Great Lakes Water Authority Fact Sheet

Great Lakes Water Authority presentation

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Agreement to Create Water Authority Guarantees Funding to Rebuild Regional System and to Assist Customers in Need

•    Detroit will lease infrastructure to suburban communities in exchange for $50 million annual fee, annual $4.5 million payment assistance fund

9/9/2014 - A historic deal has been reached between the Mayor of the City of Detroit, the Chief Executives of Wayne, Oakland and Macomb counties and the Governor to create the Great Lakes Water Authority (GLWA) to manage water and sewer operations in the tri-county area.  The agreement lays a foundation for a more financially stable system, an opportunity to create efficiencies to better control rates and greater transparency.

The deal continues Detroit’s ownership of its assets while providing suburban communities a greater voice in the operation of the regional system.  The agreement also guarantees funding to rebuild the system’s aging water infrastructure, as well as financial assistance for customers throughout the region who are struggling to pay their bills. The annual revenue required rate increases charged by GLWA are expected to be limited to 4% a year for the next 10 years. 

The regional authority will be governed by a board made up of two members appointed by the Mayor of Detroit and one appointed from each from Wayne, Oakland and Macomb Counties and the Governor.  Major decisions, such as rate increases, will require five of the six votes to be approved. 

In order for the provisions of the agreement to take effect, Detroit City Council and at least one of the counties must approve the creation of the Great Lakes Regional Water Authority.  If the authority is not approved, the Emergency Manager could make a decision himself on the fate of DWSD and could hand it over to a third party.  

Currently, the Detroit Department of Water & Sewerage department manages two distinct systems. First is a regional system of approximately 640 miles of large water and sewer pipes that serve 127 communities in Wayne, Oakland and Macomb counties. This regional system also includes five water treatment facilities and a major sewage treatment plant.  Local communities are responsible for their own local water/sewer system and the billing and collections system for their residents.  

The Detroit water and sewer system consists of more than 3,400 miles of local water mains, 3,000 miles of local sewer pipes, 27,000 fire hydrants and an extensive billing and collection system.  

Of the 1,400 DWSD employees today, it is expected that approximately 500 will remain working at DWSD on Detroit’s local system and approximately 900 will transfer to the GLWA to run the regional system.  GLWA will honor all collective bargaining agreements of DWSD employees.

Funding to replace broken mains
If the new authority is established, the city of Detroit will retain ownership of its 3,000 miles of local pipes and lease its 300 miles of suburban pipes to the local communities in which they are located. Five water treatment facilities also would be operated by the Regional Authority.  

In exchange for the use of its assets, suburban communities will pay the city of Detroit $50 million per year for the next 40 years. This will allow Detroit to finance up to $500-800 million in bonds to rebuild the city’s aged water and sewer system.  The majority of the city’s water mains are between 70 and 90 years old and failing at a rapid rate.  Detroiters have suffered through more than 5,000 water main breaks in just the last 3 years. 

Rebuilding 1% (30 miles) of its system each year at a cost of about $25 million would have put the city on par with the national average.  However, DWSD has spent no more than $3.4 million in each of the last three years to rebuild its mains.

Dedicated assistance to help customers struggling to pay bills
The agreement creates for the first time a fund dedicated to providing financial assistance to water customers in throughout the region who are struggling to pay their water bill.  The fund - established at $4.5 million - will be replenished annually.  Today, DWSD sets aside only $168,000 annually to assist its customers.  

Summary of Proposed Regional Partnership on Water and Sewer System

The Memorandum of Understanding, signed today by Detroit Mayor Mike Duggan, Macomb County Executive Mark Hackel, Oakland County Executive L. Brooks Patterson, Wayne County Executive Bob Ficano, and Governor Rick Snyder, seeks to end decades of regional division over the Detroit Water and Sewerage Department and is an effort to resolve a key issue in the Plan of Adjustment in the Detroit bankruptcy case.  

The memorandum has 12 key provisions:

1. Detroit maintains its own local system. Detroit keeps exclusive control of the local water and sewer system in DWSD – under authority of Mayor and City Council.  The Detroit local system is made up of approximately 3,000 miles of local sewer pipe and 3,400 miles of local water mains serving the neighborhoods of Detroit.  Detroit will have full authority to repair and rebuild the local system.  

