Natasha Henderson

Thanks, Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 www.cityofflint.com xxxEND_PAGE:treasury01_b38_6783_6976_075 CITY OF FLINT Dr. Karen W. Weaver January 27, 2016 Mayor Treasurer Nick A. Khouri Michigan Department of Treasury Lansing, Michigan 48922 Re: Water Related Civil Litigation Dear Treasurer Khouri: In our letter of December 10, 2015, we requested the State of Michigan’s financial assistance with the cost of defending the Shears, et al v City of Flint, et al \awsuit. As stated in that letter, if plaintiffs were to be successful in that litigation, the financial impact on the City of Flint (City) would be catastrophic. As you are aware, the City hired the law firm of Miller Canfield to aid in its defense. Since the firm became involved defending this suit, the City has won favorable rulings before Circuit Court Judge Archie Hayman. These rulings included an amendment scaling back the scope of the August 17, 2015, preliminary injunction. Prior to this ruling the City was forecasting financial insolvency as early as this summer. Now, the City is permitted to charge water and sewer rates consistent with the Revenue Bond Act and the biennial budget adopted by former Emergency Manager Gerald Ambrose. Additionally, Judge Hayman has acknowledged that the City is not obligated to repay 15.7 million dollars from its general fund to its water and sewer fund. Put simply, while the costs to retain Miller Canfield have not been insubstantial, it has been money well spent. These rulings are clear victories for the City. They are a key step in ensuring Flint’s overall financial health and stability — both now and in the future. While these triumphs are important, the City has also moved to have the case dismissed. Although Judge Hayman denied the motion, the City believes it has strong grounds for appellate review. That appeal is currently pending before the Michigan Court of Appeals, and the City expectantly awaits a favorable ruling. Despite the successes in Shears, the City must still overcome significant economic challenges. Our City is confronting the most dire water related emergency faced by a municipality in recent memory. This is not hyperbole, Both Governor Snyder and President Obama have declared states of emergency in the City because of the water. What is more, our City’s infrastructure, reputation, and people have been irreparably damaged. As a result of this situation, the City is facing a significant amount of civil litigation. Several lawsuits have already been filed against the City. These include two class action suits. The first, Mays v Snyder, et al was brought in the Eastern District of Michigan; the second, Collins v Snyder, was brought against the City in Genesee County Circuit Court. The City expects to incur significant legal City of Flint 1101 8. Saginaw St. Rim J01 - Flint, Michigan 48502 | wau.cityvofflintcom > (S10) 766-7346 © Far: (810) 766-7218 xxxEND_PAGE:treasury01_b38_6783_6976_076 fees and costs in defending these two suits. Moreover, we believe these suits are only the first wave of suits to be filed. It is very likely that additional plaintiffs will file suits against the City in the future. As is the case with the Shears litigation, if the plaintiffs in any water related lawsuits are successful, the financial impact on the City would be catastrophic. Certainly, the financial progress and accomplishments achieved by emergency managers over the lust four years are at risk. Avoiding this catastrophic result must be a priority. And, given the potential liability posed by these cases all funds expended on competent, qualified legal counsel will be money well spent. We again acknowledge that under Public Act 436, the State does not assume liability for the actions of an emergency manager. However, without State assistance, the City simply cannot cope with the voluminous number of lawsuits it will soon be facing. Our City needs the resources and expertise of proven legal counsel, such as Miller Canfield, Unfortunately, the City cannot afford these costs. Therefore, we are asking the State to provide the necessary funding for outside legal counsel. The City and its residents have sacrificed much to attain fiscal stability and end the financial emergency. Our budget, which is already thin, has been stretched to the breaking point by the water crisis. Again, we need the State’s help. We would ask that you provide us with the financial assistance necessary to deal with all water related litigation both now and in the future. Respectfully submitted, Dr. Karen W. Weaver " Nitasha L. Hendergo: Mayor City Administrator SADBR\Municipal Folders\Water Litigation Treasury Cormespondence\Ltr to N Khouri re Water Sutts | 27 16 docx xxxEND_PAGE:treasury01_b38_6783_6976_077 Pleyte, Beth (Ti reasury)

