Kwame Kilpatrick, Victor Mercado Corruption Trial: There's an App for That!

I don't plan to cover the Kwame Kilpatrick trial in any great detail; I'm not a criminal defense attorney and the trial is expected to go on for months. Moreover, the local media are gearing up for what promises to be near round-the-clock coverage of the trial. And if you can't wait until you're home for an update on the evening news, you feel the need to track the trial, moment-by-moment, you're in luck. There's an app for that!  My wife spotted this new app for the iPhone developed for WDIV. Enjoy! 

Check out this application on the App Store:

Kwame Kilpatrick Trial - WDIV LSN Mobile Category: News Updated: Sep 11, 2012 7 Ratings

Additional Resources:

• Detroit News - Kwame Kilpatrick Trial Blog (here)
• Detroit Free Press - Trial Blog (here)

For more about DWSD Update, click here. 

Water Board Authorizes Director to Negotiate 5 Year, $48 Million Contract with EMA (UPDATED)

At a Special Meeting of the Board of Water Commissioners this morning, the Board unanimously approved a resolution that authorizes the Director, Sue McCormick, to negotiate and execute a 5 year professional services contract with EMA, Inc. for an amount not to exceed $48 million.

EMA is the consultant that on August 8, 2012 recommended that DWSD cut staffing levels within the Department by 81%.  Crain's Detroit Business also reported on this story here.  

The $48 million EMA will be paid over 5 years breaks down as follows:

• $19.5 million - Consulting Services ($17M) and Expenses ($2.5M)
• $21 million - Outsourcing Services
• $7.575 million - Contingency Reserve

This information was provided to Board Members by Matthew Schenk during this morning's Special Board Meeting.

Note: I realize the breakdown figures exceed $48 million a bit, but that's what I wrote down in my notes. Once the minutes for this meeting were published, or if I can get a copy of the full text of the Board resolution, I'll fix these numbers. 

Update (9/7): The Department published a press release this afternoon announcing the Board's approval of the EMA contract, along with a bit more explanation of what's expected to be part of EMA's contract. 

"In addition to the [consulting] services listed above, EMA will work on the development, assessment, and implementation of non-core outsourced services as originally identified within the 90-day operational assessment. Non-core services include building maintenance, grass cutting, snow removal, and janitorial services. Over the term of the agreement, it is anticipated that those outsourced services will come at a cost of roughly $21 million, resulting in an expected net savings to DWSD of more than $50 million." 

Update (9/10): Here's the breakdown of projected costs from Section 10.1 (Costs) of EMA's Phase 2 and 3 Proposal: 

 

Update (9/12): The Detroit News is reporting (here) that a formal contract with EMA is expected by October 1, 2012.  

Update (11/14): The Detroit News reports (here) that the Detroit City Council, which apparently has to approve EMA's contract, has put off a vote. One Council Member referred to the contract as "outrageous." No surprise. Its unclear, at least to me, why City Council is required to approve this contract after all of the steps taken in the past 12 months by Judge Cox and others to separate DWSD from the rest of the City of Detroit. DWSD now has its own general counsel, HR department and finance. Submitting a contract that is part of an 81% staff reduction to an elected body for approval is a suicide mission. The Board of Water Commissioners knows this; Judge Cox must know it too. This situation probably explains a November 8, 2012 Root Cause Committee Report that requests in part that DWSD be allowed to exempt certain contracts from City Council approval. Without the Court giving DWSD sole authority to approve the EMA contract, it will surely languish with the City Council for the foreseeable future. 


For more about DWSD Update, click here.

DWSD Hires General Manager for Wastewater Operations Group

Wendy R. Barrott has been hired by DWSD to serve as General Manager for the Wastewater Operations Group, which includes the City of Detroit’s Wastewater Treatment Plant. This is not a new position. 

Wendy Barrott

Ms. Barrott is expected to take the lead in administering Air Emissions (incinerators, emergency generators), and Residuals Disposal Management (disposal of grit, bio-solids, screenings, grease, and rubbish). She will also assist in the further development and implementation of the Department’s Green Infrastructure plans.  As General Manager, Ms. Barrott will report to the Assistant Director for Wastewater Operations, Sam Smalley.   

