Tuesday, February 4, 2014

Guest Editorial: Emergency Manager's Plan for New Water Authority Falls Short

By: James Lang*
A gross inequity exists in the plans to disentangle Detroit from debt, in part by reorganizing the Detroit Water and Sewerage Department (DWSD).

As owner of DWSD, the City of Detroit is responsible for capital investments, including major improvements and replacements.  If that responsibility were being met, then perhaps the City would be justified in requiring lease payments from ratepayers as part of the conversion of DWSD to a regional authority.

But the city doesn’t have the cash or credit to rebuild DWSD, the city’s (purported) capital asset.

It appears to me that Emergency Manager Kevyn Orr and other city leaders want to rely on the ratepayers’ credit worthiness to pay for capital improvements and replacements (as if the ratepayers were the owners), as well as requiring ratepayers to make lease payments to the city (as if they were renters).  Bear in mind that the system was never intended to be a cash cow for the City of Detroit. Rates were not supposed to include a profit margin.

Let’s face it, DWSD's infrastructure is old and worn out, with negative or negligible value.  No sooner is one cluster of belt presses, incinerators or water mains replaced than another one breaks down.  Nick Carey of Reuters on December 16, 2013 quoted an Oakland County official [Gerald Poisson, deputy executive for Oakland County] who said he had seen estimates of $20 billion to upgrade the system in coming years.

The only value in this whole scenario is the revenue stream flowing from city (20%) and suburban (80%) ratepayers.

It’s one thing to require that ratepayers take over the responsibility to rebuild DWSD.  It’s something entirely different to also require that they make lease payments to the city for the “privilege” of assuming ownership responsibilities.

If conversion to a regional authority goes through, the savings realized by refinancing debt and cutting costs should accrue to the ratepayers without being offset by so-called lease payments to the city.

* James Lang earned his undergraduate degree from  Case Western Reserve University (B.A.) and his law degree from the University of Michigan Law School (J.D.). Mr. Lang practiced law in Flint for many years, and formerly served as a Board Member of Legal Services of Eastern Michigan. In 2012 and 2013, Mr. Lang was a guest lecturer at MSU’s Knight Center for Environmental Journalism. His interests include the Great Lakes, water quality and transparency in government. You may contact James Lang at  -- michigan.clean.natural@gmail.com

For more about DWSD Update, click here

No comments: