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untanglingwebs
El Supremo
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October 30, 2013 at 11:59 am
Orr floats $9 billion deal for Detroit water to suburbs
Robert Snell
The Detroit News
Talks involving leaders from Wayne, Oakland and Macomb counties about a regional takeover of the Detroit Water and Sewerage Department are playing out on the sidelines of Detroit's bankruptcy eligibility trial. (David Coates / The Detroit News)
Detroit— Emergency Manager Kevyn Orr wants the suburbs to pay approximately $9 billion for greater control of the Detroit Water and Sewerage department, money that could help bankroll the city’s restructuring, sources told The News.
The offer emerged within the past few weeks during private meetings with city restructuring agents and suburban leaders. It’s the first proposal in what could be a prolonged negotiation over Orr’s plan to spin off the department, share control and reduce the cost of running one of the nation’s largest public utilities.
Orr wants $9 billion paid over 40 years, which would provide a steady, unrestricted revenue stream for Detroit. Suburban leaders have been “cool” to the concept, said his spokesman Bill Nowling, who would not comment on the $9 billion figure.
“This is a typical first out-of-the-block offer,” Nowling said. “It’s not like we said ‘one trillion dollars!’ with our pinkie finger out. But we don’t want to negotiate against ourselves.”
The $9 billion figure brings focus to confidential negotiations headed by the city’s investment banker Kenneth Buckfire that would impact more than 4 million customers across southeastern Michigan. The talks involve leaders from Wayne, Oakland and Macomb counties and are playing out on the sidelines of Detroit’s bankruptcy eligibility trial, which will determine whether the city is eligible for Chapter 9 bankruptcy relief
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The trial continues Monday.
Several officials from surrounding counties declined comment, citing the confidential nature of discussions.
The $9 billion figure is intended to spark negotiations that could lead to a deal that would be a major element of any plan by Detroit to restructure $18.5 billion in debt and emerge from bankruptcy court.
“I don’t see the suburbs willing to cough up that kind of money, which would apparently go straight to the city,” said state Rep. Kurt Heise, R-Plymouth Township. “If the customers are going to pay that kind of money, they are going to want it reinvested back into the department with a far more accountable and transparent governance structure.”
Heise has introduced bills calling for a regional authority. House Bill 4009, issued in January, would incorporate the department and have scores of members — one each from the 126 municipalities served. He is against the plan being considered by Orr and the current water and sewerage board.
The department, which has about $6 billion in debt, is currently overseen by a seven-member board that includes four Detroit residents and three from Wayne, Oakland and Macomb.
In June, Orr said he wants to strip the name “Detroit” from the city’s water department, transfer assets to a regional group and refinance the utility’s debt, moves that could generate almost $1 billion in savings.
The utility’s fate needs to be decided by the end of the year. If Detroit is eligible for bankruptcy relief, the city’s legal team has said it will file a plan to adjust its debt by year’s end. That plan would include spinning off, selling or keeping the Water Department.
The so-called Metropolitan Area Water and Sewer Authority would either own or lease the department, collect revenue from water bills and make payments to the city.
Under the $9 billion proposal, annual payments would start under $100 million and steadily climb to more than $200 million, sources told The News.
County officials privately say the annual payments are too high and unrealistic for a department with an annual operating budget of almost $381 million and $1.4 billion in needed improvements and repairs.
The city’s financial crisis and July 18 bankruptcy have triggered uncertainty for a utility plagued by problems complying with federal environmental laws and fights over management and control. The city owns the department but most customers live in the suburbs.
U.S. District Judge Sean Cox ended his oversight of the Water Department in March after a decades-long fight for control among city, regional and state leaders. In doing so, he rebuffed an earlier proposal to transfer one of the city’s largest assets to a regional authority in exchange for as much as $70 million in annual payments to the city.
In March, Cox cast doubt on the $70 million figure.
“This appears to be sheer speculation, based upon the hope that the DWSD’s bond ratings would improve substantially upon the creation of the proposed authorities,” Cox wrote in a court filing.
The regional group likely would have to float bonds to come up with the $9 billion, Nowling said.
“The ability to bond is good,” Nowling said. “The moment you take the Detroit name and management off, you cut 2 percent off the bond rate. That’s huge. That’s the attractive part — the long-term savings.”
