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Tom please read. Sent from my iPad Begin forwarded message:

Dillon KWA.PDF; UPDATED FLINT DWSD KWA ASSESSMENT Version VIII 02-21-13.pdf; TYJT Recommendaton DWSD vs Flint.pdf Follow Up Flag: Follow up Flag Status: Flagged Additional reading material, per your request. Attached: 1) 2 page summary put together today by Office of Fiscal Responsibility Staff, “KWA SUMMARY FOR GOVERNOR...” 2) Final Offer from DWSD, “KWA and City of Flint.pdf’ 3) Letter from Ed Kurtz, declining DWSD offer, “Dillon KWA.PDF” And if you are really into reading more... 4) Office of Fiscal Responsibility Analysis of Situation (from February), “UPDATED FLINT DWSD KWA ASSESSMENT...” 5) One pager from Tucker Young Jackson Tull (from March), “T'Y]T’ Recommendation...” Finally, some comments from DEQ staff after the 4/15 offer from DWSD: Comment 1: From a capacity standpoint, supplying KWA is completely feasible under either proposal with no adverse impact to the rest of the DWSD supply network. The proposal lists KWAs contracted max day demand at 40.6 mgd, the design and rated capacity of the Lake Huron Plant is 400 mgd. ‘The DWSD service area average and max day are about 650 and 950 med; the other four water plants combined have a rated capacity of over 1100 med. I don’t know the details of the cost analysis other than what has been reported by DWSD. It is my understanding that over the 30 year pay back period that full service water provided from DWSD would be more a lot more expensive than what KWA has projected if they separate. Several intermediate proposals of varying cost estimates have been presented without success. KWA was issued a permit last fall for constructing an intake @ndependent of DWSDs) and I think the plan is to start construction as early as this fall. Then a treatment plant would be constructed to treat the water. Flint has a water plant that draws raw water from the Flint River, but the plan would be to purchase raw water from the KWA intake and treat at their plant, using the River as a backup source. KWA has estimated a project cost of $274 million, DWSD estimated the project cost at $375 million; but I don’t know exactly what the scope of work was for those estimates so I’m not sure that it’s an apples to apples comparison. Overall, besides the know impacts to DWSD for loss of revenue and increased cost to the rest of the system users to cover fixed cost, debt, etc., there could be other systems revisiting their proposals to separate. Grosse Tle and a few surrounding communities had looked into forming a water authority and building a plant to serve them; Grosse Pointe Park had submitted incomplete plans a few years back to build their own microfiltration plant. At one point, Grosse Pointe Shores was 1 xxxEND_PAGE:executiveofficeemails21_b0672_1557_1558_1 considering a study to see if they could re-work the Grosse Pointe Farms network to purchase water from them rather than DWSD through GP Woods. Comment 2: A response at this pomt may be moot as Flint and Genesee Co. already held a press conference yesterday rejecting the DWSD offer. It is also unclear whether DWSD provided its offer directly to Flint and Genesee Co. by the deadline in Treasurer Dillon’s letter. However, Flint and Genesee Co. still took the offer under consideration. Our office concurs with both Flint and Genesee Co. that the offers provided by DWSD were incomplete. Of the two scenarios provided by DWSD it appeared that only Scenario 2 was listed as potentially being more cost effective. However, this scenario did not address the following: 1. The DWSD scenarios are based on 40 MGD of service capacity. However, the KW’A project is providing 60 MGD of initial capacity with potential expansion to 75 MGD in the future. Therefore, in order for a more direct comparison the DWSD scenario would need to increase capacity to 60 MGD, which would increase fixed rate commodity costs as well as the capital costs for the Huron Plant that DWSD was planning to allocate to Flint and Genesee Co., presumably by as much as 50%. 2. DWSD proposals cover a 30 year period to 2042, but fail to recognize that after this period bond payments for the KWA project will be complete and result in a significant reduction in costs for the KWA option. 3. While DWSD indicates that Flint and Genesee Co. would be given “broadened representation”, it remains unclear exactly what this means in terms of actual control in the decision making process. 4. This scenario continues to rely on a single transmission system and would require the City of Flint to maintain its WIP for emergency purposes and these costs do not appear to be included. In addition, use of the Flint WTP as an emergency backup would leave Genesee Co. without an adequate backup supply to meet their 30 year needs. Again, without DWSD providing the specific details of these proposals, it is difficult to provide a true comparative analysis, and as such Flint and Genesee Co. appear to be justified in their rejection of these proposals.