Prior to joining DWSD, Ms. Barrott served in 2011 as the City of Ann Arbor’s Community Energy Coordinator, and helped implement the City’s Property Assessed Clean Energy (PACE) program (read more here, and here). 

Prior to her work in Ann Arbor, Ms. Barrott worked as the Director of Energy and Environmental Services for the City of Fort Wayne, Indiana (2006-2010); as the Board Administrator to the Detroit Area Regional Transportation Authority (DARTA) (2004); and as the Director of Air Quality for the Wayne County Department of the Environment (1997-2003). 

Ms. Barrott began her professional career at General Motors in 1983 where she worked as an engineer responsible for environmental compliance, permitting, and plant operations issues. Ms. Barrott held various positions with GM between 1983 and 1997, including Superintendent of Environmental Operations. 

Ms. Barrott holds both a B.S. and M.A. in Environmental Engineering from Purdue University (1983) and is a Certified Energy Manager (CEM), Certified Hazardous Materials Manager (CHMM), and was awarded a Smart Growth Leadership Certificate from the University of Maryland.

Ms. Barrott has two LinkedIn Profiles (here and here).

For more about DWSD Update, click here.

DeMaria Submits Low Bid on New Maintenance Contract, PC-790 (UPDATED)

DeMaria Building Co. submitted the low bid earlier this afternoon on DWSD’s new maintenance contract, also known as Contract PC-790, “Equipment Purchase and Installation on an As-Needed Basis.”  

1. DeMaria Building Co. . . .$20,457,244
2. Weiss Construction . . . . .$22,601,269
3. Motor City Electric . . . . . $23,691,917
4. Walsh Construction . . . . $26,366,000
5. Barton Malow . . . . . . . . . $26,991,000
6. Titus Welding Co. . . . . . .$30,840,467  
   

The scope of Contract PC-790 includes furnishing the skilled labor, working foremen and overall supervision required to complete major and minor skilled trades maintenance projects as well as specialized subcontract maintenance services on an as-required basis at the Wastewater Treatment Plant Operations, Group Facilities, CSO Facilities, Wastewater Treatment Plant, Industrial Waste Control Facilities, and all other DWSD facilities related directly or indirectly to the Wastewater Treatment Plant.

Update (9/26): The Board of Water Commissioners today approved a contract with DeMaria Building Co. in the as-bid amount of $20,457,244 for a duration of 1,095 calendar days. Comments made by Commissioner Fred Barnes during the Board Meeting suggest this may be the last time DWSD procures maintenance services in this manner. He referred to the maintenance contract as a "dinosaur" which "hopes will go extinct." 

For more about DWSD Update, click here. 

Former Head Engineer Weighs in on DWSD Restructuring Plan

As he did following Judge Cox’s rulings last November (here), Former Head Water Systems Engineer, Dennis L. Green, P.E., recently weighed in on DWSD’s plans to dramatically downsize its staff size.  Mr. Green, who retired from DWSD in 2009, wrote a Letter to the Editor published by the Detroit Free Press (here) on August 16, 2012: 

During my 41 years with Detroit Water and Sewerage Department Engineering, I had some contact with EMA consultants. While one of the better consultants technically speaking, I question the choice of an organization having limited experience and ties to the area for planning the future of the DWSD.

Like most consultants I dealt with during my tenure, they are salesmen first, businessmen seeking profits second, and engineers last. Nearly all consultants I dealt with stick to the conventional wisdom, because it avoids the risk of error from their limited and superficial knowledge of the client.

Editorial Page Editor Stephen Henderson's Aug. 9 tirade ("Intolerable waste in the Water Dept.") says he has taken their report as gospel. Atlanta tried massive outsourcing of its water operations, and it led to a collapse of service, requiring a costly reconstruction of its department. Are we about to repeat the proverbial unlearned lesson of history?

The proposed solutions I'm hearing are platitudinous clichés once you get past correcting the obvious outrageous practices. Outsourcing is just another way, and an inefficient way, of turning DWSD into a for-profit operation by divvying it out piecemeal on short-term leases as service contracts, yet we are told to believe that adding profit mark-ups and the administrative costs of bidding and administering outsourcing contracts reduce the total cost.