2. A regional authority is formed to operate the regional system.  A new regional authority will be formed called the Great Lakes Water Authority (GLWA) to operate the regional water and sewer assets.  The GLWA will be made up of 6 members:  2 appointed by the Mayor of Detroit, 1 each by Wayne, Oakland, and Macomb Counties, and 1 by the Governor from the service area outside the three counties.  If Wayne, Oakland, or Macomb choose not to participate, the Governor will appoint a board member from their area.

3. 5 votes required at GLWA for major issues.  Major issues will require 5 votes out of 6 for GLWA approval.  These include decisions relating to rates, budgets, contracting, and selection of management. 

4. GLWA leases assets from Detroit for $50 million a year.  The GLWA will lease the regional assets from the City of Detroit for 40 years for $50 million per year.  The leased assets will include approximately 400 miles of regional water mains and 360 miles of regional sewer pipe, 5 water filtration plants, the Jefferson Avenue Sewage Treatment Plant, and a number of retention basins and pump stations.  Detroit will retain ownership of these assets.

5. All lease payments must stay within system to fix Detroit’s infrastructure.  Detroit will use the $50 million annual lease payment only for capital improvements to the system and not to support payments to its general fund.  The Detroit local system has suffered more than 5,000 water main breaks the last three years, and the rate of incidents is rising dramatically.  Detroit can use these funds for the repair and rebuilding of Detroit’s local water system under DWSD, to build more capacity for storm water events, or to contribute to Detroit’s share of the costs of GLWA’s capital improvements.

6. GLWA supports bond issue to speed up Detroit rebuilding.  If Detroit chooses, GLWA will support using all or part of the $50 million of the annual lease payment to support bond issues, potentially supporting $500-800 million bond issues to allow Detroit to move quickly to rebuild its deteriorating local system. 

7. Detroit solely responsible for paying for its system’s operating costs.  Detroit will take full responsibility for billing and collection for the Detroit local system and any shortfalls will be the responsibility of Detroit, and not any other community.

8. $4.5 million water affordability fund created.  The GLWA will create a Water Residential Affordability Program (WRAP) with a dedicated contribution of 0.5% of operating revenues.  The first year’s funding will be  $4.5 million and is expected to grow annually.  The fund will support water customers across the region who are financially unable to afford water service.

9. Rate increases to be limited to no more than 4% a year for 10 years.  Based on an extensive analysis by several financial experts, the parties believe that the savings resulting from lower financing costs, better energy usage, and more efficient operations, will allow the GLWA to make these payments and operate on annual revenue requirement rate increases of no more than 4% a year for the next 10 years.  Individual communities might have higher rates if they choose to make additional local improvements.  The parties have retained a consultant, Veolia, to do an independent review to validate the rate assumption and the parties have the right to opt out of the deal if the review shows that the 4% annual rate limit will not be able to be achieved.

10. All union contracts will be honored.  Of the approximately 1,400 current DWSD employees, it is expected that approximately 500 will stay at DWSD with no change in their status.  Approximately 900 workers are expected to transfer to GLWA.  GLWA will become a successor employer and will assume and honor all DWSD collective bargaining agreements.

11. Approval required by October 10th. The proposed GLWA Articles of Incorporation will now be submitted to the City of Detroit and to the Boards of Commissioners of Macomb, Oakland, and Wayne Counties.  The four have until October 10, 2014 to approve the Articles of Incorporation and create the GLWA.  If Detroit and at least one other county have acted by October 10, the GLWA will be created and the Memorandum of Agreement will be in effect.  If any of the counties have not acted by October 10, the Governor will appoint the representative from that county.  It is expected that an approved authority will be recognized in the final plan of adjustment adopted by the court in the bankruptcy case.

12. GLWA to be up and running in 200 days.  The formal start of the GLWA will occur within 200 days, subject to the due diligence process, obtaining the necessary legal approvals, and execution of the final documents.

Download the Great Lakes Regional Water Plan Fact Sheet .pdf
Download the Water and Sewer Maps .pdf

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