May not be a bad idea to have this available for public consumption seeing as the two sides like to negotiate in the media. Sent from my iPad Begin forwarded message:

Interesting threat here. They will seek to recover sunk costs through rates in last two years. My guess is this will be a wildly huge increase. We cannot ignore the threat. We need legal advice asap. This needs immediate attention. Fred please work with the AG and Valerie.

| thought we had settled all these questions. If so, we need to answer his email with an explanation.

Lhave a few details to pin down: will need another few hours.

I don't know who Fred the Engineer is. I spoke to Brooks Patterson Sat night. He won't get in middle of this despite Det News story. I think we need to understand if the legacy liability issue raised twice now presents a real risk to Flint. Also, Fred were you able to sort thru rate issue we discussed? Thanks, Andy Sent from my iPhone Begin forwarded message:

FYI 1 Sent from my iPad Begin forwarded message:

Fyi... in case you missed it I heard about this on the news this a.m. Flint City Council approves resolution to buy water from Karegnondi, state approval still needed By Dominic Adams | [email protected] on March 25, 2013 at 10:45 PM, updated March 26, 2013 at 1:28 AM FLINT, MI -~ Flint is one step closer to getting its water from Lake Huron as part of the Karegnondi Water Authority. The vote, approved 7-1 at the Flint City Council meeting Monday, March 25, may have set in motion the end to Flint paying to get its water from Detroit. Under the proposal, Flint would get 16 million gallons per day of raw water from Lake Huron, pipe it to Flint for treatment and then sell it to customers throughout the city. Another 2 million gallons per day would come from the Flint River and will be treated in Flint. Mayor Dayne Walling said the Department of Environmental Quality must approve Flint’s getting 2 million gallons per day from the Flint River. Tuesday’s meeting followed weeks of discussions and special meetings surrounding the resolution. “We got there,” Councilman Joshua Freeman said. “That’s the important thing.” There were more than 50 people at Monday’s meeting. “Going with Karegnondi is the best decision. We have no opinion on the economics of the decision,” said Rebecca Fedewa, Flint River Watershed Coalition executive director. “If we start drawing water out of the Flint River, we are at risk of having to start releasing water from our reservoirs.” Genesee County Drain Commissioner Jeff Wright said the decision must still be approved by a county water and waste advisory board. The KWA board will then be reconvened for final approval. Wright said construction could start in May. State treasury officials still must approve the city council's move because Flint has an emergency 1 xxxEND_PAGE:treasury01_b06_0561_0924_237 financial manager. All expenditures over $50,000 must be approved. Genesee County Drain Commissioner Jeff Wright has said that Flint would pay roughly $6.4 million annually for water service if it joined the pipeline — a nearly $4 million savings on what it pays Detroit for water. Walling previously said the city would save $19 million over eight years by getting water from the KWA. “It’s a historic night in the City of Flint,” Walling said. “The savings will be less with the capacity level approved by city council because there will be increased treatment cost for the river water.” He said the DEQ told the city it needed to get 18 million gallons per day or there would have to be additional work done at Flint’s water plant. Flint’s water plant and the Flint River is currently the backup for Flint and Genesee County, however, the plant only operates four times per year. Councilman Bryant Nolden was the lone dissenting vote. “Tt was a protest vote,” Nolden said. “I knew they had enough votes. | just feel like the Flint River is our best option.” Karengnondi is the regional water authority that includes Genesee, Lapeer and Sanilac counties and the cities of Flint and Lapeer. Flint is the second municipality, behind Genesee County, to officially decide to purchase raw water through the K WA. Lapeer city officials said they intend to purchase water, but an agreement has been finalized. Dominic Adams is a reporter for MLive-Flint Journal. Contact him at [email protected] or 810-241-8803. Follow him on Twitter, Facebook or Googlet. © MLive.com. All rights reserved. xxxEND_PAGE:treasury01_b06_0561_0924_238 Koryzno, Edward (T reasury)