Debra Ragland

This email is being sent on behalf of Sue McCormick - Director, Detroit Water and Sewerage Department. Please replace prior email with this one.

This email is being sent on behalf of Sue McCormick - Director, Detroit Water and Sewerage Department. Please replace prior email with this one.

Good morning Mr. Kurtz, Please find attached DWSD's proposal for continued service to Flint and Genesee County. Within the hour I will also send a power point file that provides a summary level presentation of the proposal. I look forward to answering any questions you may have and supporting the conversation between you and Mr. Orr over the next few days. Sue xxxEND_PAGE:deq21_b591_1725_1726_1 Sue F. McCormick, Director Detroit Water and Sewerage Department 735 Randolph, Room 506 Detroit, Michigan 48226 Office (313)224-4701 Fax (313)224-6067 [email protected] xxxEND_PAGE:deq21_b591_1725_1726_2

Please see attached on behalf of Sue F. McCormick. faxed copy forwarded to Mayor Dayne Walling and Jeff Wright xxxEND_PAGE:treasury02_b3_159_230_50 000209 We Wiad O11) bed State of Michigan Rick SNYDER DEPARTMENT OF TREASURY ANDY DILLON GOVERNOR LANSING STATE TREASURER Mr. Edward Kurtz April 11, 2013 Emergency Manager City of Flint LIOl South Saginaw Street Flint, MI 48302 Dear Mr. Kurtz: Thank you far your March 29. 2013 letter, which is attached for reference. As the Emergency Manager for the City of Flint (“Flint or “City"), you have asked for my concurrence, pursuant 10 Public Act $36 of 2012. the Local Financial Stability and Choice Act, to authorize a contract in éxcess of $50,000.00 not subject to competitive bidding. This tequest wus related to (he City entering into an agreement with the Karegnondi Water Authority (KWA) for provision of raw water for the City. (n considering your request, I took note of the following facts in support of Flint joining KWA, First, there is widespread support in the City for this move, including the support of the Mayor, the City Council, and the Emergency Manager, Second, this move will provide a unique opportunity for the City and County to partner on an important project, which will hopefully lead to future regional collaboration, Third, the Department of Environmental Quality is supportive of the City participating in the KWA project. Finally, your representations that this deal will lead to substantial savings for the City over the coming decades, savings that are desperately needed to help with the turnarovad of the City of Flint. It is my understanding that he Dewroit Water and Sewer Department is making a final best offer to Genesee County and the City of Flint next Monday, April 15, 2013, As such, this approval will be effective at 5 py on April 16. 2013 alter receiving written note from the City that either no such offer was presented to the county and the City or that an offer was received and was rejected in good faith based upon specified objections. For the reasons described above and subject to the conditions set forth herein, pursant to Section 12 (3) of PA 436 of 2012.1 am authorizing you to proceed with adopting the resolution and entering into a contract wilh KWA PO BOA 20716 = LANSING MICHIGAN AdBe, Vr HEH IDO QovAUa Gury » (617) 27% 320e xxxEND_PAGE:treasury02_b3_159_230_51 000210 CITY OF FLINT OFFICE OF EMBRGENCY MANAGER EDWARD J. KURTZ ELECTRONIC LETTER April 16,2013 Andy Dillon ‘State Treasurer P.O. Bax 30776 Lansing, Ml 48908 Dear Treasurer Dillon: Flint, Genesee County and KWA received an eight page letter from Detroit Water and Sewerage Deparment (DWSD) offering a framework for a long-term agreement with ourfegion, Two-scenarios were presented: Scenario 1; Water from the Lake Huron Plant. This offer was dismissed immediately because Flint would still be responsible for their share of the KVVA water pipeline delivery system estimated to be $79 million. In addition Flint would not be able to operate the Filnt Water Plant in which we have invested over $40 million par MDEQ mandates over the past ten years. Finally, allhough DWSD shows this as an option and supplied a per month cost projection for the first year, no total costs over the life of the contract were provided, Scenaria 2: “Full Service” Water Supply This offer was also rejected. DWSD would supply water to Flint/Genesee the same way they currently are today, They would change the method of calculating our bill, The offer would provide a $1.00 per ccf reduction on our usage for the first year, providing a 50 year contract is signed After review of the offer, Flint/Genesee has the following cancerns: City Hall 110] S. Saginaw Sireet ~ Flint, Michigan 48302 810-766-7346 PAX: 810-766-7218 © \evow.cityofflintcom xxxEND_PAGE:treasury02_b3_159_230_52 000211 Andy Dillon, State Treasurer April 16, 2013 Page 2 1. DWSD's offer is a framework subject to negotiations and is not a fim offer 2. DWSD's offer is based on 40.6 mad, the KWA plan is basad on 60 mgd. FlintGenesee last summer hit the peak of 40,8 mgd and this DWSD offer provides no room for growth, Growth would result in penalties or added cast. 3, DWSD's offer does not include a guaranteed rate for years two through thinly, nor does it provide a maximum annual increase. 