The revenue could be spent on pensions, Nowling said. The city filed bankruptcy, in part, to slash retiree pensions and cope with an estimated $3.5 billion shortfall in the city’s retirement system.
It remains unclear whether the $9 billion purchase factors in the cost of repairs and improvements to an aging water and sewer system. Also unresolved: the exact makeup of a new regional authority and whether unpaid water bills would be erased or if the new authority would be in charge of collecting the money.
Private-equity firms are interested in buying the utility, too, according to testimony last week during the bankruptcy trial.
“Private equity is sniffing around a lot of stuff,” Nowling said. “A lot of investors are looking for sweetheart deals. We don’t want to give one at the expense of residents.”
The city also could decide to keep the department, Nowling said.
“If it doesn’t make sense,” Nowling said, “the city will keep it. The suburbs have been saying they want a chance to run it. At some point, maybe they’re going to say they don’t want to.”
rsnell@detroitnews.com
(313) 222-2028
@RobertSnell_DN
From The Detroit News: http://www.detroitnews.com/article/20131030/METRO/310300023#ixzz2jG1XZB7g |
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Wed Oct 30, 2013 8:12 pm |
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untanglingwebs
El Supremo
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Suburban leaders blast plan to lease water, sewer assets for $9B
7:06 PM, October 30, 2013 |
By John Wisely
Detroit Free Press Staff Writer
Suburban leaders are blasting a plan by Detroit emergency manager Kevyn Orr to get customers across the region to pay the city as much as $9 billion over 40 years to lease the assets of the Water and Sewerage Department.
People familiar with the offer told the Free Press it calls for creating a regional authority to manage the system. The authority would lease the plants, pipes, pumps and other assets of the system from the city.
Oakland County Executive L. Brooks Patterson called the proposal “dead on arrival.” He said he agrees with the concept of an authority to lease the assets, but not at that price.
“That figure is preposterous,” Patterson said. “I understand that when you’re in a negotiation, your first offer is up in the ionosphere, but the key word is reasonable.”
Patterson wouldn’t define reasonable but said it had to be “considerably less” than Orr’s offer.
Wayne County Commissioner Shannon Price, R-Canton, agreed.
“If Kevyn Orr believes he’s going to fleece the suburbs to balance his budget, it’s never going to work,” Price said. “It’s a great concept that should move forward at the right price. But they are way off.”
Macomb Public Works Commissioner Anthony Marrocco was even more critical.
“I don’t want to pay Detroit any kind of lease money,” he said. The department “should just provide service at what it costs. It shouldn’t be a way for the city to extract money out of the suburban ratepayers.”
Orr’s spokesman Bill Nowling acknowledged the city has proposed a deal but refused to confirm the amount, citing confidentiality agreements.
“It’s part of ongoing negotiations,” Nowling said. “We want to make sure that the asset is properly valued, that it is bringing a perceived worth back to the city that is justifiable in court.”
Those familiar with the deal say payments would begin at $94 million annually, more than double over the first 10 years, and then rise 4% annually for the next 30 years. The city would continue to own all of the system’s assets.
The offer threatens to restart a battle that raged for more than 30 years between the city, which owns the system, and the suburbs, where more than 75% of the customers now live.
Under current arrangements, the city’s general fund, which pays for services like police and fire, receives no cut of the hundreds of millions of dollars that flow through the water department annually. Michigan law prevents the city from profiting from the sale of water.
But a lease deal would get around that by allowing the city to profit from leasing its assets.
The idea isn’t new.
In March, the Detroit Board of Water Commissioners approved a plan to create a similar regional authority, but the plan was put on hold when the city went into bankruptcy.
That deal called for lease payments to begin at about $50 million annually — a far cry from Orr’s offer, which starts at almost double that and rises from there.
“It’s all about price and terms,” said James Fausone, chairman of the water board.
Fausone said he’s convinced a regional authority could reap savings by lowering borrowing costs through a better bond rating. The city’s financial troubles have dragged down the water department’s bond rating, Fausone said.
The department also is in the middle of a restructuring plan designed to save $900 million over the next decade by reducing the employee count by as much as 80%.
Contact John Wisely: 313-222-6825 or jwisely@freepress.com |
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Wed Oct 30, 2013 8:27 pm |
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untanglingwebs
El Supremo
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| This reinforces the plan to leave the Detroit water system. Detroit corruption in the water system and their repeated failure to fix their own infrastructure has only left the communities buying their services footing the bill for their snafus. |
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Wed Oct 30, 2013 8:30 pm |
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untanglingwebs
El Supremo
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DETROIT WATER DEPT. “ON THE TABLE,” SAYS EFM; …
voiceofdetroit.net/2013/03/20/detroit-water-dept-on-the-table-says...
