Correspondence between

| spoke to Mike Brown and he said Ed Kurtz used this report to fulfill his final report. Edward B. Koryzno, Jr. | Administrator - Office of Fiscal Responsibility State of Michigan | 430 W. Allegan Street, ist Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] BA Think Green! Don't print this e-masl unless you need to. CONFIDENTIALITY NOTICE: This e-mail, and any attachments, is for the sole use of the intended recipient(s) and may contain information that is confidential and protected from disclosure under the law. Any unauthorized review, use, disclosure, or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply e-mail, and delete/destray all copies of the original message and attachments. Thank you

Background information from DEQ on KWA. They also believe that KWA remains the best option, even in light of the most recent offer by DWSD.

Please prepare a response to “Fred the Engineer” to be signed by Roger on behaif of Andy. Will you please let me know today how long it will take to get a response out and then also CC me on the letter once it does go? Thanks.

xxxEND_PAGE:treasury01_b04_0379_0503_031 Received by Flint yesterday evening.

Importance: High Do we have a sense on "when" review will be complete? At last word, Caleb was working up talking points to be used after the review is complete...but hoping ta have a sense of when it all could shake out...

FYI

Importance: High No basic asstiimptions were used. | reviewed the data to attempt to determine the best option. Certain constraints focused ihe analysis in certain ways. The Flint ERM eliminated the use of the Flint River and all of the blending options. This decision eliminated all DWSD options with the exception of purchasing 100% of water fram DWSD. The Treasurer asked some very specific questions that were addressed in my report. All of this is outlined in my report, No other assumptions were utilized, In the interest of time, this is a quick answer. If more discussion isneeded, please let me know. Eric Cline | Unit Operations Specialist - Office of Fiscal Responsibility State of Michigan | Michigan Department of Treasury 430 W, Allegan Street, 3rd Floor | Lansing. Ml 48922 (517) 335-2078 | gliner] @michigan.gov CONFIDENTIALITY NOTICE: This e-mail, ond amy octachments, (s far the sale use of the intentled recipients} ond may contoin information thor!s confidential and protected from disclosure under the law. Any unauthorized review, use, disclasure, ar distribution is pronibited, {you are not (he intended recipient, please contact ihe sendey by /eply e-met, and delete/destroy all Caples of the original message ond attachments Thank you

Follow Up Flag: Follow up Flag Status: Flagged The report is attached. Edward B. Koryzno, Jr. | Administrator - Office of Fiscal Responsibility State of Michigan | 430 W. Allegan Street, 1st Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] GaThink Green! Don't print this e-mail unless you need to. CONFIDENTIALITY NOTICE: This e-mail, and any attachments, is for the sole use of the intended recipient(s) and may contain information that is confidential and protected from disclosure under the law. Any unauthorized review, use, disclosure, or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply e-mail, and delete/destroy all copies of the original message and attachments. Thank you

