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GENESEE COUNTY DRAIN COMMISSIONER'S OFFICE
SSN JEFFREY WRIGHT paws]
[RAN COMMISSIONER COMMISSIONER ao
G-4608 BEECHER ROAD, FLINT, Mi 48532
PHONE (810) 732-1590 FAX (810) 732-1474
MEMORANDUM
DATE: September 2, 2015
TO: Dennis Muchmore, Chief of Staff, State of Michigan, Office of the Governor
Harvey Hollins Il, Director, Office of Urban Initiatives, State of Michigan
FROM: Jeff Wright, Drain Commissioner, Genesee County
SUBJECT: Karegnondi Water Authority
Fact Sheets
Gentlemen,
Find enclosed 3 items as promised at our meeting of August 26, 2015.
|. Original Fact Sheet
DWSD vs. KWA: 5/1/12
2. KWA Fact Sheet: 9/1/15
3. DWSD Cost of Water
Should you have any questions, do not hesitate to contact me directly at 810-287-1925.
VIA EMAIL:
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Fact Sheet
City of Flint
DWSD versus KWA
City of Flint joining Karegnondi Water Authority and leaving City of Detroit water
system
Both the City of Flint and City of Detroit operate their water system via enterprise funds.
The water fund does not impact either community’s general fund, Leaving the water
system will not impact the general fund.
The City of Flint is a suburban customer of Detroit. If Flint leaves, it only impacts the
suburban customer rate, not Detroit’s.
Detroit’s own plan calls for (latest available estimate) $1.2 billion dollar improvements
to supply redundancy to Flint. If Flint leaves, Detroit avoids this construction cost.
Detroit and DWSD have experienced bond rating decreases in recent months. If Flint
leaves, DWSD avoids a new bond issue and eliminates a capital project from its master
plan improving its financial outlook.
Delivering water to Flint from DWSD is expensive. If Flint leaves, DWSD can reduce
its operating and maintenance costs to its contracted customers.
DWSD has a limited capacity for water treatment and delivery. If Flint leaves, the City
can resell that volume to other customers.
DWSD has multiple drinking water treatment plants. Some are more expensive to
operate and maintain than others. Without a commitment to Flint, its largest customer
other than the City of Detroit, DWSD may choose to discontinue operation of one or
more of its current facilities and realize significant cost reductions to the overall system.
Flint is not part of the DWSD sewer system. The City of Flint leaving has no impact on
the sewer system.
The creation of the KWA system will create over 1,000 construction jobs in Michigan.
Design and construction of the system will take 42 months from July 2012 through
December 2015.
KWA is offering a fixed rate for capital to its customers, Flint joining KWA will give
the City a stable rate for upwards of 20 years.
KWA will offer raw water to the region. Raw water is not enhanced with chemicals,
which is undesirable to agribusiness.
The -69 corridor/I-75 corridor crosses in Flint. Along with CN and CSX and the
Pipeline aerotropolis, Flint can be a major transportation center for agribusiness. KWA
can provide two products for agribusiness: potable and process (raw) water, and
wastewater treatment facilities.
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DWSD does not serve the Thumb region. KWA with its partners will be able to serve
both the population with its basic needs: drinking water and the businesses with large
quantities of process (raw) water.
DWSD is the only water supplier for over 4 million residents of the state. The creation
of the KWA will create a second water supply system thereby reducing the impact of
terrorist attacks on water supplies. With a mutual aid agreement between DWSD and
KWA, the system could complement each other.
DWSD does not provide water supply to major portions of the K WA service area.
KWA will provide local municipalities in the thumb region with an alternative water
supply to the Arsenic impacted well systems.
In addition, local communities can replace groundwater systems with K WA surface
water system and thereby improve local groundwater levels.
The KWA system will provide fire protection service to regions currently not served.
The current DWSD water system has over 20% water loss in its system. KWA’s water
supply is expected to have Jess than a 5% water loss. KWA will provide a more
effective use of the waters of the state.