Mr. Baird, This request was drafted and in submission process before the Mr. Earley issue and was not intended to be included in this request specifically. We were made aware of Mr. Earley's situation on Friday evening of last week and worked on a resolution over the weekend. Anthony Chubb, Chief Legal Counsel, will talk to you about this specifically to clarify. Your agreement to pay for costs to represent Mr. Earley in yesterday's meeting did not solidy your response to the request to this letter, so I hope we continue to be on the same page as relates to cases arising out of Emergency Manager actions after departure. Thanks, Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 www.cityofflint.com

Hello Mr. Baird, and Mr. Hollins, Thanks for meeting with the City of Flint's team today. I appreciated the dialogue and look forward to moving the City in a fiscally sustainable direction. Also, as discussed, I have mailed a letter requesting funding for litigation costs. Accordingly, I have attached the request. Thanks, Natasha L. Henderson, City Administrator 1101 S, Saginaw St. Flint, MI Email: Phone: (810) 237-2057 xxxEND_PAGE:treasury01_b38_6783_6976_079 Stanton, Terry A. (T reasury)

Good evening, Ms. Henderson. xxxEND_PAGE:treasury01_b41_7622_7971_044 Please find an invoice attached for your review summarizing the costs incurred as a result of the water crisis. Please let me know if you have any questions or if any additional information is required. Best regards, Jody N. Lundquist Chief Financial Officer City of Flint 1101 S, Saginaw Street, 2nd Floor Flint, MI 48502 (810) 237-2441 cee eeenen Forwarded message ----------

Harvey (GOV)" Richard (GOV)" <[email protected]> Mr. Baird, Please let me know as soon as possible what your pleasure is in this matter. Thanks, Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 www.cityofflint.com

Good evening, Ms. Henderson. In response to the email from the State regarding Yeo & Yeo's cost, availability and timeline, | reached out to Jamie Rivette. | provided her with exactly the same description of the cash flow report included in the email from Mr. Workman last week. She provided the following response: "Our estimated cost for performing monthly cash flow reports for both General Fund and the Water/Sewer Fund for the period of 7/1/2015 thru 6/30/16 (to include the information you specified below) would be billed at our standard hourly rates. | would expect this to take approximately 60 hours and cost around $15,000. Dave and | would be available to start this project next week Thursday." My original timeline of two weeks was consistent with that confirmed by Yeo & Yeo. | am happy to prepare the cash flow reports as | had intended and can make this a priority for completion by week's end now that | understand the priority and urgency placed on this item by the State. Should the State so desire to completely offset the cost of outsourcing the production of this report, !am happy to engage Yeo & Yeo, however it will cost more, take longer and require nearly the same amount of time and effort by City staff in order to provide them with the requisite information and assumptions. Please let me know how you would like to proceed. Best regards, Jody N. Lundquist Chief Financial Officer xxxEND_PAGE:treasury01_b40_7317_7621_177 City of Flint 1101 S. Saginaw Street, 2nd Floor Flint, Ml 48502 (810) 237-2441