Will you please send an electronic version of the Flint memo to me and Andy? Thanks. Sent from my iPad xxxEND_PAGE:treasury01_b06_0561_0924_210 88 (Rev 02- 11) STATE OF MICHIGAN RICK SNYDER DEPARTMENT OF TREASURY ANDY DILLON GOVERNOR LANSING STATE TREASURER SUMMARY REPORT TO: Edward Koryzno, Administrator; Office of Fiscal Responsibility FROM: Eric Cline. Unit Operations Specialist SUBJECT: City of Flint Transition Advisory Board Request DATE: March 12, 2013 Summary On March 11, 2012, the Office of Fiscal Responsibility (OFR) was asked to provide summary comments regarding a potential request by the City of Flint to be removed from Emergency Financial Manager (EFM) status. A determination needs to be made whether a Transition Advisory Board (TAB) will be installed and the City can be allowed to move away from EFM status. The OFR has analyzed the operations of the City and has identified areas of concern. The operational areas reviewed included: 1) The General Fund; 2) the FY 2011-2012 budget adopted by the Flint City Council; 3) the Water and Sewer system; 4) OPEB Liabilities; 5) Public Safety; 6) Community Development. While required reporting information provided by the EFM has shown that the City of Flint is making some progress in alleviating its fiscal distress, it is unlikely that the City is ready to leave EFM status or have a Transition Advisory Board appointed. The following details these conclusions: FY 2011-2012 Budget: The following issues were noted within 2011-2012 Budget. ¢ The budget was adopted by the City Council with an annual budget deficit and a Fund Balance deficit. e Audited Final Expenditures were $63.4-million vs. audited Revenue of $51.4-million. e The annual budget deficit for FY 2012 was $11.4-million. e Interfund Transfers for Sanitation, Building Safety, Parking, Neighborhood Policing, Parks, Fleet Management, and Senior Centers were incorrectly budgeted at <$4.7-million.> o 2 of the interfund transfers’ deficits were over $1-million. PO BOX 30716 » LANSING, MICHIGAN 48909 www michigan gov/treasury e (517) 373-3200 xxxEND_PAGE:treasury01_b06_0561_0924_211 Page 2 ¢ The Public Safety, Community Development, Transportation, Recreation, Judicial, General Government, and Legislative operations exceeded budget by a combined $10.2-million. o 2 of the departments overspent by over $2-million. e Major and Local Streets have a budgeted annual deficit of $326,000. General Fund: Structurally, some weaknesses remain in the General Fund and several financial procedural issues remain needing correction. Based upon EFM reporting, the following is noted: e Anaccumulated $19-million General Fund deficit remains. e The EFM’s amended budget projects deficit elimination in 49.6 years, © The General Fund continues to rely heavily upon borrowed cash. © The EFM has indicated that Income Tax Revenue is lower than anticipated. e A Deficit Elimination Plan (DEP) in-place and expected to be amended. e An anticipated $507,000 refund (plus interest) resulting from a MI Tax Tribunal (MTT) stipulation is expected to be made for fiscal years 2010, 2011, and 2012. Community Development: The demographic and economic outlook for the City is poor, which implies the likely generation of a number of social ramifications. The Genesee County Land Bank Authority is very active in the City of Flint and has provided much of the following data. © 32% of all property in the City is abandoned. This includes 12,000 vacant lots and 6,000 abandoned homes. © Some residential blocks have over 50% abandonment. * The County Land Bank owns over 3,600 properties in the City. e Average Sale Price for residential properties in Flint is approximately 20% of the balance of Genesee County. e These issues will require developing an innovative and coherent strategy for the challenges related to large tracts of abandon property. OPEB Liabilities: The City is facing a number of significant challenges regarding its OPEB liabilities. Based upon EFM reports, the following has been noted. * Total OPEB liabilities are nearly $400-million. e The Annual Required Contribution (ARC) payment by the City is $22-million. e The City is facing Pending Litigation regarding retiree health care changes. xxxEND_PAGE:treasury01_b06_0561_0924_212 Page 3 Water and Sewer System: In addition to the formidable decision facing the community regarding its decision to join the KWA Water Authority or remain a customer of the Detroit DWSD system, the City is facing a number of other financial and structural issues with its water and sewer system, including: e The adopted 2011-2012 Water Fund Budget was $48.3-million. The adopted 2011-2012 Sewer Budget was $28.2-million. e An $8.8-million accumulated Water Fund deficit. e A budgeted annual Water Fund deficit of $4,1-million. © Water Loss in the Distribution System is estimated to be between 20-30%. ® A budgeted annual Sewer Fund deficit of 5-million. e ©The City is facing Pending Litigation regarding water rate changes. Public Safety: The City continues to struggle with a number of systemic public safety issues. Fire services are a General Fund operation while law enforcement is separated as a Special Fund. Based upon EFM reporting, the City’s Community Dashboard and review of local news stories, the following concerns are noted: * The Fire Department budget for FY 2011-2012 was $11.6-million while law enforcement was $3.2-million respectively. e Public Safety operations exceeded budget by $6-million. e Fire Department Overtime is in excess of budgeted amounts. © Property crimes and “Other” crimes are rising within the community. © Violent crime appears to be on the rise. e The Per Resident Cost for Fire services and the District Court are rising. Conclusions: The City faces significant financial and operational challenges in the near and the long term. Given the concerns noted above, it is believed that these challenges will require the authority of an EFM to resolve. Therefore, it is recommended that the City is not yet demonstrated its readiness for a transition back to local control and that EFM status should be retained. If further analysis on this issue is needed, please let me know. Copy: Randall Byme, State Administrative Manager; Office of Fiscal Responsibility S$ \OFR\Citres\City of Flint\MISC Reports\SSUMMARY REPORT FLINT TAB REQUEST Version III 03-12-13 doc xxxEND_PAGE:treasury01_b06_0561_0924_213 Koryzno, Edward (T reasury)

