Update (6/8): At 8:37 a.m. this morning, the order entered on Friday extending Judge Cox's role as mediator was vacated by the Clerk of the Court. The order indicates that Friday's order was entered in error.
Without an extension, Judge Cox's appointment would have expired on June 14, 2015, which is the deadline for DWSD and the Great Lakes Water Authority to finalize and execute the terms of a long-term lease.
Under the contemplated lease agreements, the GLWA would operate and maintain DWSD's water and wastewater treatment facilities for 40 years in consideration of annual lease payments to the City of $50 million.
Under the terms of the Amended Plan of Adjustment submitted in the City's Chapter 9 bankruptcy, which created the Great Lakes Water Authority effective November 26, 2014, the new authority and the City of Detroit have 200 days to completion negotiations and execute the contemplated lease agreements. That deadline is June 14, 2015.
Comment: I have no inside information (which I couldn't share with you anyhow), but entry of last Friday's order, extending Judge Cox's tenure as mediator to the end of 2015, strongly suggests to me that the June 14, 2015 deadline to complete a deal on a long-term lease agreement is going to be extended. I don't know how you can finalize a deal if Macomb County is not part of the process. That makes no sense to me. If I were to guess, I would say the parties will ask (or have already asked) for a new deadline that goes to mid-October or early November. What do you think?
Earlier this morning, Judge Sean Cox entered an order concluding the EPA lawsuit and federal oversight of DWSD which began in 1977.
"The Court concludes that, after more than thirty-five years of federal oversight, the DWSD has achieved substantial compliance with its NPDES permit and the Clean Water Act. This Court shall therefore terminate the Second Amended Consent Judgment and close this case because the existing Administrative Consent Order is a sufficient mechanism to address any future issues regarding compliance with the DWSD's NPDES permit and the Clean Water Act."
"This Court has no intention of ordering the creation of a regional authority and has no intention of ordering or approving the transfer of DWSD's assets to a regional authority. This Court lacks the authority to do so. Moreover, even if this Court had the authority to order what is not being proposed, the Court would not do so for multiple reasons."
Comment: I suspect that Judge Cox's ruling this morning caught many by surprise. If DWSD still plans to become an independent authority, it either needs to convince the new EM, Kevyn Orr, that this is a good idea or throw its support behind Kurt Heise's legislative approach.
(Note: If you write me (here),
I would be glad to e-mail you a full copy of Judge Cox's Opinion and Order. I'll try to get it posted later in the day, but no time now.)
In a December 18, 2012 Special Newsletter, Mr. McCulloch, a frequent critic of DWSD, reflected on his tenure as Water Resources Commissioner for Oakland County, including his role in shaping the future direction of the Department:
During my 12-year tenure, the Oakland County Water Resources Commissioner’s Office has been at the vanguard in reducing costs, placing a premium on customer service and initiating innovative programs that have provided taxpayers with the “most bang for their buck.” Before departing, I’d like to mention a few of the major achievements of which I am most proud.
The 35-year-old lawsuit filed by my predecessor, George W. Kuhn, to force the Detroit Water and Sewerage Department (DWSD) to comply with the Federal Clean Water Act became my fight.
I am encouraged about the future of the DWSD because of a comprehensive report which calls for a wholesale reorganization of the department. It gives me hope that years of bloated bureaucracy and mismanagement at the DWSD are finally nearing an end. But despite the encouraging signs of progress, there is still much work left to do. One thing I strongly recommend is that a second opinion be sought before any drastic cuts or changes are made to the DWSD operation. In addition, it would be a good idea to search out other entities nationwide which have been successful in transforming their water/wastewater systems into well-managed, cost-effective and efficient operations.
As the DWSD moves forward, my hope is that it will make a good faith effort to reassess how it does business and provides services. The reality is that the water and sewer industry is rapidly changing. That means we need to improve the operating process to reduce costs by instituting new water technologies, as Oakland County has sought to achieve with its innovative H2Opportunities program. The fact is our underground infrastructure is aging and decaying, making innovative methods to streamline current practices absolutely essential.
Click here for the full text of Mr. McCulloch's final message, which also addresses his accomplishments with the Oakland County WRC, his principal charge.
On December 3, 2012, the U.S. Environmental Protection Agency (EPA), along the Michigan Department of Environmental Quality (MDEQ), filed a Joint Statement(*) with U.S. District Judge Sean Cox to report on their review of DWSD's restructuring plans. This report follows the EPA's October 12th request for time to review the EMA plan.