Good evening, Ms. Henderson. I sent you an email this afternoon regarding the media coverage on the City's intent to begin issuing shut off notices effectively immediately. At this point in time, I have not given such an instruction to Treasury staff nor provided them with a rate schedule to restore water and sewer rates to their pre-injunction amounts. However, there are a number of matters for which I must make you aware. Water Rates On August 17, 2015, Honorable Judge Archie Hayman issued a preliminary injunction order requiring the City to reduce its water and sewer rates. Billing was postponed for a number of weeks while the City awaited an opinion from the Court of Appeals. Having not received a stay, the City moved forward with implementing the reduced rate structure and regular monthly billing resumed on September 1, 2015. On Monday, January 11, 2016, the Judge signed an amended preliminary injunction order restoring the City's water and sewer rates to those set by the master fee schedule as adopted by emergency manager order. City Council and RTAB approved a first quarter budget amendment recognizing the reduced revenue resulting from the rates currently in effect as ordered by the original preliminary injunction order. The court-ordered rates result in rates being insufficient to meet the operations, maintenance, and bond obligations necessary to fulfill 68 xxxEND_PAGE:treasury01_b41_7622_7971_031 the requirements as set forth in the Revenue Bond Act, however the budget amendment authorized the use of unrestricted fund balance to offset the gap between rates and revenue requirements. If the City were not to restore rates pursuant to the master fee schedule, the budget has already been updated accordingly. However, I request that the legal department provide an opinion as to the City's obligation to restore the EM adopted rates as failure to do so may be a violation of PA436. Not doing so, would require further action to set a new master fee schedule. I would also note that with the current financial position of the City, this method of subsidizing insufficient rates cannot be maintained past the end of this fiscal year. Shut off Notices The preliminary injunction order prohibited the City from performing shut off notices on delinquent balances prior to the implementation of the reduced rates. Upon receiving the verbal order on August 7, 2015 the City immediately ceased disconnection of service for non payment. When the reduced rates became delinquent in October, the City worked through some administrative hurdles to "set aside" the balances outstanding prior to September 1 when regular billing resumed. In November the City held a press conference announcing that shut off notices were going to resume. (At the time, lead was not as widely present in the media coverage.) The last cycle to be sent shut off notices were mailed on or around 12/9 with a due date of 12/29/2015. Processing of additional notices was then postponed in consideration of the holidays. No disconnection for nonpayment of an active account has occurred since August. The City has seen a dramatic decline in its collection rate since August. As with any utility, the City performs shut offs to enforce timely payment. The Finance and Treasury Departments have been reviewing the financial impact of the reduced billed revenue and decrease in collections on a regular basis. In August the City's collection rate was 99%. With the issuance of shut off notices, the City received in payments each month approximately the same amount that it billed although payments were often trailing. For instance, many customers were constantly in a state of delinquency, but they were at least coming in each month and making a payment. Without the issuance of shut off notices, the City's collection rate fell to 70% in October before increasing (through issuance of shut off notices) to 89% in December. Average collection rate for the period August to December has now fallen to 84%. As I noted in my previous email, there is an incredible amount of media attention and public outcry regarding the City's policy on shutting off service for nonpayment of "poisonous" water. This does NOT absolve the City