4, DWSD's offer does not provide a redundant stipply for GGDC. 5. OWSD’s offér does not allow for te use of Flint’s existing water plant. 6. The offer indicates that the total cost to Flint over the life of the contract wauld be $567,990,565, No indication of what annual rate of increase was used in this projection. Flint can only assume it's 4.4% based on the Tucker Young repart. It is also based on 40.6 mgds. KWA's proposal is for $649,775,166 based on 60mgds (33% more), Based on 60 mgds DWSD's proposal would be $868,950,738. On a final note, Flinv/Genesee has great concem over the accuraoy of the fiqures: provided Ly DWSD. Affactiment 1 indicates fat our joint annual cost to DWSD is $50 million; actual cost Is less than $25 milan. Attachment 2 Indicates $800 million in savings over the next 30 years, That is greater than the total cost we waukd pay DWSD. ‘Therefore, | will sign the resolution to join KWA at the close of business taday, Sincerely, a Edward J. Kurtz Emergency Manager xxxEND_PAGE:treasury02_b3_159_230_53 000212 —_ Cory att Grerdaay / 733 Resco Seer Warett Ano Btwethycik Qrraitinvene Drreoit, Vicnc\nds226 Orrict at wie Beco SW eee cay April 17, 2013 = 2 = Certified Mail at ronic De! a — Ms. Inez M. Brows = City Clerk “i City of Flint = Zod Floor, City Hall 1101.8. Saginaw Street Flint, Michigan 48502 Dear Ms. Brown: Regarding; Termination of Contract for the Provision af Water Services by the City of Detroit, Water and Sewerage Department On December 20, 1965, the City of Detroit, through its Board of Water Commissioners, (DWSD) and the City of Flint, Michigan (Flint) entered into @ contract for the provision of DWSD treated water ta Flint and the disivibution by flint of that water to other Genesee County communities. Section 18 of that Agreement! provides: 18. The Board [DWSD] shall supply and sel! water to the City [Flint] from the water system of ihe City of Detroit, and the City shall receive and purchase such water in acdordance with the terms of this Agreement for an indefinite period of time but et least for a period of thicty-five (35) years from the date hereof, This Agreement may be terminated by either parly offer expiration of said 35-year period, upon ane year's written notice served upon the other party by delivering the same to the Secretary of the Board orto the Clerk of the City as the case may be, or at any time Upon routual consent of both parties. Please take notice that pursuant to this section, 18, of the above-referenced Agreement, DWSD is terminating this Agreement one year ftom today’s date (April 17, 2014). Sincerely yours, Sue F. McCormick Director * Although the Agreement betwees DWSD has been subsequently amended, Section 18 temeins anohanged and (1 Wu! effect. vA hoy oh Kp) ALY \J 0 { xxxEND_PAGE:treasury02_b3_159_230_54 000213 fet Gey OLN} STATE OF MICHIGAN RICK SNYDER. DEPARTMENT OF TREASURY ANDY DILLON GOVEKNOK LANSING STATE TREASURER SUMMARY REPORT TQ: Brom Stibitz. Senior Policy Adviser; Deparment of Treasury FROM; Erie Cline, Unit Operations Specialist SUBJECT: Tint Water Sysiem Summary: DATE: April 18,2014 Sammary In November 2012 the Department of Treasury commissioned the finn of Tucker, Young, Jackson & Tull, Inc: (TYIT) to analyze options for the City of Flint to either remain a customer of the Detroit Water & Sewer Department (DWSD) or to join the Karegnondi Water Authority (KWA) in Genesee County, The purpose of this study was to provide objective analyses 10 the State Treasurer and Flint's Emergency Financial Manager (EPM) in order to secure future potuble drinking water for the City, In December 20/2, staff from TYJIT met with representatives from the Department of Treasury and the City of Flint io provide a preliminary report on their findings. At this meeting, five options were presented: These Optiotis ranged from the Flint Water Plant providing 160% water, to 100% provision of untreated Lake Huron Water by KWA, to 100% provision of reated drinking water by DWSD, or provision of variable.amounts of water From DWSD using a combination of blended DWSD water and Flint River water