Orr thus has clearly studied a so-called “Root Cause Committee” report which the Detroit Board of Water Commissioners, (BOWC), voted 6-0 March 13 to approve in ...
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Detroit may use water department funds to pay pension debts, Orr ...
townhall.com › News › U.S.
Sep 18, 2013 · DETROIT (Reuters) - Detroit is considering tapping into some of the $1.2 billion in water and sewer revenue earmarked for repairs and instead apply it to ...
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Detroit water department in turmoil | The Detroit News
www.detroitnews.com › Metro › Wayne County
Sep 13, 2013 · The Detroit Water and Sewerage Department has shed more than 300 jobs in the past year as officials proceed with a drastic restructuring and explore ways ... |
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Sat Nov 02, 2013 6:49 pm |
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untanglingwebs
El Supremo
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DETROIT WATER DEPT. “ON THE TABLE,” SAYS EFM; COMMISSIONERS APPROVE REPORT ROOTED IN LIES
Posted on 03/20/2013 by Diane Bukowski
ABOVE: VIDEO OF DETROIT EFM VULTURE KEVYN ORR’S INTERVIEW WITH FREEP: EVERYTHING ON TABLE, LET’S PICK DETROIT’S BONES DRY.
March 19, 2013
DETROIT – “I think I’ve said everything’s on the table,” Detroit Emergency Financial Manager Kevin Orr told a Detroit Free Press editorial panel in the video above. “My operating assumption is there a net benefit to city and its residents. Water and Sewer for instance enjoys a higher bond rating than the city, operates on its own, has a positive net cash level, and provides services in a relatively good level. But if you’re able to do a structure with either a regional authority or privatization, it flows cash positive to city, $50 million with a 10 percent cap rate, half a million dollars. Everything—leasing, sale/leaseback, privatization, 99-year leases with a reversion to the city—everything’s on the table.”
BOWC chair James Fausone and Oakland Co. rep. J. Bryant Williams appear to be deeply studying RCC report at meeting March 13, 2013. They couldn't have studied TOO hard, as blatant falsehoods were rampant in report..
BOWC chair James Fausone and Oakland Co. rep. J. Bryant Williams appear to be deeply studying RCC report at meeting March 13, 2013. They couldn’t have studied TOO hard, as blatant falsehoods were rampant in report..
Orr thus has clearly studied a so-called “Root Cause Committee” report which the Detroit Board of Water Commissioners, (BOWC), voted 6-0 March 13 to approve in concept. BOWC Oakland County Commissioner The report recommended that the entire Detroit Water and Sewerage Department (DWSD) operate as an independent, autonomous public authority under the supervision of the BOWC, in exchange for an annual payment to the General Fund of $50 million. It cited fear of a takeover or bankruptcy under Orr’s governance. (Click on RCC report for whole report.)
Under the proposed structure, Detroit’s City Council would no longer have approval rights over contracts and rates. Currently, the City Council must approve all DWSD contracts over $2 million as well as rate hikes. The people of Detroit would lose their Charter-mandated right to vote on any sale or transfer of DWSD assets.
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Tia Lebherz of Food and Water Watch told the BOWC her organization is opposed to the plan.
“This is a bad proposal, not in the best interests of the City of Detroit, and a path to privatization,” Lebherz said. “The Board of Water Commissioners is appointed and not accountable to the people. This will eliminate democratic control of our water resources. The Board has already voted to approve a $47 million contract with EMA, which proposes to cut 81 percent of the DWSD workforce. We need an elected and accountable water board.”
DWSD COO Matthew Schenk told the BOWC that the separation, which he termed a “lease,” would last for at least 30 years, depending on the pay-off of $6 billion in outstanding DWSD debt, and longer if more bonds are floated. After Oakland County’s BOWC member J. Bryan Williams objected that a proposed $50 million annual pay-off to Detroit’s general fund in exchange for DWSD, which has assets of over $6 billion, might not be affordable, Schenk the number is negotiable.
“The terms of any lease agreement are important,” BOWC board member Linda Forte, representing Detroit, countered. “We want total control of DWSD again. This is temporary…we should not be locked in.”