Couple of followup questions on the memo. 1) I can't find an attachment that is referenced. 2) The statement is made a couple times that even the most expensive K WA projection is still cheaper than DWSD. What assumptions are made about rate increases for DWSD that leads to this conclusion? 3) How does the new issue of the second pipe for redundancy change the equation? Does it affect the recommendation? Thanks. Sent from my iPad 41 xxxEND_PAGE:treasury01_b06_0561_0924_208 Project Costs - TYJT Slides 26 through 30 Intake and Crib Construction ELAC Property Pumping Stations Construction Engineering Design Engineering Construction Management Administration Legal / Easements / Contracts Power Redundant Power Total Construction Total ELAC Total Land / Property / Easements Total Power Total Redundant Power Total ELAC as % of Construction ELAC KWA $22,076,850 $5,519,213 $2,300,000 $24,618,080 $6,154,520 $166,202,316 $41,550,579 $4,000,000 $212,897,246 $53,224,312 $2,300,000 $4,000,000 $0 $272,421,558 25.0% 1/4/2013 TYJT $22,076,850 $5,519,213 $2,300,000 $54,573,314 $75,000 $16,394,494 $167,419,530 $50,225,859 $1,166,170 $16,939,581 $14,434,609 $349,440 $831,000 $4,000,000 $1,273,200 $244,069,694 $104,694,196 $3,541,170 $4,000,000 $1,273,200 $357,578,260 42.9% ROWE xxxEND_PAGE:treasury01_b06_0561_0924_209 Lamphier, Wendy (Treasury)

We've been working on the final touches to our KWA report, which includes our recommendation. However, we learned within the past few days that Tucker Young apparently met with Andy and is exploring another alternative. Do you have any information about that? I asked for some additional edits on the Highland Park plan, which has been evolving along with the KWA report.

Did we ever track down the responses to Andy's KWA questions? What about the Highland Park plan?

| believe Ed Kurtz stated that the Flint City Council is 100% in favor of the KWA option. —---Original Message-——