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq01_b358_4173_4175_3

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq02_b004_0729_1335_164 Rennaker, Joanne (DEQ)

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq03_b607_4179_4696_243 Rennaker, Joanne (DEQ)

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq03_b188_0282_0283_2

Please see attached on behalf of Sue F. McCormick. | Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq03_b604_2838_3252_140 City oF Detrorr 735 RANDOLPH SreeEt Water AND SEWERAGE DEPARTMENT Durrort, MicHiGAn 48226 Orrice OF THE Director WIWW.DETROITMEGOV April 15, 2013 Karengondi Water Authority 4160 Beecher Rd. Flint, Michigan 48532-2617 Ed Kurtz, Emergency Manager City of Flint i101 South Saginaw Street Flint, Michigan Gentlemen: Over the last several months, governed by a process laid out by the State of Michigan, the Detroit Water and Sewerage Department (DWSD) has proposed a number of alternatives for long term water supply to the City of Flint. Each alternative was offered in the spirit of working in earnest to address the needs, priorities and concerns of the City of Flint and each provided an immediate cost reduction when compared to the current costs of water purchased from DWSD. In the final analysis conducted by Flint, these proposals did not overcome the desire for the Flint/Genesee region to be served by the same system and to have a voice in the future decisions governing the provision of water to this region. Many of the proposals DWSD has made to Flint during this period are applicable to Flint/Genesee County or KWA with adjustments to demand and use requirements and would provide similat overall benefit. These options remain available for further discussion should the parties’ desire. These prior proposals are included in summary form in Attachment | as an expanded table 6-1 from the February 2013 State of Michigan Contract No. 271N3200089, City of Flint Water Supply Assessment, submitted by Tucker, Young, Jackson, Tull, Inc. For comparison purposes only, DWSD’s new proposal (Flint’s 30% allocated share) is inserted. The proposal scenarios outlined today offer a public/public partnership with options _ tailored to Flint/Genesee County or KWAs interests. For ease of writing, the remainder of this memo will present this proposal to KWA. Two basic scenarios are presented for consideration, both of which contemplate that KWA would enter a multi-year contract. Service commitments and usage definitions would be negotiated in the same manner as employed that have resulted in new contracts for other customers. In brief, the proposal provides a unique opportunity to reserve capacity at DWSD’s Lake Huron Water Treatment Plant and to participate in decision making for-facility operation and capital investment through a joint operating committee, The proposal envisions that KWA would enter into a 30-year contract to purchase treated water directly onsite at DWSD’s Lake Huron Water Treatment Plant. xxxEND_PAGE:deq03_b604_2838_3252_141 In Scenario 1 the purchased water can either be pressurized or unpressurized. This first scenario results in a “supply only” rate schedule, with a “standby delivery” component to provide for emergency service at the existing Baxter / Potter connection. This scenario provides K WA the ability to construct new transmission owned and operated by KWA, Scenario 2 maintains the public/public partnership concept and extends it to transmission facilities through which the Lake Huron Water Treatment Plant provides water, This scenario results in a “full service” rate schedule. The standby delivery component is eliminated, since the rate structure to KWA includes costs associated with the transmission system between the Lake Huron Water Plant and the Baxter / Potter connection. DWSD proposes a modified rate schedule for the customers currently served through the contract with the City of Flint, which includes Flint and Genesee County. This modified schedule is intended to facilitate negotiations for a new water service agreement with the Karegnondi. Water Authority (KWA). The scenarios presented herein represent the innovative thinking that DWSD and its new leadership are bringing to the table. Our goal is to provide the lowest cost water solution for the KWA service area, The potential rate structures are introduced in summary form herein, with preliminary calculations using the proposed rate structures with FY 2013-14 as a baseline. These calculations and the accompanying discussion are based on the assumptions regarding contract terms that approximate recent discussions amongst the parties. The proposal introduces the concepts, but does not definitively present all of the specifics, appreciating that such specifics are best addressed through negotiations designed to produce a new contractual agreement satisfactory to all parties. [Remainder of page intentionally left blank] xxxEND_PAGE:deq03_b604_2838_3252_142 Scenario 1 —- Lake Huron Direct Supply Purchase: KWA enters into a long term partnering arrangement with DWSD to purchase all of its primary water supply directly at the