In their Joint Statement, the EPA and MDEQ explained that while EMA's proposal is outside of their normal jurisdiction and area of expertise, "because EMA's Proposal was raised in DWSD's Motion for an Interim Order, EPA and MDEQ reviewed [it] to assess whether an aspects of it appear likely to affect DWSD's compliance with its NPDES permit and the Clean Water Act ("CWA), 33 USC 1251, et seq." Its not surprising, then, that the one aspect of the EMA plan that attracted negative attention was the planned 75% reduction of staff within the wastewater operations group (WWOG) headed by Assistant Director Sam Smalley:
At this time, EPA and MDEQ take no position on the appropriateness of EMA’s
Proposal. However, EPA and MDEQ have identified one aspect of the Proposal that, if
implemented as written, could have a negative impact on CWA compliance: the significant
projected reductions in staffing levels within DWSD’s wastewater operations group
(“WWOG”). DWSD informs EPA and MDEQ that the WWOG currently has over 600
employees. By contrast, after implementation of all recommended actions, EMA’s Proposal
projects fewer than 150 WWOG employees. In discussions with EPA and MDEQ, DWSD managers indicated that EMA’s projected
staffing levels have not been adopted by DWSD and are only projections, not a plan. DWSD represented that it intends to move forward with EMA’s proposed staffing actions (i.e., job
classification redesign, team training, etc.) in a step-by-step, piloted manner, with time to
evaluate and adjust as necessary. DWSD further represented that no recommended actions
would be implemented that threatened safety or compliance.
Safeguards already in place should help to minimize the risk that reductions in WWOG
staffing levels might undermine DWSD’s ability to comply with its NPDES permit and the
CW A: [4 bullet points omitted]
At this time, EPA and MDEQ have not identified a basis for seeking relief concerning DWSD's consideration of EMA's Proposal. EPA and MDEQ will continue to monitor WWOC staffing levels through the ACO already in place. [FN4 - Below]
Because the extent to which specific elements of the Proposal will be implemented
remains to be determined and because EMA’s recommendations and DWSD’s actions in the
future may change, EPA and MDEQ reserve their right to review future developments to ensure
continuing CWA compliance. By conducting this review and continuing to monitor the situation, EPA and MDEQ do
not intend to impair DWSD’s efforts to undertake appropriate reorganization, automation, and/or
technology and control systems upgrades that DWSD may deem necessary to improveefficiency, control costs, and address DWSD’s need for long-term strategic and financial
planning.
The EPA and MDEQ also acknowledged the firestorm controversy surrounding the EMA Proposal, but report that they are not inclined to interfere with DWSD's plans, for now, so long as there is compliance with the Clean Water Act.
FN4 -- The United States and Michigan are aware that, on November 20, 2012, the Detroit CityCouncil rejected a part of the EMA Proposal that called for a $48 million contract between EMA
and DWSD. We also are aware that DWSD recently proceeded with a smaller EMA contract
involving job classification redesign, training, and implementation. There have been suggestions
that EPA and/or MDEQ should take a position on the $48 million EMA contract (for example,
by approving or disapproving it). While the United States and Michigan reserve the right to take
all actions necessary to ensure compliance with the Clean Water Act and any other applicable
federal or state laws, we are not aware, at this time, of any reason why the United States and
Michigan would assert authority to approve or disapprove any contract between DWSD and
EMA.
(*) For readers with a PACER Account, the EPA and MDEQ's Joint Statement was filed 12/3/12 in Case No. 2:77-cv-71100-SFC at Dkt #2509. If you're interested in a copy, I'd be glad to e-mail it to you. Just write me and put "Joint Statement" in the reference field. While the statement itself is only 5 pages, there's an additional 85 pages of exhibits, including the Administrative Consent Order [7/8/2011] and First Amended Administrative Consent Order [5/18/2012]. The entire document is about 7MB. It should be available through Scribd within a few days.
“Those 45 days have not elapsed yet," Cockrel said. "We have not heard from the EPA. They have not indicated that they have no concerns. And I think when you have a federal agency that’s in charge of regulating environmental concerns for the country…I think we ought to give them the time to do it.” (Cite: Michigan Radio)
Comment: So what's next? Will the Water Board acquiesce (uh, not likely) or proceed with (24) consecutive $2 million contracts, each one just small enough to avoid a City Council vote? (Possibly) Or will Judge Cox resort to "more drastic measures" as he has alluded to in several of his rulings this past year? (What will that look like?) And is this any way to run a public utility, one that serves 4.3 million people? Really? For more about DWSD Update, click here.