This is Jody on Natasha's computer. xxxEND_PAGE:treasury01_b41_7622_7971_040 , Please find attached the updated draft of the financial needs summary. I have not had a chance to include the capital improvement projects that were suspended across the City’s other funds as a result of the spending freeze following the judge's preliminary injunction order (i.e. facilities improvements, IT upgrades, and vehicle/equipment purchases). Thanks, Natasha L. Henderson, City Administrator City of Flint, Michigan 1101 S. Saginaw St. Flint, MI. 48502 Email: Phone: (810) 237-2057 www. cityofflint.com xxxEND_PAGE:treasury01_b41_7622_7971_041 CITY OF FLINT SUMMARY OF WATER CRISIS FINANCIAL NEEDS Shears v. City of Flint Litigation Description Amount Loss in monthly billed revenue $ 3,080,000 The Preliminary Injunction Order issued by Honorable Judge Archie Hayman on August 17, 2015 required the City to reduce water and sewer rates to exclude the September 16, 2011 rate increases This resulted in a loss of monthly billed revenue of approximately $616,000 per month for approximately 5 months Loss in monthly revenue collections $ 4,830,000 As a result of the City's inability to enforce payment through shut offs, which was later accelerated by the declaration of the water emergency, the City's collection rate has fallen from 98% in August to 75% in November before improving slightly in December. The average collection rate for the period August to December is now 84%. The City issued tts first round of shut off notices in November but has not resumed processing as of January 14, 2015 No disconnection of service for nonpayment on active accounts has occurred since August 2015. Based on the reduced average monthly billed revenue of $4 6 million and the increased delinquency rate, the City's allowance for uncollectible accounts must be increased. The collection rate is expected to remain tow until shut off notice processing is resumed and processed consistently. ($4.6 million x 15% x 7 months) Loss due to uncottectible delinquent accounts at August 17, 2015 $ 10,890,947 The original preliminary injunction order enjoined the City from disconnecting any accounts for non payment for which the delinquency arose between September 16, 2011. This effectively forced the City to set aside approximately $10.9 million in outstanding customer balances as uncollectible Rate increase for the penod September 16, 2011 through June 30, 2012 $ 16,100,000 Judge Hayman has stated in open court that the rate increase from September 16, 2011 to June 30, 2012 was illegal. White a ruling regarding this matter is anticipated, the increase to rates and charges during that time penod resulted in approximately $15 million of billed revenue. Should the judge order the City to repay these billings or provide credits to customer accounts in that amount, the City's current revenue will need to offset this enormous cost. Collections for the period October 2011-July 2012 for which the September 16, 2011 rate increase would have been billed in received total $46 million Refunding the amount of collections dunng that perod resulting from the rate increase will cost the City over $16 million. Capital Improvement Projects removed from Fiscal Year 2016 Budget $ 5,600,000 As a result of the immediate and drastic impact of the preliminary injunction order, the City issued a spending freeze for all non-critical items In order to offset the reduction tn billed revenue and collections, the City reviewed its capital improvement plan and cancelled or postponed nearly all projects with the exception of those necessary to prepare for the Karegnondi Water Authority (KWA). The removal of $3.9 million and $1 7 million in planned capital improvement projects for the Sewer and Water funds. respectively, were included in the adopted FY16 First Quarter Budget Amendments Legal costs associated with litgation $ 300,000 The State has agreed to reimburse the City 75% of legal costs associated with this litigation not to exceed a total reimbursement of $300,000 Total legal expense of representation by external legal counsel |s anticipated to reach $600,000 leaving a gap of $300,000 borne entirely by the City. (25% of the first $400,000 = $100,000 plus an additional $200,000 through final ruling) TOTAL FINANCIAL IMPACT OF SHEARS V. CITY OF FLINT LITIGATION $ 40,800,947 xxxEND_PAGE:treasury01_b41_7622_7971_042 CITY OF FLINT SUMMARY OF WATER CRISIS FINANCIAL NEEDS Declaration of State of Water Emergency Description Additional Corrosion Control Procedures Implementation of the additional corrosion control procedures totaled approximately $45,000 and is being maintained at an estimated cost of $100/day ($45,000 + $100/day x 365 days/year x 5 years) Purchase of DWSD Water The City expended $2 million towards the $10 million escrow required by the Detroit Water and Sewage Department (DWSD) to resume purchasing water through June 30, 2016 It is expected that the City will need to continue purchasing water from Great Lakes Water Authority (formerly DWSD) for an additional three months until the City is ready to begin receiving water through KWA. Backflow system necessary for testing and future back flow supply As a result of switching the City's water supply to DWSD, the pipe that would have been used to transport raw water from Lake Huron to the City's water plant is in use The City must develop an alternate path from which to receive water dunng the penod for which raw water must be tested pnor to full conversion to KWA as the City's water supplier. PSI contractor for locating and mapping lead lines Histoncal data maintained by the City is incomplete and inaccurate. A third party contractor has been engaged to assist in locating lead lines and testing water samples obtained from those sites Additional services may inciude integrating the results of their efforts with the City's GIS maps University of Michigan for data compilation The University of Michigan has agreed to assist the City in its efforts to compile histoncal data on the location of lead lines and any additional data obtained through the course of this emergency. Excavation of residential service lines The excavation of 6 residential services lines is necessary for additonal testing ($5,000/line x 6 lines) Replacement of service lines Replacement cost included in other estimates provided to the State of Michigan detailed each residential line to cost $1,500 to replace. ($1,500/line x 15,000 lines) 8" residential water mains and 24” transmission mains {ts estimated that there are approximately 600 miles of 8" residential lines and 60 miles of 24" transmission mains needing replacement. Preliminary estmates place replacement of residential lines at $145 per foot and $800 per foot for transmission mains. ($145/foot x 600 miles x 5,280 feet/mile plus $800/foot x 60 miles x 5,280 feet/mile) Loss of monthly County backup revenue ($40,000/month x 9 months) As a result of the media coverage and declaration of a health emergency, Genesee County has decided to discontinue its contractual payment to the City per its backup agreement. The City has not received payment since September 2015 Assuming another agreement for backup supply 1s negotiated with Genesee County, $360,000 in revenue adopted in the City's FY16 budget will be lost or remain uncollectible without litigation Fire Department overtime The Fire Department is now operating an additional fire station as a distribution center 7 days per week. With the necessity to designate staff to the EOC and overseeing distribution at each of the other sites, overtime costs are being incurred daily ($2,000/day x 180 days) PTO's for counter ($3,000/month x 6 months) In order to carryout staffing of the EOC and distribution counter at City Hall, civilian staff within the police department has been assigned to fulfilling this specific function. Additional wages are estimated at $3,000 per month. ($3,000/month x 6 months) TOTAL FINANCIAL IMPACT OF DECLARATION OF WATER EMERGENCY Amount $ 227,500 $ 6,000,000 $ 6,342,326 $ 75,000 $ 3,600 $ 30,000 $ 22,500,000 $ 712,800,000 $ 360,000 $ 360,000 $ 18,000 $ 748,716,426 xxxEND_PAGE:treasury01_b41_7622_7971_043 Workman, Wayne (TREASURY)