DWSD Lake Huron water treatment plant. Supply rate schedule is designed to recover only water treatment revenue requirements. This rate schedule does not contain any delivery costs (pumping, transmission, storage, etc.), Supply rate schedule is computed based on specific costs associated with the Lake Huron Plant. No other DWSD revenue requirements, including those associated with other DWSD water plants, are included in the rate to KWA. Revenue requirements are separated into capital recovery and operation and maintenance expense elements. Baseline revenue requirement data (including operating budget, rate of return, depreciation assumptions, etc.) are identical to those developed for all other wholesale customers, KWA is allocated Lake Huron Plant capital revenue requirements based on the proportion of their contracted max day demand (assumed in these calculations at 40.6 mgd) relative to the total capacity at the Lake Huron Plant (400 mgd). The resulting revenue requirements are recovered through a fixed monthly charge. KWA is allocated Lake Huron Plant operating revenue requirements based on the proportion of their contracted average daily usage (assumed in these calculations at 24 mgd) relative to the total average daily usage at the Lake Huron Plant (assumed at 125 med in these calculations). Calculations are conducted for two alternatives. Purchase of pressurized water (afler high lift pumping) and unpressurized water (K WA takes ditectly from clearwell.) Contract includes an arrangement for emergency service at the existing Baxter / Potter connection, and computes a standby charge related to such service. The standby charge is computed in the manner set for the by the American Water Works Association (AWWA) in its Manual of Water Supply Practices M1 - “Principles of Water Rates, Fees, and Charges” Manual M1. o KWA is allocated one day’s worth of transmission related capital revenue requirements. Scenario 2 — “Full Service” Lake Huron System ° Same as the “pressurized” option in Scenario 1, except that concept is extended to the pumping, storage, and transmission facilities directly served by the Lake Huron Plant Transmission rate schedule is computed based on specific costs associated with these facilities. No other DWSD revenue requirements, including those associated with other DWSD transmission mains, ete, are included in the rate to KWA. Revenue requirements are separated into capital recovery and operation and maintenance expense elements. Baseline revenue requirement data (including operating budget, rate of return, depreciation assumptions, etc.) are identical to those developed for all other wholesale customers. KWA is allocated Lake Huron “transmission system” capital revenue requirements based on the proportion of their contracted max day demand (assumed in these calculations at 40.6 mgd) relative to the total capacity at the Lake Huron Plant (400 mgd). The resulting revenue requirements are recovered through a fixed monthly charge. xxxEND_PAGE:deq03_b604_2838_3252_143 °¢ KWA is allocated Lake Huron “transmission system” operating revenue requirements based on the proportion of their contracted average daily usage (assumed in these calculations at 24 mgd) relative to the total average daily usage at the Lake Huron Plant (assumed at 125 med in these calculations), ¢ Standby charge is eliminated. The resulting potential proposed rate structures under both Scenarios are summarized below. Potential Proposed DWSD Water Rate to KWA Lake Huron Direct Scenario 1 - Supply Rate @ LH Plant _| 2 - Full Service Unpressurized Pressurized § Wholesale Rate Supply Rate Fixed Monthly Capital Charge - $ 219,900 316,600 503,200 Commodity Rate - $/Mcf 2.60 4,16 5.31 Average Unit Cost - $/Mef 4.85 7.40 10.46 Monthly Standby Charge 167,500 110,300 0 Total Monthly Charge 387,400 426,900 503,200 Total Average Unit Cost - $/Mef 6.57 8.53 10.46 The direct comparison over the period 2013-2042 is demonstrated in Attachment 2. As KWA considers this proposal, I offer the following observations for consideration; « The Public Partnership requires the least near term capital investment and preserves the economy of scale associated with operation of a large regional system resulting in an immediate reduction in the cost of water supply for Flint/Genesee, making the identified and necessary near term investment in local water infrastructure more feasible. | e The Public Partnership provides the opportunity to optimize service level and efficiency through collaborative asset management decision making. e The Public Partnership provides representation for critical decision making consistent with DWSD newly demonstrated interest in engaging our customers in critical decisions impacting them. This formalizes that interest in contractual terms. © The Public Partnership reduces the risks identified with a ‘go alone’ solution, including further declines in use/sales (see graph), project cost overruns or schedule delays and other unforeseen costs inherent in starting a new venture. See Attachment 3 ¢ The DWSD Board of Commissioners has previously approved sale of raw water :