However, she voted “Yes,” as did Detroit’s other representatives Mary Blackmon and James Thrower, apparently not having reviewed the report for accuracy.
The report flagrantly falsified information about what it claims are six successful authorities in other cities. No one from the Root Cause committee, which unanimously approved the report (meaning City Council Pres. Charles Pugh and Pro-Tem Gary Brown signed on), the BOWC, the DWSD administration, or U.S. District Judge Sean Cox’s court apparently bothered to screen the document for factuality
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It is unclear if the report has even been presented to Cox, who appointed the Root Cause Committee. It is not posted on the federal court website, where previous Root Cause reports have been posted. It is unclear also whether Orr has any authority to act independently of Cox as a federal district judge.
The report and a separate Compliance Report issued by DWSD Director Sue McCormick recommend that federal oversight of DWSD be ended, after 36 years. It ignores the fact that litigation is still outstanding under the 1977 case from water department unions. AFSCME Local 207 and others challenged earlier orders from Cox changing DWSD governance and union rights before the U.S. Sixth Circuit Court of Appeals. The court has not yet rendered a decision.
Recommendations and conclusions in the entire report are suspect, if one examines blatant falsehoods it puts forward regarding other municipalities, which it claims have water and sewerage departments run successfully by “authorities.”
NEW YORK CITY
The report says, “The New York Municipal Water Authority was established by state law as a separate authority from the City of New York to manage the water and wastewater services for area residents. The Authority has a seven member board comprised of 4 ex officio New York City Directors, two mayoral appointments, and one gubernatorial appointment. The Authority holds the assets of the system pursuant to a lease agreement with the City and makes annual lease payments into the City’s general fund based upon a capped formula tied to total indebtedness.”
In fact, there is NO “New York Municipal Water Authority.”
According to New York City’s website and other sources, there is a “New York City Municipal Water FINANCE Authority.” Its sole purpose as a public benefit corporation established in 1985 is to finance the capital needs of the system through the issuance of bonds and other instruments.
It does NOT manage water and wastewater services. That is the responsibility of the New York City Department of Environmental Protection, which has 5,600 workers and is listed on the NYC government website as a regular city department. It is comprised of the Bureau of Water Supply, the Bureau of Water and Sewer Operations, and the Bureau of Wastewater Treatment. Its employees are regular city workers, represented in part by AFSCME District Council 37, among other public service sector unions.
A third entity, The New York City Water Board, sets water and sewer rates and collects payments from customers for services provided by the NYCEP. It has five board members appointed to two-year terms by the Mayor of New York City.
CLEVELAND, OHIO
City of Cleveland water logoThe report says, “The Northeast Ohio Regional Sewer District (“NEORSD”) was created by order of District Court Judge George McMonagle in April, 1972 in response to a lawsuit involving violations of the Clean Water Act. Prior to the Court’s involvement, the Sewer District was owned and operated by the City of Cleveland and served multiple jurisidictions . . .Through the litigation, Judge McMonagle ordered the transfer of assets by the City to a newly created public authority in Ohio.”
So far, so good. But sewage is sewage and water is water. The report completely neglects to cite the fact that Cleveland’s water supply services are provided by the City of Cleveland Public Utilities Department and its city workers, who are also unionized under AFSCME Local 100 and other labor organizations. Sewerage work is also included.
According to the city’s website, the Public Utilities department includes:
The city’s website says the city’s public governance of water and sewerage began in 1840.
LANSING BOARD OF WATER AND LIGHT
Public-Power1The RCC report says, “In Lansing, the Board members are appointed by the Mayor with Council ratification. The Board has full and final authority over all matters affecting the operation of the utility including contracting, rate setting, capital planning, hiring a Director, etc.”
It says that the Lansing entity pays the city a total of five percent of sales according to a current five-year agreement.
The website for the Lansing BWL says however, “As a public power utility the Board of Water & Light is owned by its customers. While many utilities are investor-owned and managed to deliver profits into the pockets of stockholders, the BWL is managed to return value and benefits to the people it serves.
Lansing’s Board of Water and Light also provides electricity for Lansing residents at far cheaper rates than private utilities. While the BOWC is at it, if Detroit is going to emulate Lansing, why not have a public takeover of DTE and Consumers Power?