On October 12, 2012, the U. S. Environmental Protection Agency (EPA) asked Judge Sean Cox for 45 days to evaluate DWSD's recently-announced plan to dramatically cut its workforce and to take no further actions toward implementing the plan during this evaluation period.
In a two page document(*) filed with the U. S. District Court captioned "Notice of the United States Regarding the DWSD's Motion for Interim Order," EPA Attorney Annette M. Lang, and Assistant U. S. Attorney Peter A. Caplan request that the Court give the EPA time to evaluate DWSD's proposal and whether it would affect compliance with the Clean Water Act:
"The Michigan Department of Environmental Quality ("MDEQ") recently informed EPA about a proposal that the Detroit Water and Sewerage Department ("DWSD") was considering that recommended, inter alia, a dramatic reduction in staffing level within DWSD's wastewater treatment plan and combined sewer overflow operations. EPA has not had the opportunity to review and evaluate the potential impact and implications of the proposal on DWSD's compliance with the Clean Water Act, 33 U.S.C. 1251, et seq, and its NPDES permit, including the operation and maintenance requirements contained therein. To the extent that actions by this Court on DWSD's Motion for Interim Order may open the way for DWSD's initiation of the implementation of that proposal, EPA seeks to notify this Court and the parties of its interest in having the opportunity to meaningfully undertake an evaluation of the proposal prior to any such action.
"During the period of its evaluation of the proposal, EPA plans to work with both MDEQ and DWSD. To that end, managers and staff from EPA are already planning to meet with managers and staff from MDEQ on Tuesday, October 16, 2012, to discuss and evaluate the current situation. The meeting is intended to provide further clarification on a path forward.
"With this notice, EPA is not taking any position on any aspect of the proposal before DWSD.
"Accordingly, EPA seeks a period of forth-five (45) days to evaluate the potential impacts of the proposal on CWA compliance and asks this Court not to take any actions that would open the way for DWSD to initiate the implementation of the proposal prior to that time. DWSD has not reported any violations of its NPDES numeric limitations on solids since November 2011 and has not reported any other NPDES numeric limitations since March of this year [2012]. Therefore, nothing in the record would indicate that immediate commencement of the implementation of the proposal is required." (emphasis added)
Note: The case that Judge Cox currently presides over was originally filed in 1977 by the U. S. Environmental Protection Agency to enforce compliance with the Clean Water Act. The EPA has not played an active role in the case, however, for a number of years. The EPA's request that Judge Cox 'take no action' for 45 days is an interesting development. Judge Cox is not bound to comply with the EPA's request, but it is unlikely that he would simply ignore it. Stay tuned for how the Court and DWSD responds to the EPA's request. (*) For readers with a PACER Account, the EPA's Notice was filed 10/12/12 in Case No. 2:77-cv-71100-SFC at Dkt #2492. If you're interested in a copy, I'd be glad to e-mail it to you. Just write me and put "EPA Notice" in the reference field. For more about DWSD Update, click here.
Earlier today, at the request of the members of the Root Cause Committee, Judge Sean Cox entered an Order creating the position of Chief Operating Officer (COO) within the Detroit Water and Sewerage Department.
In a joint letter to the Court's Special Master, David Ottenwess, dated last Friday, March 23, 2012, the four members of the Root Cause Committee -- James Fausone, Charles Pugh, Gary Brown, and Mayor Dave Bing -- plus Director Sue McCormick, laid out the need for another position within DWSD, reporting to the Director, and urged Judge Cox to create the position of Chief Operating Officer:
The undersigned are the members of the Root Cause Committee originally appointed by the Hon. Sean F. Cox in his Order of September 9, 2011 with continued authorized responsibilities in his subsequent Order of November 4, 2011.
The Root Cause Committee has met recently to address a number of serious issues facing the DWSD which involve matters of finance and internal structural changes originally mandated by the Court in its November 4 Order. Specifically, we have determined, based on the current level of activity required to implement the November 4th Order by the Board and the Director, it is appropriate and imperative that the DWSD management structure include the position of a Chief Operating Officer (COO) reporting to the Director.
The COO should have significant experience in municipal law, municipal finance, and operations oversight which would include, human resources, procurement, finance and law. These are the four divisions DWSD must stand up to implement the November 4th Order and achieve short and long term compliance with environmental permits.