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. | xxxEND_PAGE:deq03_b606_3718_4178_060 Rennaker, Joanne (DEQ)

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq04_b077_2967_3228_226 City oF DetRorr 735 RANDOLPH STREET WATER AND SEWERAGE DEPARTMENT Derroit, MicHican 48226 OFPICE OF THE Director WW W,DETROFPMMLGOV April 15, 2013 Karengondi Water Authority 4160 Beecher Rd. Flint, Michigan 48532-2617 Ed Kurtz, Emergency Manager City of Flint 1101 South Saginaw Street Flint, Michigan Gentlemen: Over the last several months, governed by a process laid out by the State of Michigan, the Detroit Water and Sewerage Department (DWSD) has proposed a number of alternatives for long term water supply to the City of Flint. Each alternative was offered in the spirit of working in earnest to address the needs, priorities and concerns of the City of Flint and each provided an immediate cost reduction when compared to the current costs of water purchased from DWSD. In the final analysis conducted by Flint, these proposals did not overcome the desire for the Flint/Genesee region to be served by the same system and to have a voice in the future decisions governing the provision of water to this region, Many of the proposals DWSD has made to Flint during this period are applicable to Flint/Genesee County or KWA with adjustments to demand and use requirements and would provide similat overall benefit. These options remain available for further discussion should the parties’ desire. These prior proposals are included in summary form in Attachment 1 as an expanded table 6-1 from the February 2013 State of Michigan Contract No. 271N3200089, City of Flint Water Supply Assessment, submitted by Tucker, Young, Jackson, Tull, Inc. For comparison purposes only, DWSD’s new proposal (Flint’s 30% allocated share) is inserted. The proposal scenarios outlined today offer a public/public partnership with options . tailored to Flint/Genesee County or KWAs interests. For ease of writing, the remainder of this memo will present this proposal to KWA. Two basic scenarios are presented for consideration, both of which contemplate that KWA would enter a multi-year contract. Service commitments and usage definitions would be negotiated in the same manner as employed that have resulted in new contracts for other customers. In brief, the proposal provides a unique opportunity to reserve capacity at DWSD’s Lake Huron Water Treatment Plant and to participate in decision making for.facility operation and capital investment through a joint operating committee. The proposal envisions that KWA would enter into a 30-year contract to purchase treated water directly onsite at DWSD’s Lake Huron Water Treatment Plant. xxxEND_PAGE:deq04_b077_2967_3228_227 In Scenario 1 the purchased water can either be pressurized or unpressurized. This first scenario results in a “supply only” rate schedule, with a “standby delivery” component to provide for emergency service at the existing Baxter / Potter connection. This scenario provides KWA the ability to construct new transmission owned and operated by KWA, Scenario 2 maintains the public/public partnership concept and extends it to transmission facilities through which the Lake Huron Water Treatment Plant provides water. This scenario results in a “full service” rate schedule. The standby delivery component is eliminated, since the rate structure to KWA includes costs associated with the transmission system between the Lake Huron Water Plant and the Baxter / Potter connection. DWSD proposes a modified rate schedule for the customers currently served through the contract with the City of Flint, which includes Flint and Genesee County. This modified schedule is intended to facilitate negotiations for a new water service agreement with the Karegnondi. Water Authority (CWA). The scenarios presented herein represent the innovative thinking that DWSD and its new leadership are bringing to the table. Our goal is to provide the lowest cost water solution for the KWA service area. The potential rate structures are introduced in summary form herein, with preliminary calculations using the proposed rate structures with FY 2013-14 as a baseline. These calculations and the accompanying discussion are based on the assumptions regarding contract terms that approximate recent discussions amongst the parties. The proposal introduces the concepts, but does not definitively present all of the specifics, appreciating that such specifics are best addressed through negotiations designed to produce a new contractual agreement satisfactory to all parties. [Remainder of page intentionally left blank] xxxEND_PAGE:deq04_b077_2967_3228_228 Scenario 1 — Lake Huron Direct Supply Purchase: KWA enters into a long term partnering arrangement with DWSD to purchase all of its primary water supply directly at the DWSD Lake Huron water treatment plant. Supply rate schedule is designed to recover only water treatment revenue requirements. This rate schedule