The staggering overhead of contracting is invisible if city workers are not unshackled from the city's own stupid rules and allowed to compete. For example, my unionized staff saved DWSD more than a million dollars over the consultant's proposal for designing the wholesale water metering system contract, even doing it on overtime at time-and-a-half so as not to interfere with our regular duties, but I'll bet my pension that is not in EMA's report, because they probably told the client what they thought it wanted to hear. The anti-union rhetoric declared the verdict before the trial.

Dennis L. Green, P.E.

What are your thoughts about DWSD's plans? Post a comment or let me know offline.

For more about DWSD Update, click here.

Detroit Water Department Proposes Major Restructuring

On August 8, 2012, Director Sue McCormick announced plans for massive overhaul of DWSD operations, including plans to cut more than 1,600 jobs. Details of this plan are reported here by Crain's Detroit Business.  In addition, a video of the Director's presentation to the Water Board can be found here, and here.  The slides, minus audio, are below.

DWSD Restructuring Presentation - August 8, 2012

For more about DWSD Update, click here.


 

Walsh Construction Submits Low Bid on Springwells Upgrade Project (SP-563) (UPDATED)

Walsh Construction submitted the low bid earlier this afternoon on the project known as DWSD Contract SP-563 “Springwells Water Plant Rehab Project.” 

1. Walsh Construction . . . . . . . .$75,899,000 
2. Weiss Construction. . . . . . . . $81,676,000 
3. Christman Co. . . . . . . . . . . . . $85,728,000
4.  Barton Malow. . . . . . . . . . . . . $86,695,000

The Springwells job was originally advertised in April. The bid opening was delayed several times before today.

Update (9/26): The Board of Water Commissioners today approved a contract with Walsh Construction for this project for $75,899,000 and a duration of 1,710 calendar days. 

For more about DWSD Update, click here.

Detroit Water Department Hires General Counsel

As part of its move toward independence from the City of Detroit, the Detroit Water and Sewerage Department has hired William Wolfson to serve as General Counsel.  DWSD previously relied on attorneys from the City's Law Department, notably Robert Walter  and Laurie Koester.

Mr. Wolfson previously served as Interim Corporation Counsel and Assistant Deputy CEO for Wayne County before retiring at 50 in 2009.  Most recently, Mr. Wolfson maintained a private law practice in Detroit. Click here for his LinkedIn profile.

Mr. Wolfson will be paid $132,500 per year by DWSD.  Mr. Wolfson will also receive a $118,000 a year pension from Wayne County. 

For more about DWSD Update, click here.

Detroit Water Board Approves Updated Capital Improvement Program (CIP)

At its regular June 27, 2012 meeting, the City of Detroit, Board of Water Commissioners approved a $1.49 billion Capital Improvement Program (CIP) for 2013-2017. This is a 15% increase in planned spending over the $1.3 billion approved by the Water Board last year.

Included in the 2013-2017 CIP is $789.4 million for new construction and improvements to DWSD's water and wastewater facilities; $700.8 million is for projects that are active or under procurement.

Of the new construction funding, $280.5 million is designated for water projects (down from $422.5 million last year), and $508.9 million is designated for wastewater projects (up from $317.9 million last year).

Additional Resources:

• Water Supply System CIP - FY 2013-2017
• Sewage Disposal System CIP - FY 2013-2017
• Wastewater Master Plan - Volume 4: Capital Improvement Program

For more about DWSD Update, click here.

Oakland Macomb Interceptor Drain, Owner Seeks Technical Submission for OMID Contract 4

The Oakland-Macomb Interceptor Drain Drainage District (OMID) is requesting qualified suppliers and manufacturers of interceptor relining products to submit technical information for relining approximately 22,800 lineal feet of the Oakland Macomb Interceptor - Segment 3, in Macomb and Wayne Counties. Host pipe inside diameters range from 9 ft to 12.8 ft plus.