Thanks, Natasha L. Henderson, City Administrator City of Flint, Michigan 1101 S. Saginaw St. Flint, MI 48502 Email: Phone: (810) 237-2057 www.cityofflint.com ---------- Forwarded message ----------

Good afternoon, Mr. Workman. Thank you for sharing this detailed information request with me. I will ensure that City staff begin working on this immediately. This information will take some time to prepare, however I am confident that City staff is fully capable of responding to your request in its entirety. We appreciate your offer of assistance. Although I believe that it will be unnecessary at this time, we will be sure to inform you should additional support be necessary in the future. Thanks, Natasha L. Henderson, City Administrator xxxEND_PAGE:treasury01_b40_7317_7621_179 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 Mayor Weaver, This is to confirm our discussion on January 12, 2016 regarding the financial information Treasury needs for the City of Flint. Please submit the following: 1. Monthly cash flow reports (for both General Fund and the Water/Sewer Fund) for the period of 7/1/2015 thru 6/30/16. The report should show the actual cash flow for the months already past and the projected cash flow for the remainder of the city’s fiscal year. It should show the ending cash balance assuming that the Shearer decision is upheld and a second balance assuming the Shearer decision is reversed. 2. Water shutoff history starting 1/1/2015 to present. The history should include the number of shutoffs and what that represents in terms of percentage of customers and percentage impact on revenues. 3. Water bill collection history starting 1/1/2015 to present. 4. Reports required by the emergency loan agreement issued in April 2015 (requirements will be sent in a separate letter). As I mentioned, if the City needs additional resources to help gather this information quickly, Treasury is prepared to offer financial help for the City to retain the help of your auditors. If you want to pursue this please contact Randy Byrne regarding estimated cost. We look forward to working with the City to identify and secure additional funds from foundations, corporations and the federal government to provide long term solutions for Flint's water system. Should you have any additional questions or need assistance on the formatting or content of the reports, please do not hesitate to contact Suzanne Schafer at 517-373-0533. We look forward to getting this information as soon as possible. Thank you, Wayne xxxEND_PAGE:treasury01_b40_7317_7621_180 Workman, Wayne (TREASURY)

Mayor Weaver, This is to confirm our discussion on January 12, 2016 regarding the financial information Treasury needs for the City of Flint. Please submit the following: 1. Monthly cash flow reports (for both General Fund and the Water/Sewer Fund) for the period of 7/1/2015 thru 6/30/16. The report should show the actual cash flow for the months already past and the projected cash flow for the remainder of the city’s fiscal year. It should show the ending cash balance assuming that the Shearer decision is upheld and a second balance assuming the Shearer decision is reversed. 2. Water shutoff history starting 1/1/2015 to present. The history should include the number of shutoffs and what that represents in terms of percentage of customers and percentage impact on revenues. 3. Water bill collection history starting 1/1/2015 to present. 4. Reports required by the emergency loan agreement issued in April 2015 (requirements will be sent in a separate letter). As | mentioned, if the City needs additional resources to help gather this information quickly, Treasury is prepared to offer financial help for the City to retain the help of your auditors. If you want to pursue this please contact Randy Byrne regarding estimated cost. We look forward to working with the City to identify and secure additional funds from foundations, corporations and the federal government to provide long term solutions for Flint’s water system. Should you have any additional questions or need assistance on the formatting or content of the reports, please do not hesitate to contact Suzanne Schafer at 517-373-0533. We look forward to getting this information as soon as possible. Thank you, Wayne xxxEND_PAGE:treasury01_b40_7317_7621_135 Workman, Wayne (TREASURY)

1 xxxEND_PAGE:treasury01_b40_7317_7621_141 Workman, Wayne (TREASURY)