KWA provides redundant water supply to Flint. Currently, DWSD only provides a
single source to Flint, KWA provides multiple supply sources to Flint at a fraction of
the cost.
KWA has offered to purchase excess infrastructure from DWSD, If Flint leaves, Detroit
has 25 miles of watermain it no longer needs. K WA has offered to purchase the pipeline
and enter into a long-term arrangement for purchase of water from DWSD.
Each incorporating municipality in KWA will pay the same rate for raw water; therefore,
each community will set its own treatment standards and exert local control of the cost
of water it provides to its citizens.
Lapeer and Sanilac Counties are facing depletion of their groundwater supplies.
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created 9/1/2035
Karegnondi Water Authority (K WA) Fact Sheet
KWA is incorporated by the State of Michigan, compnised of the City of Flint, City of
Lapeer, Genesee County, Lapeer County, and Sanilac County.
As specified in its Articles of Incorporation, each of these constituent municipalities has one
tepresentative to the board — specifically the Mayors or their designees of the 2 cities (Flint
and Lapeer), the Drain Commissioners or their designees from each of the counties (Sanilac,
Lapeer. and Genesee).
KWA will deliver raw water to customer utilities.
Each governmental unit will still own and operate their respective treatment and distribution
systems. GCDC will have no jurisdiction over the City of Flint water. Flint will have all
franchise rights for sale and treatment of water from K WA within the City of Flint.
Each community that obligates itself to the debt for construction of the KWA infrastructure
pipeline, intake and pump stations, receives commensurate voting membership to the board.
Flint’s debt obligation is based on the volume as selected by the city.
Additional members are appointed by their respective communities.
All board members serve without compensation.
KWA will operate with 5 to 7 full-time equivalent employees. KWA will contract its labor
force.
To date, only the City of Flint and Genesee County have bought capacity in the project.
Once KWA water is available, each community receiving untreated Lake Huron water from
KWA will pay a share of the operating costs, i.e.: electricity, labor, maintenance, and
chemicals in proportion to the volume of water they receive.
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xxxEND_PAGE:treasury01_b37_6553_6782_018
MILLER, CANFIELD, PADDOCK AND STONE, PLC
KAREGNONDI WATER AUTHORITY FINANCING CONTRACT
THIS CONTRACT, dated as of August 1, 2013, by and among the Karegnondi Water Authority,
a municipal authority and public body corporate of the State of Michigan (hereinafter referred to as the
“Authority”), the City of Flint in the County of Genesee and the County of Genesee (collectively, the
“Local Units” and each a “Local Unit”).
WITNESSETH:
WHEREAS, the Authority has been incorporated under the provisions of Act No. 233, Public
Acts of Michigan, 1955, as amended (hereinafter referred to as “Act 233”), for the purposes set forth in
Act 233; and
WHEREAS, the Authority will acquire, construct and operate a water supply system to be
known as the Karegnondi Water Supply System that provides untreated water to the Local Units, each of
which is a constituent municipality of the Authority; and
WHEREAS, it is immediately necessary and imperative for the public health and welfare of the
present and future residents of each of the Local Units that a certain water supply system, as more fully
described on Exhibit A hereto, together with all necessary interests in land, appurtenances and
attachments thereto (the “System”) be acquired, installed and constructed; and
WHEREAS, plans and an estimate of cost of the System have been prepared by the Authority’s
consulting engineers, Wade Trim (the “Consulting Engineers”), which said estimate of aggregate cost
totals an amount not to exceed $300,000,000; and
WHEREAS, each of the Local Units is desirous of having the Authority acquire and own the
System in order to continue to operate the System in order to furnish the Local Units with untreated raw
water; and
WHEREAS, the parties hereto have determined that the System is essential to the general health,
safety and welfare of each of the Local Units; and
WHEREAS, the Authority and each of the Local Units are each agreeable to the execution of
this Contract by and among themselves which provides, among other things, for the financing of all or a
portion of the cost of the System; and
WHEREAS, this Contract contemplates the issuance of bonds in one or more series by the
Authority to pay all or part of the costs of the System; and
WHEREAS, each of the Local Units has or will approve and authorize the execution of this
Contract by resolution of its governing body; and
21268959 3\114855-00006
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MILLER, CANFIELD PADDOCK AND STONE, PLC
WHEREAS, each of the Local Units has published or will publish, individually or jointly, a
notice of intention to enter into this Contract in a newspaper of general circulation in the territory
encompassed by each Local Unit; and
WHEREAS, this Contract will become effective for each Local Unit upon expiration of a period
of forty-five (45) days following publication by each Local Unit of its notice of intention without filing
of a petition for referendum on the question of its entering into this Contract, or if such referendum
election be required, then upon approval by the qualified electors of the Local Unit.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE COVENANTS
MADE HEREIN, THE PARTIES HERETO AGREE AS FOLLOWS:
SECTION 1. The Authority and the Local Units hereby approve the acquisition, construction
and operation of System, together with all necessary interests in land, appurtenances and attachments
thereto.