The City of Lansing website adds that sewerage services are provided through the city’s Public Service Department, using city workers.
“Wastewater Division is responsible for collection, pumping, processing and treatment of the city’s wastewater, and compliance with State pollution control regulations and the National Pollutants Discharge Elimination System (NPDES) program,” says the site. “This division, in conjunction with the Engineering Division, is also responsible for monitoring the Combined Sewer Overflow (CSO) systems. The city’s Wastewater Treatment Plant (WWTP) is the largest WWTP in the region with a current capacity of treating up to 50 million gallons of wastewater per day.
“The City operates the treatment facility under a National Pollution Discharge Elimination System permit issued by the Environmental Protection Agency and Michigan Department of Environmental Quality. The government has mandated that we treat the wastewater to specified levels of metals, nutrients, and chemicals before discharge to the Grand River.”
So much for speaking truth about power in Lansing.
LOUISVILLE WATER
Perhaps the most blatant falsehood put forward by the RCC involves its description of Louisville, Kentucky’s system which is in fact totally publicly owned and controlled by the city government. (VOD had to check to see if there is any other Louisville in the U.S., we were so astonished at the different versions presented. There is not.)
The RCC claims, “In Louisville, the Louisville Metro Mayor appoints all Board members and serves as an ex officio member. . . .The Board has total autonomy to make all decisions impacting operation of the utility with no other governmental oversight from the Metro Government. Annually, the utility pays a return on equity or dividend to its shareholder (Louisville.)”
The report says Louisville’s water system paid a total of $32.6 million to Louisville Metro.
Again, let’s take a look at Louisville’s website. LouisvilleWater.com is listed as a regular city department on Louisville’s government site.
“Louisville Water Company was incorporated in 1854,” says the government website. “On March 6, 1906, Kentucky State Legislature enacted legislation that called for the City of Louisville to become the sole stockholder of the company — at the time only 51 shares had remained in private hands. The act replaced the Board of Directors with the Board of Water Works and allowed the mayor to appoint four members, subject to approval by the aldermen. The act also stipulated that free water would be provided to the city and the company would become tax-exempt. The city would not be responsible for the company’s debt and all improvements had to be financed from income.”
The RCC took care to point out in its report that Michigan state law does not allow the free provision of water to anyone, but did not cite WHICH Michigan statute.
Free water systemsA report from the University of Louisiana says, “Louisville Water Company and American Federation of State, County and Municipal Employees Local 1683 have claimed the 13th annual labor-management award from the University of Louisville Labor-Management Center. . . . .Water company union and management leaders were praised for working together to improve quality and operations. As a result, water-related customer complaints have dropped by half and employee suggestions have saved the water company millions of dollars, award judges said.”
So—unionized Louisville city employees run the Louisville Water Company, in total contradiction to the implications made by the RCC.
WASHINGTON, DC WATER
“DC Water was created as an independent authority pursuant to a statute enacted in 1996,” says the RCC. “Under that framework, there is an independent board of directors created that has autonomy over all operations of DC water with very limited exceptions. The 11 member board is appointed by the Mayor . . The Board must receive Mayoral and District Council approval for any sale of a plant facility or any privatization of the entire plant operations. Also, DC retains all access rights to the waterfront on all DC Water property.”
DC water logoIt says DC Water makes an annual payment to the city of Washington, D.C. of about $25 million a year under terms of a five-year Memorandum of Understanding, and that all assets are held by DC Water until all revenue bonds are repaid.
The report neglects to mention that Washington, D.C. does not have home rule. DC water was created in 1996 by both the city and the U.S. federal government.
Not long afterwards, DC Water became the focus a a huge scandal involving lead contamination of its water supply.
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In 2001, Marc Edwards, a civil engineering professor at Virginia Tech, found that DC water contained lead levels 83 times higher than safely acceptable. The national Centers for Disease Control and Prevention (CDC) claimed the water was nonetheless safe. But a Congressional investigation prompted by articles in the Washington Post found that the CDC had made “scientifically indefensible” claims about health effects from the lead.
Edwards found that the use of chloramine instead of chlorine to treat the water was responsible, with chloramine picking up lead from pipes and solder and dissolving it into the water. Lead is a serious health hazard, particularly in children, where it can cause brain damage, learning disabilities, tendencies to violence, and other adverse effects.
In 2010, the CDC reported that 15,000 DC area homes might still have water supplies with dangerous levels of lead.