Technical Submission packages must be submitted on or before Friday, September 28, 2012 at 5:00 p.m. to the Owner's consultant:

NTH Consultants
Attn: Abdulnasser Almadhoun
2000 Brush St
Detroit, MI 48226

The "Request for Technical Submission" document along with attachments and other relevant information can be obtained electronically from ftp.nthconsultants.com  To obtain a Username and Password,  please contact Abdulnasser Almadhoun at (313) 237-3942 or e-mail: aalmadhoun@nthconsultants.com 

For more information about the Oakland-Macomb Interceptor project, click here, here, and here. 

For more about DWSD Update, click here.

DWSD Sewer Bond Sale Postponed (UPDATED)

Reports in the financial media (here, here, and here) indicate that the Detroit Water and Sewerage Department is postponing the sale over $596 million in new sewer bonds, which was scheduled for June 14, 2012.  

The precise reasons for this decision are not known at present, but the decision is undoubtedly tied to reports that the City of Detroit is about to run out of cash by June 15, 2012. This follows the lawsuit by the City's Corporation Counsel seeking to invalidate the Consent Agreement negotiated between Governor Rick Snyder and Mayor Dave Bing.

Check back for more details as this story unfolds. 

Update (6/13): The Bond Buyer has a very detailed article this morning (here) about the reasons why the DWSD bond sale was postponed, as well as the swap agreements that will be terminated using some of the proceeds.  In the short, DWSD is waiting for the City of Detroit to make Friday's $34.2 million debt payment.  The Bond Buyer, citing COO Matthew Schenk, reports that DWSD will bring its bonds to market next Wednesday (6/20). According to Mr. Schenk, the one week delay will "allow time for the city and state to work through their resolution of the city's upcoming bond payment. Upon resolution and disclosure of the bond payment to the market, we will proceed with the transaction."

The Bond Buyer article also notes that DWSD "could face a liability tied to interest-rate swaps that hedge $800 million of Detroit pension obligation debt." Stay tuned. . . 

Update (6/15): Citing Water Board Chair, James Fausone, Crain's Detroit Business is reporting (here) that  DWSD will return to the bond market next Wednesday, June 20th.

Update (6/20): Despite a spate of bad news, the Wall Street Journal reports (here) that DWSD sold $667 million worth of sewer bonds today. Strong demand allowed the Department to lower yields on the bonds by 10 basis points. An uninsured 2039 bond offered a yield of 5.30%, while a 2039 bond insured by Assurance Guaranty Municipal Corp. yielded 5.00%.  

Update (9/13): Bloomberg Businessweek reports (here) that $314 million of the sewer bonds sold in 6/20/12 went to banks to pay off interest-rate swap agreements, and that $222 million raised in December, 2011 selling bonds went to pay off swap agreements. That's $536 million dollars in about 6 months! No wonder the Department has to consider slashing its workforce by some 81%. 

For more about DWSD Update, click here. 

Proposals Sought to Inspect, Repair and Upgrade DWSD Reservoirs and Booster Stations (DWS-874)

The Detroit Water and Sewerage Department (DWSD) has announced an RFP for Program Management Services to inspect and repair reservoirs and to rehabilitate reservoirs and upgrade booster pumping stations within a six (6) year and four (4) month period.

The scope of the RFP includes comprehensive engineering, design, pre-bid management, construction subcontract administration, construction assistance and post-bid management services.

The successful Program Manager will implement a program to provide an ongoing inspection and repair program for all thirty-three (33) reservoirs in the DWSD system. All construction services subcontracts associated with the Reservoir Inspection and Repair Program shall be prepared, awarded, held and managed by the Program Manager. In addition, task orders will be given on as-needed basis for rehabilitation of reservoirs and upgrade of booster stations.

Contract DWS-874 will be a negotiated guaranteed maximum price (GMP) contract.

Key Dates

• RFP packages will be available beginning June 18, 2012. Contact Yolanda Pippen at (313) 964-9548 to order a copy. 

• There will be a site tour at the Ford Road Reservoir on June 26, 2012 at 10:00 a.m. Proposers should meet at the following address: 26015 Ford Rd., Dearborn Heights, MI 48127, and bring their own safety gear.

• A pre-proposal conference will be held on June 26, 2012 at 2:00 p.m. in the 16 th Floor Conference Room of the Water Board Bldg, 735 Randolph St., Detroit, MI 28226. 

