for the man.  My group was charged with the construction management of the department’s installation work. While my group worked everywhere in the department and installed projects generated by 13 head engineers over a period of thirty years, none produced more work than Mirza and since my group’s success was largely tied to the work product of the design groups, Mr. Rabbaig can be credited for a sizable portion of my success.

As time has passed, I find myself often remembering a lost colleague.  My friend and mentor Dave Casey like Mirza worked and never retired, dying before he had an opportunity to do so.  Just yesterday I learned of the death of André Hindo PE who, with his brothers Ned and Kal, were important personalities in the design and construction business in our region. Now I reflect on the passing of yet another colleague, Mirza Rabbaig and find myself sad and a bit lonely.

All who read this should remember Mirza as a man who got things done and who in significant ways improved the water quality environment of our region. 

If one day you are driving on I-94 west and pass the “concrete channel” on the Rouge River and see a heron wading along its shore stalking minnows, think of Mr. Rabbaig whose CSO facilities upstream made such a sight possible. Can we say more of a man who has left this sort of mark, I think not. 

 

Lakeshore Global Submits Low Bid on Water Main Replacement Project, WS-691 (UPDATED)

On May 15, 2014, Lakeshore Global Corporation submitted a low bid of $11,798,827 for the project known as "Water System Improvements: Joy Rd from Trinity to Southfield Fwy," DWSD Contract WS-691. 

There were only three (3) bidders on this project. The as-read bids received by DWSD are as follows:

1. Lakeshore Global Corporation . . . $11,798,827
2. Major Cement Company . . . . . . . . $14,879,043
3. Blaze Contracting, Inc. . . . . . . . . . $15,249,000  

All three of these contractors are Detroit Based Businesses.

The scope of work for Contract WS-691 includes the replacement of existing 8-inch, 16-inch, and 24-inch water mains. The Contractor will furnish and install approximately 13,300 linear feet of 8-inch, 133 linear feet of 16-inch, and 8,022 linear feet of 24-inch ductile iron pipe and fittings.  

Update (6/25): Major Cement Company was awarded this contract today at the Regular Water Board Meeting. Lakeshore Global Corporation's bid was rejected as non-responsive because the required bid security and accompanying documentation was not contained in the bid package at the time of submittal.

For more about DWSD Update, click here. 

Support Building for Regional Water Authority Among DWSD's Suburban Wholesale Customers

Among DWSD's suburban wholesale customers, there is growing support for a regional water authority, despite continued opposition by Oakland and Macomb Counties. Wholesale customers are also seeking to join the currently-private mediation process aimed at forming a new water and sewer authority.   

On May 2, 2014, the Southeastern Oakland County Water Authority (SOCWA), which represents 11 suburban wholesale customers, including Birmingham, Royal Oak, and Southfield, filed papers with the bankruptcy court in Detroit's Chapter 9 case seeking to participate in the private mediation process originally requested by Wayne County in April. 

The Western Townships Utility Authority (WTUA), which represents Canton, Northville, and Plymouth has also endorsed a regional water authority as a viable alternative and sought participation in the process. 

Conference of Western Wayne Communities

Most recently, on May 9, 2014, the Conference of Western Wayne (CWW), a group of 18 wholesale customers in Wayne County representing some 700,000 residents, unanimously adopted a resolution endorsing the concept of a regional authority and seeking participation in the on-going mediation process with the three suburban counties -- Wayne, Oakland and Macomb. 

Comment: The impression I have from these latest developments is that not all suburban communities are in line with Oakland and Macomb County's hard-line stance toward negotiating a new authority, nor do the Wayne County communities fully endorse their county leaders. Given what's at stake, I think as many stakeholders as possible should have a voice in the process of creating the Great Lakes Water and Sewer Authority.

For more about DWSD Update, click here.  

Mirza Rabbaig: DWSD Loses Veteran Engineer

Sad News -- Over the past weekend, Mirza M. Rabbaig, P.E.,  a 33-year veteran of the DWSD died unexpectedly while visiting his family in India.  He was 64 years old. Mr. Rabbaig is survived by his wife, Shaheen, sons Maseer and Shaheer, and daughter, Sheema.

Mr. Rabbaig was the Head Engineer of the CSO Control Group, and had over thirty years of experience with the Detroit Water and Sewerage Department. Since 1994 he managed the development and implementation of the DWSD's Combined Sewer Overflow Control Program.

Mr. Rabbaig was also active in his community. He was President of his mosque (Muslim Community of Western Suburbs) at this time of his death.  

Comment: I met Mirza only a few times, and didn't know or work with him like many of you did. If any of you have thoughts or stories that you'd like to share with the DWSD community, I'd be glad to publish them. Please e-mail me here and put "Mirza" in the reference field. You're also free to post a comment.   
 

Oakland County to Study (Again) Alternatives to Remaining with DWSD

Oakland County is reportedly set to spend $500,000 to $3 million for a study of alternatives to remaining with the Detroit Water and Sewerage Department. Crain's Detroit Business published a story here, and the Detroit News reported a similar story here.
 

Reading these stories reminded me that in April, 2007, Oakland County committed $125,000 to study alternatives to DWSD for drinking water. The Oakland County Commission approved funding this study on April 26, 2007.  This was at the time that Genesee County was looking to form its own authority, the Karegnondi Water Authority, which is now a reality; construction of the first phase of a new intake pipeline began in 2013 and the KWA recently sold its first round of water bonds.  