DC water
So one would think that DC Water no longer uses chloramine. But an article in the Dcist Daily this month asks, “Does your tap water smell like a swimming pool?” It explains that one month a year, DC Water cleans out its pipes using chlorine, but continues to use chloramine the rest of the year.
In an email, Prof. Edwards confirmed that is the case.
DC water sampleLeadBoy“The lead pipes are still there, and still cause lead to be higher than the EPA LCR, but not in more than 10 percent of the homes,” Edwards said. “So officially they meet the action level. They started to dose orthophosphate in 2004, which seems to have helped keep the lead on the pipes. DC WASA was a horrible disaster of a utility through 2004, and probably through at least 2010 when their manager (Jerry Johnson) was fired and a new guy was hired. Three whistleblowers were fired for reporting safety problems from 2001-2004, and two won lawsuits against the utility, after years of consumers drinking water laced with high lead.”
So much for autonomous, independent control of a basic need of human life. And so much for the 10 percent of DC households whose children still drink lead-contaminated water.
INDIANAPOLIS
The RCC report says, “Indianapolis sold its public utility groups to Citizens Energy Group in 2011. CEG holds the assets as a not-for-profit public trust and is managed by a private board of directors. . . that nominates its own successors who shall be confirmed by the Mayor. . . The sale of the water and wastewater services to CEG by the City of Indianapolis included CEG assuming $1.5 billion of current indebtedness for a total price of approximately $1.9 billion, netting the City of Indianapolis $425 million to fund general fund expenses.”
The RCC did not report the real history of Indianapolis’ water system, which has been a rocky road indeed.
According to a study on water privatization, “Indianapolis purchased its water utility from the [private] Indianapolis Water Company in 2002 and immediately privatized the operation of the system. Veolia received the 20-year, $1.5 billion deal to manage the city’s water system. This had been Veolia’s largest water contract in the United States.
“Since then, workers, consumers and government officials alike have all had problems:
◾Employees claimed the company cut their benefits by more than $50 million.
◾Residents accused the company of using unfair billing practices and overcharging them.
◾More than one million people were put on a boil alert in 2005 after a company employee entered a wrong code into a computer. This meant that before water could be safely used, it needed to be boiled. As a result, schools and businesses shut down and hotels and restaurants were forced to serve only bottled water.
◾A city councilmember criticized the company for cutting back on staffing, water testing, treatment chemicals and maintenance, and other members questioned whether the company had a financial incentive to fudge quality tests.
“ . . . .A controversial contract amendment signed in 2007 shifted millions of dollars in liabilities from the company to the city while increasing city’s annual payment to the company by $1.9 million. In total, the amendment cost the city more than $144 million. State regulators refused to allow the city to recoup some of these additional expenses in a rate increase.
“By 2010, with infrastructure needs mounting, the city opted to wash its hands of the water utility altogether and decided to sell it, along with the sewer system, to the nonprofit Citizens Energy Group. As part of the transfer, the city agreed to pay Veolia $29 million to terminate its contract early. Citizens Energy believed it could realize savings not possible within the constraints of the contract.
So, Indianapolis Water and Sewerage was publicly controlled for only a brief period of time, and its subsequent privatization of the system resulted in disaster for the city.
So much for Kevyn Orr’s alternative of privatization for DWSD.
Orr, the BOWC, the RCC, the DWSD administration, Mayor Dave Bing, Governor Rick Snyder and their corporate/banker backers need to be charged with fraud and obstruction of justice for perpetrating this flagrant hoax on the people of the City of Detroit, not to mention a federal judge.
no-water-privatization→
One Response to DETROIT WATER DEPT. “ON THE TABLE,” SAYS EFM; COMMISSIONERS APPROVE REPORT ROOTED IN LIES
Saulius Simoliunas says:
03/21/2013 at 10:35 am
Fausone conveniently ignores his conflict of interest by being Westland City attorney and DBOWC chairman as well de facto leader of root cause committee. Judge Cox should remove him from the public trough.