• Proposals must be submitted not later than August 12, 2012 at 12:00 noon. Sealed proposals will be received at the Water Board Bldg., 735 Randolph St, Room 1504, Detroit, MI 48226.

For more about DWSD Update, click here.

Design-Build Proposals Requested for Improvements to DWSD Incinerators (PC-791) (UPDATED)

The Detroit Water and Sewerage Department (DWSD) has released an RFP package for design-build services for the construction of Contract PC-791, “Sewage Sludge Incinerator Air Quality Control Improvements.” Proposals are due August 1, 2012* July 25, 2012 at 12:00 noon. 

A pre-proposal conference will be held on Thursday, June 7, 2012 at 9:00 a.m. at the Detroit Wastewater Treatment Plant at 9300 W. Jefferson, Detroit, Michigan.  For more information, contact Dan Edwards at (313) 964-9471 or daedwards@dwsd.org. 

In the RFP, DWSD is seeking a qualified firm to provide design-build services under a negotiated, fixed-price contract to provide all design, obtain all necessary permits, furnish all materials and equipment, perform any required demolition and removal, temporary or permanent rerouting of existing piping or electrical service, construct, start-up, and test all modifications and improvements necessary to enable the eight multiple hearth incinerators at Incineration Complex II of DWSD’s Wastewater Treatment Plant to continuously comply with new air quality regulations for Sewage Sludge Incineration Units as incorporated into 40 CFR Part 60 by the Final Rule published by U.S. EPA on or about March 21, 2011, as well as providing all other Work and obligations required by the Contract Documents. 

Optionally, DWSD may direct the Contractor to also bring two incinerators in Incineration Complex I into compliance with the new regulations.

Click here for a copy of the RFP Advertisement.  RFP documents are also available on Dodge Reports (No. 201200531301).

Update (7/20): The due date for proposals was extended to August 1, 2012 per Addendum No. 3.  

Update (9/26): The Board of Water Commissioners approved today a design-build contract in the amount of $37,989,471 with Walsh Construction Company. The contract duration is 1,676 calendar days. 

For more about DWSD Update, click here.

Fitch Downgrades Detroit's Sewer Bond Rating (UPDATED)

Earlier today, Fitch Ratings downgraded (slightly) the City of Detroit Water and Sewerage Department's sewer bond rating. Fitch assigned an A- rating to approximately $498 million in senior lien bonds (series 2012) that DWSD expects to market within the next 2 weeks. An A- rating by Fitch means the bonds are considered "Upper Medium Grade" bonds.  Fitch reports that the ratings outlook for DWSD debt is stable.

Fitch also downgraded $1.4 billion in senior lien sewer revenue bonds to A- from A; and $1.0 billion in second lien sewer revenue bonds to BBB+ from A-. 

For more information about Fitch's ratings decision, including the key rating drivers, review the entire Fitch press release. 

Moody's downgraded DWSD's water and sewer bond debt on April 9, 2012 (click here). 

Additional Resources:

• “Moody’s: Detroit Ratings On Review For Cut On Possible State Takeover,” Wall Street Journal, December 7, 2011 (subscription required)
• “Detroit on Review by Moody’s Will Pay $211 Million to Cut Swaps,”  Bloomberg Business Week, December 8, 2011 
• “Moody’s Puts Detroit GO, Water Debt on Negative Watch,” The Bond Buyer, December 8, 2011 
• "Fitch Drops $3B of Detroit Sewer Debt Ahead of New-Money Deal," The Bond Buyer, May 31, 2012

Update (5/31): The Bond Buyer reports (here) that $288 million of the $489 million in new bonds (debt) will be used to finance the termination of interest rate swaps, $185 million will be used for various capital projects with the balance to be used for a debt-service reserve fund.  

"It's the second time in several months that Detroit has borrowed to terminate interest rate swaps. In December [2011], the city sold $500 million of senior-lien water bonds, using about half of the proceeds to finance the unwinding of 15 interest rate swaps tied to water debt."  

In fact, the City paid $211.6 million in December, 2011 to unwind swap deals. Thus, in the span of 6 months, it appears that DWSD will have taken on just shy of $500 million in new debt to terminate credit default swaps! This is an extraordinary amount of money. 