does not contain any delivery costs (pumping, transmission, storage, etc.). Supply rate schedule is computed based on specific costs associated with the Lake Huron Plant. No other DWSD revenue requirements, including those associated with other DWSD water plants, are included in the rate to KWA. Revenue requirements are separated into capital recovery and operation and maintenance expense elements. Baseline revenue requirement data (including operating budget, rate of return, depreciation assumptions, etc.) are identical to those developed for all other wholesale customers, KWA is allocated Lake Huron Plant capital revenue requirements based on the proportion of their contracted max day demand (assumed in these calculations at 40.6 mgd) relative to the total capacity at the Lake Huron Plant (400 mgd). The resulting revenue requirements are recovered through a fixed monthly charge. KWA is allocated Lake Huron Plant operating revenue requirements based on the proportion of their contracted average daily usage (assumed in these calculations at 24 med) relative to the total average daily usage at the Lake Huron Plant (assumed at 125 med in these calculations). Calculations are conducted for two alternatives. Purchase of pressurized water (after high lift pumping) and unpressurized water (K WA takes directly from clearwell.) Contract includes an arrangement for emergency service at the existing Baxter / Potter connection, and computes a standby charge related to such service. The standby charge is computed in the manner set for the by the American Water Works Association (AWWA) in its Manual of Water Supply Practices M1 - “Principles of Water Rates, Fees, and Charges” Manual M1. o , KWA is allocated one day’s worth of transmission related capital revenue requirements. Scenario 2 — “Full Service” Lake Huron System Same as the “pressurized” option in Scenario 1, except that concept is extended to the pumping, storage, and transmission facilities directly served by the Lake Huron Plant Transmission rate schedule is computed based on specific costs associated with these facilities. No other DWSD revenue requirements, including those associated with other DWSD transmission mains, ete, are included in the rate to KWA, Revenue requirements are separated into capital recovery and operation and maintenance expense elements. Baseline revenue requirement data (including operating budget, rate of return, depreciation assumptions, etc.) are identical to those developed for all other wholesale customers. KWA is allocated Lake Huron “transmission system” capital revenue requirements based on the proportion of their contracted max day demand (assumed in these calculations at 40,6 mgd) relative to the total capacity at the Lake Huron Plant (400 mgd). The resulting revenue requirements are recovered through a fixed monthly charge. xxxEND_PAGE:deq04_b077_2967_3228_229 « KWA is allocated Lake Huron “transmission system” operating revenue requirements based on the proportion of their contracted average daily usage (assumed in these calculations at 24 mgd) relative to the total average daily usage at the Lake Huron Plant (assumed at 125 mgd in these calculations). * Standby charge is eliminated. The resulting potential proposed rate structures under both Scenarios are summarized below. Potential Proposed DWSD Water Rate to KWA Lake Huron Direct Scenario 1- Supply Rate @ LH Plant__] 2 - Full Service Unpressurized — Pressurized = Wholesale Rate Supply Rate Fixed Monthly Capital Charge - $ 219,900 316,600 503,200 Commodity Rate - $/Mcf 2.60 4.16 531 / Average Unit Cost - $/Mef 4.85 7.40 10.46 | Monthly Standby Charge 167,500 110,300 0 , Total Monthly Charge 387,400 426,900 503,200 Total Average Unit Cost - §/Mef 6.57 8.53 10.46 The direct comparison over the period 2013-2042 is demonstrated in Attachment 2. As KWA considers this proposal, I offer the following observations for consideration: « The Public Partnership requires the feast near term capital investment and preserves the economy of scale associated with operation of a large regional system resulting in an immediate reduction in the cost of water supply for Flint/Genesee, making the identified and necessary near term investment in local water infrastructure more feasible. * The Public Partnership provides the opportunity to optimize service level and efficiency through collaborative asset management decision making. e The Public Partnership provides representation for critical decision making consistent with DWSD newly demonstrated interest in engaging our customers in critical decisions impacting them. This formalizes that interest in contractual terms. e The Public Partnership reduces the risks identified with a ‘go alone’ solution, including further declines in use/sales (see graph), project cost overruns or schedule delays and other unforeseen costs inherent in starting a new venture. See Attachment 3 ¢ The DWSD Board of Commissioners has previously approved sale of raw water

