By Nathan Bomey, Christina Hall and Bill Laitner
The City of Detroit has ended negotiations with Wayne, Oakland and Macomb counties over the potential spinoff of the city’s water department as a regional authority, but the city and counties signaled they haven’t ruled out a deal entirely.
After Wayne County last week asked Judge Steven Rhodes to appoint a mediator to resolve the dispute between Detroit and the counties, the city asked Rhodes to reject the request.
Detroit bankruptcy attorneys said in a court filing that they have ended talks with the counties, leaving the possible privatization of the system as the city’s main focus.
“The City of Detroit has participated in good faith in negotiations for the past several months with Wayne County, Oakland County and Macomb County regarding the possibility of creating a regional water/sewer authority,” the city said in a court filing. “Those negotiations have not proven successful, and the City believes that they have run their course.”
The lawyers added: “Nevertheless, if the Court believes that mediation is appropriate, the City will, of course, abide by the Court's order.”
Bill Nowling, a spokesman for Detroit emergency manager Kevyn Orr, said there’s still a chance negotiations could be restarted.
“We’re not saying ‘no’ to ... any further negotiations,” Nowling said.
The statement follows months of finger-pointing between the municipalities with the counties recoiling at the prospect of endorsing a regional water authority that would pay $47 million per year for 40 years in lease payments to Detroit. Wayne had signaled a willingness to consider a deal.
Oakland County officials said in a statement that they “disagree” that the city negotiated in good faith, but signaled they would consider a deal if the city provides adequate information about its proposal. The county has started exploring the prospect of investing in its own water system.
“We remain open to the possibility of a reasonable solution to forming a regional water and sewer authority,” said Oakland Chief Deputy County Executive Gerald Poisson and Deputy County Executive Robert Daddow, in a statement. “But any resolution must protect all ratepayers; keep water and sewer revenues in the water and sewer system to pay for critical upkeep and rehabilitation, and cannot merely be a vehicle to divert funds from water and sewer customers to Detroit’s general fund so the city can meet its other obligations.”
Under Orr’s proposed regional authority, the counties and the city would share governance of the new system, collectively setting water rates and directing investment priorities.
But Orr has recently turned his attention to seeking a potential deal with for-profit water system operators. The city plans to consider bids from private water companies to acquire or lease the Detroit Water and Sewerage Department.
Macomb County Executive Mark Hackel said Detroit negotiations “were trying to get the ratepayers to pay for something that wasn't helping the system.”
Under any scenario, metro Detroit water rates are expected to rise in the coming years to fund badly needed infrastructure improvements. The system is also expected to continue cutting jobs to eliminate bureaucracy.
If Orr gets a private deal done, the transaction could help reduce proposed pension cuts to Detroit retirees and could allow the city to invest more in city services.
Hackel said he would endorse a privatization of the system, but said the Michigan Public Service Commission would need to provide oversight and protect ratepayers.
Wayne County Executive Robert Ficano said Monday he was determined not to let negotiations on the regional authority falter and he doesn’t want a profit-driven company assuming control of the system.
“Mediation has proven its worth in a number of areas of this bankruptcy proceeding — the DIA issue, the pension situation — and my feeling is, it’s never too late to put together a good deal for taxpayers and ratepayers,” Ficano said. “I’m just saying, let’s get back to the table. It’s going to be better for the taxpayers as well as for the retirees, who really are the innocent victims of the whole bankruptcy.”
In contrast, privatizing the system would likely trigger rapid rate increases, Ficano said.
“A private company’s goal is to maximize profits,” he said. Privatization would “probably lead to a lot of infrastructure costs being passed on immediately to the ratepayers, and so people would see much higher bills almost immediately,” compared with a regional authority of local governments, which would finance improvements over many years and “be easier on the ratepayers,” Ficano said.
But not all Oakland County officials were still as open to negotiations.
“I think the (Detroit) water department should be taken away from the city of Detroit by the state, reorganized and given back to the region. That’s just how I feel,” said Oakland County Commissioner Bob Gosselin, R-Troy, who was appointed in March to chair a study group on the water and sewer system for the board of commissioners.
Oakland County’s commissioners are expected to meet Thursday and approve a plan to spend $500,000 on a feasibility study to see how the county — possibly in tandem with Macomb County — could set up its own water and sewer system. The resolution would set aside an additional $2.5 million for extending the study, said Commissioner Jim Runestad, R-White Lake, who proposed the resolution.
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