There must be a very interesting back story to the Department's decision to enter into the swap agreements, which are now being terminated at tremendous cost. We need someone like Michael Lewis to help us explain what just happened here. I invite someone with the requisite financial background to contact me about this story.

Update (6/4): The Board of Water Commissioners has released a slug of documents (49pp.) related to the sewer bond sale, and swap termination issue, which can be accessed here in one large PDF.  I haven't had time to fully digest this information. 

Update (6/12): There are reports in the financial media (here) that DWSD's planned $500 million bond sale on June 14, 2012 has been postponed. No official word yet from DWSD. Undoubtedly, reports that the City of Detroit is about to run out of money by week's end are playing a major factor. 

Update (6/14): Earlier today, Moody's cut the rating on DWSD’s water and sewage senior lien and second lien debt by one notch to Baa2 and Baa3, respectively.  

For more about DWSD Update, click here.

Court Grants DWSD Motion to Intervene in 15 Mile Sewer Collapse Lawsuit

On May 7, 2012, U.S. District Judge Robert Cleland granted the City of Detroit's Motion to Intervene and join a federal lawsuit filed in July, 2011 by the Macomb Interceptor Drainage District against some 40 contractors who participated in the 15 Mile Sewer Repair  project in 2004-05.

Macomb County and (now) the City of Detroit seek to recover more than $20 million from the contractors involved in the project under counts for civil racketeering (RICO) and violation of federal anti-trust statutes (Sherman and Clayton Anti-Trust Acts). 

The Court denied the City of Detroit's request to expand the scope of the existing case by adding new claims and new parties unrelated to the 15 Mile Sewer Collapse. The City of Detroit will likely file a separate lawsuit to advance those claims.  

2012-05-07.Opinion and Order Granting City of Detroit Motion to Intervene in Macomb Interceptor Lawsuit

For more about DWSD Update, click here.

Springwells Water Plant Rehab Project (SP-563) Finally Out for Bids (UPDATED)

The Detroit Water and Sewerage Department today released bid documents for Contract SP-563, the long-awaited contract for upgrades to the Springwells Water Treatment Plant (WTP).   

Sealed bids will be received by DWSD on Tuesday, July 31, 2012* July 17, 2012 at the Water Board Building, 735 Randolph, Room 1510, Detroit, MI 48226. Click here for the Bid Advertisement.  Plans and Specs are available from DWSD. They're also on Dodge Reports (No. 200500879249.)

According to the Department's 2012-2016 Capital Improvement Program (CIP) budget, revised here in July, 2011, SP-563 is estimated to cost $121 million and take 4-5 years to complete. 

The Springwells Water Plant was originally authorized in 1924. When construction was completed in 1935, it was the largest self-contained water treatment plant in the world and added some 300 million gallons per day (MGD) to the Detroit system.

For more history of the Springwells WTP, click here, and here.

For more about DWSD Update, click here.

Update (5/22): The bid opening has been extended to July 3, 2012 at 2:00 p.m. per Bulletin 1.   

Update (5/31): The bid opening has been extended to July 12, 2012 at 2:00 p.m. per Bulletin 2.  The last day for questions is June 28, 2012. 

Update (6/12): The bid opening has now been extended to July 17, 2012 at 2:00 p.m. per Bulletin 3.  

Update (7/16): The bid opening has now been extended to July 31, 2012 at 2:00 p.m. per Bulletin 4. 

Rep. Kurt Heise to Discuss Recent DWSD Developments at Wayne State University

On Thursday, April 12, 2012 at 2:30 p.m., State Rep. Kurt Heise will be speaking at Wayne State University (WSU)  about recent developments with the Detroit Water and Sewerage Department.

Mr. Heise, who is State Representative for Michigan's 20th House District and an adjunct professor of civil and environmental engineering at WSU, will present "The Detroit Detroit Water and Sewerage Department (DWSD) -- the Political and Environmental Impact of a Utility in Transition." 

In October, 2010, Mr. Heise outlined a 6 point plan for creating a regional water and sewerage authority for Southeast Michigan.In January, 2011, Rep. Heise introduced H.B. 4112, which would create a regional water and sewer authority. To date, there has been no action taken on this bill.