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq01_b170_3811_3812_2

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq01_b355_4162_4165_4

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq01_b356_4166_4169_4

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq01_b357_4170_4172_3

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:executiveofficeemails21_b0668_1548_1550_3

[email protected], Sue McCormick <[email protected]> Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:treasury01_b04_0379_0503_020 City of Detroit 735 RANDOLPH SikEE! Water ann Stwerace DEPARTMENT Deiroit, MicntiGan 48226 Orrice or tHt Director WWW.DE I ROTI MI.GOV April 15,2013 Karengondi Water Authority 4160 Beecher Rd. Flint, Michigan 48532-2617 Ed Kurtz, Emergency Manager City of Flint 1101 South Saginaw Street Flint, Michigan Gentlemen: Over the last several months, governed by a process laid out by the State of Michigan, the Detroit Water and Sewerage Department (DWSD) has proposed a number of alternatives for long term water supply to the City of Flint. Each alternative was offered in the spirit of working in earnest to address the needs, priorities and concems of the City of Flint and each provided an immediate cost reduction when compared to the current costs of water purchased from DWSD. In the final analysis conducted by Flint, these proposals did not overcome the desire for the Flint/Genesee region to be served by the same system and to have a voice in the future decisions governing the provision of water to this region. Many of the proposals DWSD has made to Flint during this period are applicable to Flint/Genesee County or KWA with adjustments to demand and use requirements and would provide similat overall benefit. These options remain available for further discussion should the parties’ desire. These prior proposals are included in summary form in Attachment 1 as an expanded table 6-1 from the February 2013 State of Michigan Contract No. 271N3200089, City of Flint Water Supply Assessment, submitted by Tucker, Young, Jackson, Tull, Inc. For comparison purposes only, DWSD’s new proposal (Flint’s 30% allocated share) is inserted. The proposal scenarios outlined today offer a public/public partnership with options tailored to Flint/Genesee County or KWAs interests. For ease of writing, the remainder of this memo will present this proposal to KWA. Two basic scenarios are presented for consideration, both of which contemplate that KWA would enter a multi-year contract. Service commitments and usage definitions would be negotiated in the same manner as employed that have resulted in new contracts for other customers. In brief, the proposal provides a unique opportunity to reserve capacity at DWSD’s Lake Huron Water Treatment Plant and to participate in decision making for.facility operation and capital investment through a joint operating committee. The proposal envisions that KWA would enter into a 30-year contract to purchase treated water directly onsite at DWSD’s Lake Huron Water Treatment Plant. xxxEND_PAGE:treasury01_b04_0379_0503_021 In Scenario 1 the purchased water can either be pressurized or unpressurized. This first scenario results in a “supply only” rate schedule, with a “standby delivery” component to provide for emergency service at the existing Baxter / Potter connection. This scenario provides K WA the ability to construct new transmission owned and operated by KWA. Scenario 2 maintains the public/public partnership concept and extends it to transmission facilities through which the Lake Huron Water Treatment Plant provides water. This scenario results in a “full service” rate schedule. The standby delivery component is eliminated, since the rate structure to KWA includes costs associated with the transmission system between the Lake Huron Water Plant and the Baxter / Potter connection. DWSD proposes a modified rate schedule for the customers currently served through the contract with the City of Flint, which includes Flint and Genesee County. This modified schedule is intended to facilitate negotiations for a new water service agreement with the Karegnondi Water Authority (KWA). The scenarios presented herein represent the innovative thinking that DWSD and its new leadership are bringing to the table. Our goal is to provide the lowest cost water solution for the KWA service area. The potential rate structures are introduced in summary form herein, with preliminary calculations using the proposed rate structures with FY 2013-14 as a baseline. These calculations and the accompanying discussion are based on the assumptions regarding contract terms that approximate recent discussions amongst the parties. The proposal introduces the concepts, but does not definitively present all of the specifics, appreciating that such specifics are best addressed through negotiations designed to produce a new contractual agreement satisfactory to all parties. [Remainder of page intentionaily left blank] xxxEND_PAGE:treasury01_b04_0379_0503_022 Scenario 1 — Lake Huron Direct Supply Purchase: KWA enters into a long term partnering arrangement with DWSD to purchase all of its primary water supply directly at the DWSD Lake Huron water treatment plant. Supply rate schedule is designed to recover only water treatment revenue requirements, This rate schedule does not contain any delivery costs (pumping, transmission, storage, ete.). Supply rate schedule is computed based on specific costs associated with the Lake Huron Plant. No