Categories: Blue Category Please see my responses to each item below. Should you need any further clarification or have any additional questions, please let me know. 1, The City Administrator in her email proposes using $7,287,125 of Fund Balance in the water fund to offset the balance projected decrease in the revenue. The latest "budget to actual” report provided shows the Fund Balance in the water fund to be $4,937,210. Will there be an amendment showing where the remaining $2,349,915 will be taken from? When the first quarter budget amendments were originally presented ta Council the FYE 6/30/2015 fund balances for the water and sewer funds were $4.9M and $17.2M, respectively. These were unaudited year end projections as the City worked to close it's books and prepare for the auditors arrival. The City has historically looked at the combined total of the fund balances of both funds to determine the financial position of the system as a whole. I would note that, in light of the recent attention being paid to the City's compliance with the Revenue Bond act, the practice of reviewing the combined fund balances for financial position of the total system will not be followed in the future. This is especially important as new GASB statements governing the preparation of the City's financial statements continue to be issued requiring the City to report total pension labilities for unfunded expenses. With the changes in GASB reporting that require net pension liability to be reported for the first time, the water and sewer funds now carry unrestricted deficits for both funds. The funds maintain a positive total net position. Net pension liability is a long term liability that has always existed, however with the implementation of GASB 68 and 71 is shown on the face of the financial statements. I have been maintaining ongoing conversations with the City's auditors regarding the presentation of the net pension liability on the water and sewer fund unrestricted fund balances (also referred to as unrestricted net assets) and how to communicate that to the City's management, elected officials and public. These statements impact all units af government across the nation and have resulted in many of them, including Flint, reporting negative unrestricted balances for their enterprise funds. I have asked that the auditors be prepared to discuss this matter in mare detail with the Council and RTAB, I have summarized unrestricted net asset data below. The unrestricted net position has been adjusted to remove net pension Uability in order to present a clearer indication of the City's current financial position and, therefore, its ability to respond ta any change in financial circumstances ($11.3M for water and $22,8M for sewer). It would be from these assets that the City would be offsetting the shortfall in revenues to cover operating expenditures (shown as budgeted use of fund balance af $7.3M for water and $4M for sewer). The unrestricted net asset and net pension liability balances were taken directly from page 3-11 of the City's audited financial statements, which are now available online. CITY OF FLINT WATER AND SEWER FUND UNRESTRICTED NET POSITION ANALYSIS Projected FYE Actual FYE Unrestricted Budgeted Use 6/30/2015 6/30/2015 Add Back: NetNet Position of Fund Unrestricted Audited Pension w/o Net Balance Net Assets Unrestricted Liability Pension Net Assets Liability Water = (7,287,125) 4,937,210 (20,358,465) 31,703,314 11,344,849 Sewer (3,975,246) — 17,229,833 (14,158,340) 36,982,444 22,824,104 Total (11,262,371) = 22,167,043 (34,516,805) 68,685,758 34,168,953 xxxEND_PAGE:treasury01_b40_7317_7621_097 2. The last budget to actual report provided to RTAB (Month Ended October 31, 2015) the 590 Sewer Fund shows a "YTD Balance” at 10/31/15 of $2,480,146 in the "Charges for Services” line item. If I annualize this, the total would be $7,440,438. The budget amendment of a $5,941,475 reduction in that budget line item adjusts the total budgeted amount to be $24,493,240. In what months from November 2015 through June 2015 will there be an acceleration of service for fee revenue that will allow us to achieve the amended budget? Unfortunately, as a result of the Preliminary Injunction Order the process of moving delinquent balances off of customers accounts removed all of the billed revenue from the current year actual totals. This was necessary in order to identify accounts with delinquent balances outstanding on bills issued after the rates were reduced. The City’s Utility Billing and Finance staff are working together to repost the actual billed revenue to the appropriate periods and move the revenue that was reduced to the appropriate allowance for doubtful accounts. Stated another way, nearly $11.6 million in delinquent balances were "set aside” in order to process shut off notices. In doing so, the utility billing department inadvertantly reduced the current year billed revenue reported under "Charges for Services" on the RTAB report by the same amount, Adding this back and annualizing activity through 10/31/2015 to fiscal year end returns projections closely to those reflected by the amounts reflected in the first quarter budget amendment. It should be further noted that with the amendment to the preliminary injunction order, the City looks forward to recommending a third quarter budget amendment that will restore a portion of the projected revenue. 3. The same concern for the Water Fund as well. See above. Thanks, Natasha L. Henderson, City Administrator City of Flint, Michigan 1101 S. Saginaw St. Flint, MI. 48502 Email: Phone: (810) 237-2057 www. cityofflint.com

