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Detroit water deal: Motown's reinvention

The new regional water authority deal directly affects the city's bankruptcy trial.
The new regional water authority deal directly affects the city's bankruptcy trial.

DETROIT – The Great Lakes Regional Water Authority is really just a tentative agreement. Yet, it is a game-changing deal.

It was negotiated over 15 months.

"Everybody in the region is paying for the system and everyone in the region should have a voice on the regional system," said Detroit Mayor Mike Duggan.

It goes to show you the power of municipal bankruptcy and how quickly minds and hearts can be moved when dire consequences and deadlines loom.

Consider that Mayor Coleman Young used to say of the Detroit Water and Sewerage Department, "One gallon, one vote -- how much water have you got?"

That quote came to me from Local 4 bankruptcy expert and retired bankruptcy Judge Ray Reynolds Graves who knew Coleman Young and understands -- like few in Detroit -- the tectonic shift Detroit's Chapter 9 has brought about.

Detroit's Charter states categorically that if the city were to ever give up control over the system it would have to be done with a vote of the people. Under municipal bankruptcy the Charter is inoperative and a deal can be cut at any time. In fact, Judge Rhodes said this afternoon of the situation: "Let's make a deal and stop spending all this money." And that's just from the city's perspective.

From the suburbs there has been an outcry for two generations that the DWSD was paying for spending sprees on the backs of suburban ratepayers and imposing double digit rate increases with the dependability of the sunrise. The 'burbs were tired of paying for Detroit police radios and other items that were, in fact, paid for by water rate hikes over the years. They wanted some say in rate hikes, repairs and the contractors who did the work on the broken down system that records 2,000 water main breaks a year. The water main break this past winter outside the City-County building downtown took months to fix and it was a great example of what is wrong with the DWSD.

Oakland County Executive L. Brooks Patterson had seriously doubted it could ever happen because the cost of the fix is likely to be $1 billion or more and he did not want the suburbs to have to pay that tab.

Also, Detroiters are notorious for not paying their water bills, and there are a couple of good reasons. One is many cannot afford to and most of the rest because the DWSD didn't chase them for their back bills. But Patterson also admitted Judge Steven Rhodes' ability to force a regional water authority and "cram down" a deal on the suburbs gave him reason to strike a deal he could better control.

Patterson told me today at the news conference that when his CFO Bob Daddow told him the $50 million a year in lease payments in exchange for a vote on how the system is managed, and that the money would have to stay within the system for the ultimate fix, he was sold on the authority. Now all that's left to do is have the County Commissions and the Detroit City Council approve the deal. Oct. 10 is the date by which all of that should be accomplished.

Ultimately this deal had to happen, and it now shortens the bankruptcy trial because instead of objecting to the plan of adjustment the counties will approve it before Judge Rhodes in the next few days. While the Detroit bankruptcy trial slogs on with the city laying out its case for how bad things are, the only drama left is whether Syncora might get to settle. If they can work out a deal it could come as early as next week. If so Detroit's bankruptcy goes in the rear view and the city looks to rebuild itself.

All of a sudden we in this town has learned the breakneck pace with which bankruptcy can be accomplished. It's a sad and difficult lesson to be sure. It's been quite the interesting 15 months! It's also been a transformative 5 years regarding both public [GM, Chrysler, Delphi] and municipal bankruptcies [Detroit]. Let's hope this puts an end to this exhausting process and we genuinely learned something about fiscal sanity as we go about the reinvention of Motown.


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