SECTION 2. Each of the Local Units hereby consents to the use by the Authority and any
parties contracting with the Authority of the public streets, alleys, lands and rights-of-way in each Local
Unit for the purpose of constructing, operating and maintaining the System including any improvements,
enlargements and extensions thereto.
SECTION 3. The System is designed to provide and transport untreated raw water to each of
the Local Units and the System is immediately necessary to protect and preserve the public health.
SECTION 4. The Authority and each of the Local Units hereby approve and confirm the plans
for the System prepared by the Consulting Engineers and the total estimated cost thereof in the sum of
not to exceed $300,000,000. Said cost estimate includes all surveys, plans, specifications, acquisition of
property for rights-of-way, physical construction necessary to acquire and construct the System, the
acquisition of all materials, machinery and necessary equipment, and all engineering, engineering
supervision, administrative, legal and financing expenses necessary in connection with the acquisition
and construction of the System and the financing thereof.
SECTION 5. The Authority shall not enter into any final contract or contracts for the acquisition
and construction of the System if such contract price or prices will be such as to cause the actual cost
thereof to exceed the estimated cost as approved in Section 4 of this Contract unless the Authority has
sufficient funds to cover such excess, or, each of the Local Units, by resolution of its respective
legislative body, (a) approves said increased total cost, and (b) agrees to pay such excess over the
estimated cost, either in cash or by specifically authorizing the maximum principal amount of bonds to
be issued, as provided in Sections 9 and 14 of this Contract, to be increased to an amount which will
provide sufficient funds to meet said increased cost, and approves a similar increase in the installment
obligations of each Local Unit, if any, pledged under the terms of this Contract to the payment of such
bonds.
SECTION 6. The System shall be acquired and constructed by the Authority substantially in
accordance with the plans and specifications therefor approved by this Contract. All matters relating to
engineering plans and specifications, together with the making and letting of final construction
contracts, the approval of work and materials thereunder, and construction supervision, shall be in the
2:1268959.3\1 14855-00006 2
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MILLER, CANFIELD PADDOCK AND STONE, PLC
contro] of the Authority. All acquisition of sites and rights-of-way, if any, shall be done by the
Authority. Each Local Unit’s share of the costs of such acquisition in each Local Unit, if any, shall be
paid from the Local Unit’s share of bond proceeds and, in addition, any costs incurred by any Local Unit
in connection with the acquisition or construction of the System, including, but not limited to,
engineering expenses, shall be promptly reimbursed to the Local Unit by the Authority from the
proceeds of the Authority’s Bonds with the approval of the Authority board.
SECTION 7. The Authority shall operate, maintain and administer the System for and on behalf
of the Local Units. The System shall be maintained in good condition and repair. The Authority shall
provide insurance as part of its obligation to operate the System. The Authority will furnish reports to
the Local Units at periodic intervals corresponding with the reporting periods of the Local Units in detail
sufficient to inform the Local Units of the operations of the System and to permit the Local Units to
meet their financing requirements hereunder.