So what became of the 2007 study of alternatives to DWSD?

I don't know if its the same study, but in 2007 the then Oakland County Drain Commissioner published an extensive, 5 volume "Water and Wastewater Master Plan" prepared by URS Engineers. Volume 4 of the Master Plan is a 125 page "Alternatives Analysis." The "alternatives" being being alternatives to DWSD. 

   Oakland County Drain Commission, Water and Wastewater Master Plan - Volume 4 - Alternatives Analysis - Sept...

I haven't thoroughly studied this "Alternatives Analysis," but obviously Oakland County didn't join the Karegnondi Water Authority, and didn't leave DWSD in 2007.  If they're serious about doing so now, this report will offer some clues as to why they might (or why it didn't make sense to do so in 2007). 

But this report also begs the question - why spend upwards of $3 million to update a study that already exists? And if this isn't the report that cost $125,000 in 2007, where is that study?

The Oakland County Board of Commissioners is scheduled to meet on April 17, 2014, and the $3 million expenditure is on page 17 of their agenda here. 
 

For more about DWSD Update, click here.  

Karegnondi Water Authority to Sell $220 Million in Water Bonds for New Pipeline (UPDATED)

The Bond Buyer reported earlier this week [3/26] that the Karegnondi Water Authority (KWA) is making plans for an initial $220 million bond offering to finance its new 63 mile pipeline, which was first proposed in 2009. Bonds could be sold as early as next week [4/1].  

As the Detroit Water and Sewerage Department's bond rating falls deeper into junk territory, the Karegnondi Water Authority has been assigned an initial A2 rating by Moody's in advance of this first bond sale. 

The Bond Buyer article details some of the particulars about the KWA's bonding offering:

"In light of Flint's severe fiscal distress — the city has been under state controlled emergency management since late 2011 — the bonds feature a back-up pledge from Genesee County.

"The governments expect to make their payments from the system's revenues, but the debt carries the limited-tax general obligation pledge of both credits. Genesee has promised to cover Flint's payments within 15 days if the struggling city is unable to make its payments.

* * *

"Flint is set to no longer receive water from the DWSD as early as April 17, relying on its own water treatment plant and water drawn from the Flint River. The city expects to see significant savings from the move.

"Genesee will pursue a separate contract with the Detroit system through at least 2016. The DWSD and Genesee are also negotiating a separate contract that would require Detroit to provide a long-term emergency stand-by service if the new system fails.

The bonds sold by Genesee County will mature in 30 years and are payable from the water supply contracts as well as Long Term General Obligation (LTGO) pledges of the City of Flint and Genesee County.

For more background on the Karegnondi Water Authority, click here. 

For more about DWSD Update, click here.

Update (4/2): Bloomberg is reporting (here) that KWA completed its $220 million bond sale yesterday.

"The water agency's sale included debt maturing as late as November 2043 that priced to yield 4.89 percent, or about 1.2 percentage points more than benchmark munis. The securities are rated A2 by Moody's Investor Service, five steps below the top."

Emergency Manager Gives His Account of Failed Negotiations for Regional Water Authority

On March 26, 2014, the Michigan Chronicle published an exclusive interview with Detroit Emergency Manager Kevyn Orr and asked for his take on why negotiations for a regional water authority (have thus far) failed.

Here are excerpts from that interview:

MICHIGAN CHRONICLE: What really happened in the deal involving the Detroit Water and Sewerage Department that made Oakland and Macomb counties balk?

KEVYN ORR: We tried to design a proposal for them that was responsive in a number of ways. First, it was responsive to their request for decades that they have increased governance control and management of the water department. Suburban communities make up over 65 percent of our revenue. We appreciate that and we want to be responsive. Secondly, it was to make sure that citizens of Detroit continue to own the water department. So the pipes, the lines, switches, the sewerage system, all of that is still going to be owned by the City of Detroit. You can’t replace that overnight. No matter what happens it will be owned by the City of Detroit. Number three, it was to generate sufficient cash from interest rate savings by having a better credit rating department.

Number four, capital improvements. The concerns about capital improvements were going to be addressed, provide a reserve for delinquent accounts that would be replenished yearly. That there will be no delinquencies, rate pressures on the counties customers or city customers and result of rate pressures. And generate a revenue stream of 47 million dollars a year for 40 years for Detroit’s creditors. We thought it was an ideal solution that was going to benefit all parties and be responsive to the requests that people have been talking about.

* * * 

MICHIGAN CHRONICLE: Can you explain what you meant by leasing as an option?

KEVYN ORR: We were going to create an authority, which would essentially lease the department and operate it and pay the city a lease payment. That would be $47 million a year. Our county partners don’t want to do that. That’s fine. So we are going to move away from the lease concept more to a contract. There are operating contractors out there who would bring greater efficiency to the system. That’s what they do. We would also entertain requests for information about an outright purchase. I said when I first came in here I did not want to sell the water department. I still do not want to sell the water department.
But I think because our expectation was that we were going to have an authority deal in fairly short time, that’s what everybody wanted. But I think in order for me to be responsive to our creditor class now that the authority proposal appears to be slipping away, we have to be able to say we explored every avenue to rationalize the key assets of the city. And when I came in I said there are 15 buckets of assets. We’ve dealt with most of them.

Click here to read the full interview with Mr. Orr at the Michigan Chronicle. 

Photo Credit: Reuters


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