- See more at: http://voiceofdetroit.net/2013/03/20/detroit-water-dept-on-the-table-says-efm-commissioners-approve-report-rooted-in-lies/#sthash.fKXSwETM.dpuf |
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Sat Nov 02, 2013 7:00 pm |
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untanglingwebs
El Supremo
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Originally Published: September 18, 2013 7:11 PM Modified: September 19, 2013 7:01 AM
Orr: Detroit may pay debt with money meant for sewer repair
By Bloomberg
Nathan Skid / Crain's Detroit Business
Detroit bankruptcy judge to hear from residents today
Detroit may use hundreds of millions of dollars earmarked for required upgrades and repairs to its water and sewer system to pay debts it's trying to restructure in bankruptcy.
Detroit's emergency manager, Kevyn Orr, was asked in a Sept. 16 deposition whether he was considering using cash from the Detroit Water and Sewerage Department "to fund existing obligations rather than new capital improvements," according to a transcript filed today in U.S. Bankruptcy Court in Detroit.
"We have examined a number of options and alternatives related to DWSD including those that might be implicated by your question," Orr said. "I didn't say that we would take any capital. I said we will -- we would consider it."
Detroit filed the largest-ever U.S. municipal bankruptcy in July, listing debt of about $18 billion. The city has about $5.4 billion worth of water and sewer bonds that Orr has said would be paid in full. Creditors seeking a share of Detroit's remaining cash may seek to nullify the bankruptcy by arguing the city isn't really insolvent because it has access to more money than it claims, such as the water and sewer revenue.
The deposition was filed by unions and retirees challenging the city's eligibility for federal bankruptcy court protection.
"Mr. Orr was responding to a hypothetical posed by an attorney representing city retirees and not elucidating on a plan currently under consideration," Bill Nowling, a spokesman for Orr, said in an e-mail.
Possible Obstacle
Orr also said in the deposition that restrictions in bond instruments or previous rulings from the bankruptcy judge may bar him from using water and sewer repair funds for anything else.
Separately, Fitch Ratings said in a report today that it expects Detroit to default on its general-obligation bonds on Oct. 1. The New York-based ratings company already cut the Motor City's pension-obligation certificates to D in June after Orr announced it would miss a $39.7 million payment. A grade of D signals a failure to pay debt service.
"Detroit's landmark bankruptcy sets the stage to confirm or challenge basic premises underlying municipal debt credit ratings," Amy Laskey, a Fitch managing director, said in the report.
If Detroit's case lumps general-obligation bonds with post- employment benefit payments, Fitch may "reconsider" municipal grades broadly, according to the statement. Fitch said there's "substantial protection" for the city's water and sewer debt.
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Sat Nov 02, 2013 7:35 pm |
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untanglingwebs
El Supremo
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Detroit, suburbs fall short on water department deal
December 20, 2013 |
By John Wisely
Detroit Free Press Staff Writer
Suburban officials say they don’t expect to meet today’s deadline for hammering out an agreement on the future of the Detroit Water and Sewerage Department.
Emergency manager Kevyn Orr set the deadline earlier this year, hoping to have a deal done in time to include revenue projections in the plan of adjustment he submits to the bankruptcy court.
“We all understand the time frame, but this is a very complex issue with a lot of moving parts,” said Deputy Oakland County Executive Robert Daddow. “We’ve been meeting and airing some discussion, and I think we’re moving in the right direction.”
Daddow said based on the talks, today’s deadline seems less important than next month, when the city prepares to submit the plan of adjustment — its blueprint for digging Detroit out of bankruptcy.
■ Full coverage: Detroit’s financial crisis
Orr initially proposed a long-term deal that would have had the suburbs essentially lease the assets of the water department for about $9 billion in exchange for a greater say in how the operation is run.
Suburban leaders balked at the price. Oakland County Executive L. Brooks Patterson called that offer “dead on arrival,” but said he’d be willing to consider a reasonable lease payment.
Macomb County Public Works Commissioner Anthony Marrocco told the Free Press last week he’s opposed to any lease deal that allows water department revenue to be diverted to the city’s general fund. The state of Michigan isn’t paying any rent to Detroit for its control of Belle Isle, Marrocco said.
The water department is considered one of Detroit’s most valuable assets, and Orr has been looking for a way to monetize it as part of restructuring city government.
The department also has long been a source of friction between the city, which owns it, and the suburbs, where three-quarters of the customers now live. The trial of former Mayor Kwame Kilpatrick exposed rampant corruption in the department’s contracting practices, reinforcing suburban suspicious about its operation.
Contact John Wisely: 313-222-6825 or jwisely@freepress.com |
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Fri Dec 20, 2013 7:11 am |
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