SECTION 8. To provide for the construction and financing of the System in accordance with the
provisions of Act 233, the Authority shall take the following steps:
(a) The Authority will take steps to adopt a resolution or resolutions providing for the
issuance of its bonds in one or more series in the principal amount of not to exceed $300,000,000
(except as otherwise authorized pursuant to Section 5 of this Contract) to finance all or part of
the costs of the System. Said bonds shall mature serially or be subject to mandatory sinking fund
redemption as authorized by law, and shall be secured by the contractual obligations of each
Local Unit in this Contract. After due adoption of the resolution or resolutions , the Authority
will take all necessary legal procedures and steps necessary to effectuate the sale or sales and
delivery or deliveries of said bonds.
(b) The Authority shall take all steps necessary to take bids for and enter into and
execute final acquisition and construction contracts for the acquisition and construction of the
System as specified and approved hereinbefore in this Contract, in accordance with the plans and
specifications therefor based on the plans as approved by this Contract.
(c) The Authority will require and procure from the contractor or contractors
undertaking the actual construction and acquisition of the System necessary and proper bonds to
guarantee the performance of the contract or contracts and such labor and material bonds as may
be required by law.
(4) The Authority, upon receipt of the proceeds of sale of each series of bonds, will
comply with all provisions and requirements provided for in the resolution authorizing the
issuance of such series of bonds and this Contract relative to the disposition and use of the
proceeds of sale of such series of bonds.
(ec) | The Authority may temporarily invest any bond proceeds or other funds held by it
for the benefit of each Local Unit as permitted by law and investment income shall accrue te and
follow the fund producing such income. The Authority shall not, however, invest, reinvest or
accumulate any moneys deemed to be proceeds of the bonds pursuant to §148 of the Internal
Revenue Code of 1986, as amended, and the applicable regulations thereunder (the “Code”), in
such a manner as to cause the bonds to be “arbitrage bonds” within the meaning of Code §
21268959 3\1 14855-00006 3
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MILLER, CANFIELD, PADDOCK AND STONE, PLC
103(b)(2) and §148, or otherwise as may jeopardize the tax status of the bonds.
SECTION 9. Each Local Unit irrevocably covenants and agrees to pay to the Authority its
Local Unit share of each series of bonds to be issued by the Authority pursuant to this Contract. The
share of each Local Unit shall be determined as set forth on Exhibit B hereto.
The cost of the System to be financed with the issuance of bonds of the Authority in the
aggregate principal amount of not to exceed $300,000,000 shall be paid in annual installments on the
dates and in the amounts as established in the Authority's bond authorizing resolution.
Each Local Unit covenants that it will make or cause to be made its payments as required by this
Contract not less than 3 days prior to the dates on which the Authority is required to make payments on
the bonds described herein to the transfer agent for the bonds.
It is understood and agreed that the bonds of the Authority hereinbefore referred to will be issued
in anticipation of the above contractual obligation, with principal maturities on the dates established by
the Authority corresponding to the principal amount of the installments then coming due, and there shall
also be paid in addition to said principal installments, on such dates as shall be determined by the
Authority, commencing on such date as determined by the Authority, as accrued interest on the principal
amount remaining unpaid, an amount sufficient to pay all interest at an interest rate not to exceed ten
percent (10%) per annum, due on the next succeeding interest payment date on the bonds from time to
time outstanding.
It is further understood and agreed that the bonds of the Authority may be secured by a debt
service reserve fund or funds to provide additional security for the timely payment thereof if the
Authority determines, in consultation with its financial advisor, that the provision of such debt service
reserve fund or funds is advisable. If the bonds of the Authority are secured by a debt service reserve
fund or funds, each Local Unit covenants and agrees to provide for the replenishment of such debt
service reserve funds as described in Exhibit B.