Categories: Yellow Category Natasha: See the attached questions from Beverly Walker-Griffea. Sincerely, Frederick Headen Legal Advisor to the State Treasurer

Natasha, | have been informed that the City of Flint is planning on submitting a Drinking Water Revolving Fund Project Plan by May 1, 2016 for ranking on the fiscal year 2017 project priority list. | will be the project manager for Flint and just wanted to provide you with an estimated timeline to prepare a project plan for submittal. The following is an estimated timeline that should be followed to have a plan ready by the May 1°* deadline date: February 1, 2016- Submit a draft project plan to the MDEQ for comments (Please see our Project Plan Preparation guidance on what information should be included in a project plan) March 1, 2016- Incorporate MDEQ comments into the draft project plan arch 9, 2016- Provide a mandatory 30-day notice for the public hearing and have the draft project plan available for the public to view April 9, 2016-Incorporate public comments into draft project plan prior to the public hearing. Make final project plan available to the public prior to the public hearing April 11, 2016- Hold public hearing on project plan. (The hearing can take place after 30 days of notice. If the hearing is held on the 30 day the plan will be rejected) April 25, 2016- Resolution of Project Plan Adoption (This can also be done on the same day as the hearing but the resolution should be voted on only after the project presentation and comments

On August 7, 2015 Genesee County District Court Judge Archie Hayman issued a Preliminary Injunction Order (the “Order™) against the City. As a result of the Order, the City anticipated an immediate and devastating impact on the financial stability of the Water and Sewer Funds if a stay was not quickly granted by the Michigan Supreme Court Appellate Court. Indeed, the City’s request was denied and the financial impact of the Court order has been reviewed through the fiscal year ending June 30, 2016. Upon issuance of the Order, the City was immediately enjoined from charging and collecting water and sewer rates that include the September 16, 2011 35% rate increases and disconnecting water service for its delinquent water and sewer customers wherein the delinquency arose between September 16, 2011 and the date of the Order. This immediately resulted in a decrease in cash collections on outstanding and current water bills and a decrease in total billed revenue. xxxEND_PAGE:treasury01_b40_7317_7621_099 The following budget amendments reflect a decrease in revenue projections as a result of monthly billing activity for the period September 2015-June 2016. September billing reflected the reduced rates as ordered by the Preliminary Injunction and confirmed preliminary estimates with $670,000 less in billed usage from the same period in 2014. The City has assumed and average decrease of $616,148 in monthly billed revenue, or $6,777,624 by fiscal year end (for 11 months of billing). The City had total accounts receivable due of $13,738,190 for all active and inactive accounts at August 7, 2015. It is highly probable that a large percentage of that balance will have to be written off as uncollectible without the ability to enforce payment. The proposed amendments reflect an estimated uncollectible balance at this time of $8,340,823. The City is working diligently to review the FY2016 operating budgets for additional sources of savings. Upon issuance of the Order, a spending and hiring freeze for all non-critical items was immediately implemented. The City has worked diligently to redevelop its capital improvement plan and has now canceled or postponed many planned projects and purchases until financial stability can be regained. Changes to appropriations reflect the carry forward of projects in progress but not completed at June 30, 2015 for the Sewer and Water Funds of $41,796 and $1,456,922, respectively. This carry forward is largely offset by decreases to the City’s capital improvement plan. The City’s emphasis at this time continues to be on providing safe, clean water to the City’s residents and moving forward with preparations for the KWA pipeline to come online. As a result of this re-prioritization, the budget amendments reflect a reduction to budget capital improvements of $5,564,804. Sewer Fund The Sewer Fund budget (590) reflects a decrease in projected revenue of $6,741,475 and increase in Use of Fund balance of $2,883,373. The Sewer Fund was paid in full by the 101 fund at the end of FY2015, therefore the budgeted payment of $800,000 from the Public Improvement Fund must be removed. As noted previously, the decrease in Charges for Services of $5,941,475 is a result of the combined impact of inability to enforce collections on balance prior to August 7 and decrease in billed revenue per Court ordered rate reductions. The roll forward of incomplete FY2015 projects of $41,796 is reflected by a corresponding decrease in cancelled and postponed capital improvement projects of $3,899,898. 4 xxxEND_PAGE:treasury01_b40_7317_7621_100 Water Fund The Water Fund budget (591) reflects a decrease in projected revenue of $8,560,824 and increase in Use of Fund balance of $7,287,125. Again, as noted previously, the decrease in Charges for Services are a result of the combined impact of inability to enforce collections on balance prior to August 7 and decrease in billed revenue per Court ordered rate reductions. The roll forward of incomplete FY2015 projects of $1,456,922 is reflected by a corresponding decrease in cancelled and postponed capital improvement projects of $1,664,906. The City had just begun its much need meter replacement program at the end of FY2015. A significant portion of the roll forward reflects outstanding purchase orders and invoices related to this project prior to the spending freeze. The reduction in FY2016 budgeted improvements reflects the reprioritization of the KWA project and postponement of other significant projects such as the Dupont Street Pipeline Project and Hamilton Dam Sheet Piling. Thanks, Natasha L. Henderson, City Administrator City of Flint, Michigan 1101 S. Saginaw St. Flint, MI 48502 Email: Phone: (810) 237-2057 www.cityofflint.com aenennnnne Forwarded message ----------