Judge Cox granted this request. Earlier today, the Court entered an Order directing Mayor Bing (or his designee) to hire a Chief Operating Officer / Compliance Officer at the DWSD.
Update (3/29): Mayor Bing's office announced yesterday that DWSD has hired Matthew Schenk to serve as the new Chief Operating Officer for the Department. Mr. Schenk, 40, most recently served as Chief of Staff for Wayne County Executive Robert Ficano. According to the Free Press (here), Mr. Schenk will be paid $194,000 per year, just shy of the $195,000 per year paid to DWSD Director Sue McCormick.
Update (4/16): Matthew Schenk's hiring continues to raise questions. The Detroit News reports today (here) that both Oakland County Water Resources Commissioner, John McCulloch, and Macomb County Public Works Commissioner, Anthony Marracco, were unaware of the decision to hire Schenk.
For the second time in less than a month, Judge Sean Cox has denied a local union's motion to intervene in the 34 year old lawsuit against the City of Detroit, Water and Sewerage Department.
This time, Judge Cox considered and denied a Motion to Intervene by AFSCME Local 207 and the Senior Accountants, Analysts and Appraisers Association (SAAA). The reasons cited by the Court were virtually the same ones Judge Cox cited when he denied AFSCME Council 25's motion on November 18, 2011: Local 207's motion was untimely.
Less than a week after AFSCME Council 25 filed its Motion to Intervene in the EPA Lawsuit in order to block implementation of the U.S. District Court's November 4, 2011 Order, Judge Sean Cox earlier today issued an Opinion and Order DENYING the motion on grounds that the motion was untimely.
Timeliness of a motion to intervene is a threshold issue for any court to consider. In this case, Judge Cox found that "this Court's analysis begins, and ends, with timeliness."
Judge Cox considered four (4) elements related to timeliness:
1. How long did AFSCME know of their interest in the case?
The first factor, the length of time preceding the application for intervention during which the proposed intervenor knew or reasonably should have known of his interest in the case, is the most significant factor here and weighs heavily against intervention.
The DWSD has been under federal court oversight since 1977. This case has garnered considerable media attention over the past four decades. . . . [T]he risk that orders in this action may affect collective bargaining agreements and union work rules, as they relate to DWSD, has been apparent for decades. [Court then cites reports from 1977-2009] * * * In addition, there is no question that AFSCME had actual knowledge, no later than September 9, 2011 [when the Court issued its Opinion and Order Denying Detroit's Motion to Dismiss the EPA Lawsuit], that its interests would likely be impacted by orders that would be issued in this case on an expedited basis. * * * Nevertheless, neither AFSCME nor any of the other 19 unions that represent employees of the DWSD sought to intervene after this Court issued its September 9, 2011 Opinion & Order. Rather, union representatives met with members of the Root Cause Committee to voice their views and adopted a "wait-and-see" approach . . .
2. What is the purpose for intervening in the lawsuit?
Under Rule 24 of the Federal Rules of Civil Procedure (Fed. R. Civ. P. 24), a motion to intervene must be accompanied by a pleading that sets out the claim or defense for which intervention is requested.
In this case, AFSCME Council 25 did not attach a proposed complaint or other pleading.
3. Will there be prejudice to the original parties to the lawsuit?
Judge Cox concludes in his Opinion and Order that the answer to this question is a resounding -- Yes.
The EPA initiated this action [in 1977] to address violations of the Clean Water Act, the objective of which is to restore and maintain the chemical, physical, and biological integrity of the Nation's waters. It is undisputed that, over the course of the past four decades, the DWSD has had serious and recurring NPDES permit violations, which constitute violations of the Clean Water Act.
* * *
This Court has already concluded that certain collective bargaining provisions and work rules are impeding the DWSD from achieving compliance with its NPDES permit and the Clean Water Act and issued an order enjoining those provisions. If the Court's Order is not implemented immediately, the DWSD's ability to function and reach compliance with its NPDES permit, the ACO, and the Clean Water Act will be jeopardized. That would prejudice the City of Detroit, the DWSD and its customers, the general public, and the DEQ -- the entity current charged with enforcing the DWSD's NPDES permit, which has spent considerable resources monitoring DWSD over many years.
4. How far has the case already progressed?
Judge Cox also answers this question in the affirmative citing the long duration of this case and numerous reports citing issues with the collective bargaining agreements, work rules and job descriptions.
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