This event is Water @ Wayne seminar and is free and open to the public.

Date:           April 12, 2012 

Time:          2:30 p.m.

Location:   Welcome Center Auditorium, 

                    42 W. Warren, Detroit, MI 48201

For more about DWSD Update, click here.

Detroit Water and Sewer Debt Downgraded by Moody's (UPDATED)

Earlier today, Moody's dropped the rating on Detroit's senior lien water and sewerage disposal debt to Baa1 from A1 and the rating on second lien debt to Baa2 from A2. The last major cut occurred in December, 2010, as we reported here.

Thomson Reuters reports (here) that Detroit's water and sewer systems could also be liable for some portion of an estimated $350 million the City of Detroit may have to pay after a termination of the city's interest rate swap agreements was triggered when Moody's last month cut the city's general obligation bond rating further into the junk category to B2.

Additional Resources:

• “Moody’s: Detroit Ratings On Review For Cut On Possible State Takeover,” Wall Street Journal, December 7, 2011 (subscription required)
• “Detroit on Review by Moody’s Will Pay $211 Million to Cut Swaps,”  Bloomberg Business Week, December 8, 2011 
• “Moody’s Puts Detroit GO, Water Debt on Negative Watch,” The Bond Buyer, December 8, 2011 
  

Update (6/14): Earlier today, Moody's cut the rating on DWSD’s water and sewage senior lien and second lien debt by one notch to Baa2 and Baa3, respectively.

For more about DWSD Update, click here.

Judge Cox Orders DWSD to Hire Chief Operating Officer, per Request of Root Cause Committee

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. 

2012-03-26.Order by Judge Sean Cox Appointing Chief Operating Officer (COO) for DWSD

Comment: What about the Deputy Director?

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 more about DWSD Update, click here.

Water Board Finds Insufficient Evidence to Suspend or Debar L. D'Agostini & Sons and DLZ Michigan (UPDATED)

On March 14, 2012, the Board of Water Commissioners received the report and recommendations of the Ad Hoc Hearing Committee, which conducted Responsible Vendor Hearings on March 7th and March 14th for L. D'Agostini & Sons, Inc.  and DLZ Michigan, Inc. The Hearing Committee reported that at the present time it did not have sufficient facts or other evidence to warrant taking any action against the two contractors.

In both cases, on a 5-1 vote, with Commissioner Forte abstaining both times,  the Board of Water Commissioners adopted the findings of the Hearing Committee.

A third contractor, Inland Waters Pollution Control, reportedly reached an agreement with the Water Board which will give it 45 days to negotiate a final settlement agreement or (presumably) participate in a Responsible Vendor Hearing.
 

The lone dissenting vote against adopting the recommendations of the Hearing Committee came from the Chairperson of the Water Board, James Fausone. Prior to casting his NO vote, twice, Chairperson Fausone read a statement outlining his concerns and specific reasons regarding each contractor. Both statements contained a common thread: integrity.

The standard that applies is tied to the City of Detroit purchasing ordinance and the burden is on the vendor to demonstrate it has a "satisfactory record of integrity, judgment or performance." The burden is not on this Board. The debarment policy picks up on this on page one --"The BOWC may determine that a vendor is not a responsible vendor if there is a finding that the vendor has failed to demonstrate a satisfactory record of integrity, judgment or performance."

Additionally I would note Section III, #14 of the Debarment policy provides in terms of causes that "any other conduct or activity by the vendor that has a harmful effect upon the integrity of the bidding, contracting or procurement processes of the DWSD or the public trust or confidence in the operations of DWSD" are grounds for debarment.

So I must ask -- what is integrity? The dictionary definition is simple: adherence to moral and ethical principals; soundness of moral character; honesty.

* * * 

The need for integrity in public construction process is paramount. The burden on a vendor is high.

Chairperson Fausone stated that in both cases he believed the vendor -- based on the criminal indictment against Kwame Kilpatrick, Bobby Ferguson and others, which he said could not have been brought without the federal prosecutor satisfying a probable cause standard -- had failed to meet its burden of proof under the Department's Suspension and Debarment Policy.

