03.13.14

Getting Ready to Rumble. As we wrote yesterday, Detroit Emergency Manager Kevyn Orr is increasingly focusing on key, unresolved issues that are critical components of the Motor City’s proposed plan of adjustment, telling the Detroit Free Press: “That’s my job as a receiver, as a fiduciary, to look at all opportunities so I’ll be able to say to creditors, ‘We pursued every effort we could to find as much value, within reason, that we could to pay off creditors while leaving the city with the resources that it needs to go forward and resolve many of the operational and structural issues that it has.’ ” In his comments yesterday with both the News and Free Press, Mr. Orr focused on his efforts to address the city’s water and sewer authority—and his proposal to create a regional authority. Admitting that those efforts were foundering, albeit he said not at a complete impasse, Mr. Orr said he still prefers his original option, which would be vital in terms of longer term sustainability for the Motor City through providing Detroit $47 million a year for 40 years to invest in public services such as police and firefighters—resources the city is precluded from generating currently. Mr. Orr indicated that negotiations with the city’s suburban leaders were continuing—something with which Oakland County does not agree—and he said the chance of an outright sale of the water department is remote. He reported that such a sale would eliminate the water and sewer department’s tax-exempt status and make it ineligible for some forms of federal funding; nevertheless, he said he and his staff are examining other options, including privatization or leasing the system to contractors, noting that the private American Water Works Company, based in New Jersey, operates water and sewer systems in 16 states.

Neighbors. A key part of the regional water and sewer challenge involves Detroit’s rocky relationship with its metropolitan neighbors—especially because of longstanding concerns about a history of rate increases, delinquent water bills, corruption in contracts, and inability to provide updated financial records. Yesterday, Mr. Orr said he understood the concerns of suburban leaders including county executives L. Brooks Patterson in Oakland and Mark Hackel in Macomb about costs the suburbs would bear in any such regional facility—including the imposition of significant fees to address perhaps billions in system improvements and to offset the costs of unpaid water bills in Detroit and Highland Park—and he promised that a long-delayed report and audited financial information will be made available to his suburban neighbors in the near future. Nevertheless, while generating revenues has been a key tenet of Mr. Orr’s recovery plan, especially in terms of the Motor City’s sustainability, he said yesterday he could submit his final plan of adjustment to the U.S. Bankruptcy Court this summer without resolution of the water and sewer issue. Nevertheless, Gerald Poisson, chief deputy Oakland County executive, yesterday noted county leaders remain frustrated that after eight months of urgent inquiries, they remain empty-handed in terms of financial information from Detroit: “I would characterize the negotiations as stalled.” said Gerald Poisson, chief deputy Oakland County executive. Wayne County Executive Robert Ficano has supported the authority proposal, but his deputy notes that despite several conversations with advisers from Mr. Orr’s staff in recent weeks, they have received few answers, noting: “None of the county’s issues are new. We’ve made some progress. Our concern is we haven’t made enough progress on those issues that are of importance to the counties.”

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