other DWSD revenue requirements, including those associated with other DWSD water plants, are included in the rate to KWA. Revenue requirements are separated into capital recovery and operation and maintenance expense elements. Baseline revenue requirement data (including operating budget, rate of return, depreciation assumptions, etc.) are identical to those developed for all other wholesale customers. KWA is allocated Lake Huron Plant capital revenue requirements based on the proportion of their contracted max day demand (assumed in these calculations at 40.6 mead) relative to the total capacity at the Lake Huron Plant (400 mgd). The resulting revenue requirements are recovered through a fixed monthly charge. KWA is allocated Lake Huron Plant operating revenue requirements based on the proportion of their contracted average daily usage (assumed in these calculations at 24 mgd) relative to the total average daily usage at the Lake Huron Plant (assumed at 125 med in these calculations). Calculations are conducted for two alternatives. Purchase of pressurized water (after high lift pumping) and unpressurized water (K WA takes directly from clearwell.) Contract includes an arrangement for emergency service at the existing Baxter / Potter connection, and computes a standby charge related to such service. The standby charge is computed in the manner set for the by the American Water Works Association (AWWA) in its Manual of Water Supply Practices M1 - “Principles of Water Rates, Fees, and Charges” Manual M1. o KWA is allocated one day’s worth of transmission related capital revenue requirements, Scenario 2 — “Full Service” Lake Huron System Same as the “pressurized” option in Scenario 1, except that concept is extended to the pumping, storage, and transmission facilities directly served by the Lake Huron Plant Transmission rate schedule is computed based on specific costs associated with these facilities. No other DWSD revenue requirements, including those associated with other DWSD transmission mains, etc, are included in the rate to KWA. Revenue requirements are separated into capital recovery and operation and maintenance expense elements. Baseline revenue requirement data (including operating budget, rate of return, depreciation assumptions, etc.) are identical to those developed for al! other wholesale customers. KWA is allocated Lake Huron “transmission system” capital revenue requirements based on the proportion of their contracted max day demand (assumed in these calculations at 40.6 mgd) relative to the total capacity at the Lake Huron Plant (400 mgd). The resulting revenue requirements are recovered through a fixed monthly charge. xxxEND_PAGE:treasury01_b04_0379_0503_023 ¢ KWA is allocated Lake Huron “transmission system” operating revenue requirements based on the proportion of their contracted average daily usage (assumed in these calculations at 24 mgd} relative to the total average daily usage at the Lake Huron Plant (assumed at 125 mgd in these calculations). © Standby charge is eliminated. The resulting potential proposed rate structures under both Scenarios are summarized below. Potential Proposed DWSD Water Rate to KWA Lake Huron Direct Scenario == si Li Supply Rate @ LH Plant _| eeu ate GU Pant 2 - Full Service Pressurized Wholesale Rate Supply Rate Fixed Monthly Capital Charge - $ 219,900 316,600 503,200 Commodity Rate - $/Mcf 2.60 4.16 531 Average Unit Cost - 8/Mef 4.85 7.40 10.46 Monthly Standby Charge 167,500 110,368 0 Total Monthly Charge 387,400 426,900 503,200 Total Average Unit Cost - §/Mcf 6.57 8.53 10.46 The direct comparison over the period 2013-2042 is demonstrated in Attachment 2. As KWA considers this proposal, I offer the following observations for consideration: e The Public Partnership requires the least near term capital investment and preserves the economy of scale associated with operation of a large regional system resulting in an immediate reduction in the cost of water supply for Flint/Genesee, making the identified and necessary near term investment in local water infrastructure more feasible. * The Public Partnership provides the opportunity to optimize service level and efficiency through collaborative asset management decision making. e The Public Partnership provides representation for critical decision making consistent with DWSD newly demonstrated interest in engaging our customers in critical decisions impacting them. This formalizes that interest in contractual terms. e The Public Partnership reduces the risks identified with a ‘go alone’ solution, including further declines in use/sales (see graph), project cost overruns or schedule delays and other unforeseen costs inherent in starting a new venture. See Attachment 3 « The DWSD Board of Commissioners has previously approved sale of raw water

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq17_b253_1580_1582_3

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq17_b364_1920_1923_4

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq19_b02_0037_0259_017

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq20_b10_223_431_005

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq21_b034_0050_0050_1

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq21_b036_0059_0060_2

4 xxxEND_PAGE:deq21_b548_1550_1554_4 "Dillon, Andy (Treasury)" <DillonA2 "James Fausone" "Sue McCormick"

Please see attached on behalf of Sue F. McCormick. Faxed copy forwarded to Mayor Dayne Walling and Jeff Wright. xxxEND_PAGE:deq21_b590_1722_1724_3