Commissioner Williams, a member of the Hearing Committee, also read a statement which indicated that he was confident that the Water Board could revisit these issues at a later time if additional (new) facts come out during any subsequent criminal prosecutions or civil actions.

Update (11/15/12): For anyone who is interested to see how a Responsible Vendor Hearing was conducted, one of the participants, L. D'Agostini & Sons, recently filed a transcript of their March 7, 2012 Hearing in the 15 Mile Sewer Collapse lawsuit pending in U.S. District Court. A copy of the transcript of the March 7, 2012 Responsible Vendor Hearing for L. D'Agostini & Sons can be read here. 

For more about DWSD Update, click here.

WS-682A, Imperial Construction Submits Low Bid on Water Main Repair Project

On March 15, 2012, Imperial Construction submitted the low bid on the project known as DWSD Contract WS-682A, "Repair of Water Main Systems: Various Pipe Sizes at Various Locations Throughout the City of Detroit."

1.  Imperial Construction  . . . . . . . .$4,395,965

2.  Blaze Contracting. . . . . . . . . . . . $4,496,705

3.  Willie McCormick & Assoc . . . . $4,582,008

4.  L. D'Agostini & Sons . . . . . . . . . .  $7,673,214

5.  Ric-Man Construction . . . . . . . $12,518,706

Contract WS-682A is an as-needed repair contract covering a minimum of 500 water main breaks per year. 

For more about DWSD Update, click here.

Wayne State Law School Symposium, Panel to Address Possible Privatization of DWSD

On Friday, March 23, 2012, the Wayne State University Law School, Journal of Law and Society will host a symposium entitled “Michigan In Transition: The Restructuring of Governance Through Privatization and Corporatization."

Of interest to readers of DWSD Update is Panel 2 of the Symposium, which is scheduled to begin at 2:30 p.m., and will discuss privatization of DWSD.

The second panel will address the possible privatization of Detroit's water and sewage system. Environmental consultant and former assistant director at the Detroit Water and Sewerage Department Jim Ridgway will focus on how the current system functions. Oakland County Water Resources Commissioner John McCulloch will present the suburban perspective on privatization. Shar Habibi of In the Public Interest will provide insight on competition, valuation and delivery under privatized systems. Alex Beauchamp of Food and Water Watch will contribute with his grassroots expertise of water privatization in Atlanta and Chicago.

The Symposium will be held at the WSU Law School, Spencer M. Partrich Auditorium, 471 West Palmer, Detroit, MI 48202.  The  event is free, but attendance limited to 200 people.

If you're interested, click here to register online or call WSU at 313-577-8032.

Additional Resources:

• Brown, "Water Privatization Can Help Detroit from Drowning in Debt," Michigan Privatization Report (Mackinac Center for Public Policy, 2001). 
• Wolfram, "Don't Waste Water Treatment Privatization Opportunities," Michigan Privatization Report (Mackinac Center for Public Policy, 2001).
• "The Fiscal Condition of the City of Detroit," Citizens Research Council, April, 2010, p. 60 [discussed here] 
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For more about DWSD Update, click here.

Board of Water Commissioners, Hearing Committee to Conduct Responsible Vendor Hearings

The Board of Water Commissioners has scheduled a Special Meeting on March 7, 2012 at 1:00 p.m. to authorize a Hearing Committee to review the status of three contractors as responsible vendors under the DWSD Suspension and Debarment Policy adopted on January 25, 2012.

According to the Agenda for the Special Meeting published earlier today (here), the following contractors are scheduled to participate in a responsible vendor hearing: 

• Inland Waters Pollution Control, Inc.
• DLZ Laboratories, Inc.
• L. D'Agostini and Sons, Inc. 

Based on statements made at prior Water Board meetings, tomorrow's Responsible Vendor Hearings will be open to the public.

The Hearing Committee will consist of Commissioners Thrower, Kenoyer and Williams.

The Board of Water Commissioners have also scheduled a Special Meeting on March 14, 2012 at 1:00 p.m. to receive, discuss and (presumably) act upon the recommendations of the Hearing Committee.

For more about DWSD Update, click here.