Natasha, Attached please find the EPA Flint Drinking Water Task Force Recommendations for a Performance Evaluation Period. As we discussed on December 11 and December 15, it is important to gain operational experience at the Flint Plant prior to distribution of KWA-sourced water. We have informally referred to this as a “shakedown” period for ensuring a safe and appropriate transition to the new water source. Please feel free to call me if you have any questions. We are pleased to continue to work together. - Bob

Thanks, xxxEND_PAGE:executiveofficeemails21_b1028_2544_2546_1 Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: nhenderson@eitvofflint com Phone: (810) 237-2057 www. citvolint com weeencne ne Forwarded message ----------

Ok-I'll get that to you Monday! Have a good weekend! Thanks, Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 www.cityofflint.com

Natasha, thanks very much for letting us know. That's good news. Congrats to you and your team for making this happen. Bab Robert Kaplan Deputy Regional Administrator U.S. EPA Region 5 Pho!

orthophosphate? Hello Bob, We are feeding phosphate as of 1:45 p.m. today. Just wanted to make sure you know, as we did not have this information during the conference call. Thanks, Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 www.cityofflint.com On Dec 8, 2015 2:59 PM, "Kaplan, Robert"

orthophosphate? Not feeding yet, due to not receiving the spill-containment and electrical wiring change that is complete now. This all must be verified before we can start feeding. Thanks, Natasha L. Henderson, City Administrator City of Flint, Michigan 1101 S. Saginaw St. Flint, MI. 48502 Email: Phone: (810) 237-2057 www. cityofflint.com On Mon, Dec 7, 2015 at 12:18 PM, Kaplan, Robert <[email protected]> wrote: Hello Natasha, Is Flint feeding corrosion control yet? I know that Mike said he “jar testing” was ongoing as of last week. It would be helpful to get an update. Thanks very much! - bob Robert Kaplan Deputy Regional Administrator U.S. EPA Region 5 xxxEND_PAGE:deq04_b274_3584_3587_3 Phone: (312) 886-1499 Cell: (312) 515-9827 Fax: (312) 692-2075 xxxEND_PAGE:deq04_b274_3584_3587_4

Thank you we will get it on the list Wayne L. Workman Deputy State Treasurer Michigan Department of Treasury

Hello Randy and Mr. Workman, I am requesting that you submit Steve Landfall's name as an appointment to the RTAB. He lives in Flint and has a successful business in the City of Flint named Landall Packaging. Thanks, Natasha L. Henderson, City Administrator 1101 S. Saginaw St. Flint, MI Email: Phone: (810) 237-2057 www.cityofflint.com DA, xxxEND_PAGE:treasury01_b26_3730_4111_005 Dempkowski, Angela (T reasury)

Thank you