Andy is pretty reluctant to have an unelected EM/EFM make the decision on the KWA. Do we have any sense where the council is on this issue? | think he would feel much better if we had a supportive resolution from the Council. Can you please inquire? Sent from my iPad xxxEND_PAGE:treasury01_b06_0561_0924_066 89 (Rev 02-11) STATE OF MICHIGAN RICK'SNYDER DEPARTMENT OF TREASURY ANDY DEON GOVERNOR LANSING STATE TREASURER ANALYSIS TO: Edward Koryzno, Administrator; Office of Fiscal Responsibility FROM: Eric Cline. Unit Operations Specialist SUBJECT: Flint Water System Status Assessment DATE: January 22, 2013 On November 26, 2012, the Department of Treasury commissioned the firm of Tucker, Young, Jackson & Tull, Inc. (TYJT) 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 (K WA) in Genesee County. The overarching purpose of this study was to provide objective analysis to the State Treasurer and to Flint’s Emergency Financial Manager (EFM) in order to secure potable drinking water for the City for the foreseeable future. The Office of Fiscal Responsibility (OFR) has been the lead office representing Treasury on this project. On December 21, 2012, staff from TYJT met with representatives from the Department of Treasury and the City of Flint to provide a preliminary report on their findings. At this meeting, TYJT outlined $ options that they had analyzed. These options were: 1) 100% water provision by the City of Flint Water Plant from its water source of the Flint River; 2) 100% provision of untreated Lake Huron Water by KWA (which would require treatment by the Flint Water Plant); 3) Effective 100% provision of treated drinking water by DWSD,; 4) Provision of variable amounts of water from DWSD through the existing Potter & Baxter mains (this option called for Flint to treat and blend river water into DWSD water in order to reach their daily needs); and 5) Provision of variable amounts of water from DWSD through the 72” Imlay City main (this option also called for Flint to treat and blend river water into DWSD water in order to reach their daily needs). Each of the blending options looked at Flint purchasing 4, 8, or 12 Million Gallons per Day (MGD) from DWSD and blending the balance in river water to achieve their maximum daily water needs of 18 MGD. The Imlay City option also provided for DWSD to sell the 72” main to the City of Flint, which would then become the operational and maintenance responsibility of Flint.

Andy asked for a little followup on our conversations. Can you guys have someone put together a written response to these questions ASAP? 1) Please show the different projected construction costs provided by TYJT and in the presentation by Flint this week. If different, please indicate why we believe the Flint #s are acceptable projections. 2) Please show the contingency on construction included in both projections. 109 xxxEND_PAGE:treasury01_b06_0561_0924_056 3) What are the protections that Flint has in the case of a) cost overruns on construction, and b) a delay in the construction timeline that forces Flint to use DWSD water longer. Thanks.

Follow Up Flag: Follow up Flag Status: Flagged A document for discussion at this afternoon’s meeting from Ed Kurtz regarding Flint water system options. Edward B. Koryzno, Jr. | Administrator - Office of Fiscal Responsibility State of Michigan | 430 W. Allegan Street, Ist Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] = Think Green! Don't print this e-mail unless you need to, CONFIDENTIALITY NOTICE: This e-mail, and any attachments, is for the sole use of the intended recipient(s) and may contain information that is confidential and protected from disclosure under the law. Any unauthorized review, use, disclosure, or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply e-mail, and delete/destroy all copies of the original message and attachments, Thank you

Follow Up Flag: Follow up Flag Status: Flagged FYI - Mike Brown called to say that Mayor Walling will be joining Ed Kurtz, Mike Brown and Jerry Ambrose for this afternoon’s meeting. Edward B. Koryzno, Jr. | Administrator - Office of Fiscal Responsibility State of Michigan | 430 W. Allegan Street, Ist Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] = Think Green! Don't print this e-mail unless you need to CONFIDENTIALITY NOTICE: This e-mail, and any attachments, is for the sole use of the intended recipient(s) and may contain information that ts confidential and protected from disclosure under the law, Any unauthorized review, use, disclosure, or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply e-mail, and delete/destroy all copies of the original message and attachments. Thank you xxxEND_PAGE:treasury01_b06_0561_0924_037 Koryzno, Edward (T reasury)

Can you guys please touch base with the City and Tucker to make sure that their analysis takes into account the details

Below is Eric's initial observations of the preliminary TYJ&T report and what DWSD' current offer: | have compared the written proposal received fram DWSD to the Charts and PowerPoint provided by TYJT. As the DWSD proposal is written and contains more detail than the graphic summary provided by TYIJT, it is difficult to completely determine if all points are covered in both presentation formats. However, here is what stands out to me. The DWSD proposals state that the first year of a contract with Flint would be 2014. TYIT states 2013 as Year One. 75 xxxEND_PAGE:treasury01_b06_0561_0924_002 The DWSD proposals discuss a “redundancy credit” to Flint that will result from the blending option by Flint. | do not see this identified in the TYJT information. The DWSD proposals make no reference to the 12 or 8 MGD Maximum Day options outlined by TYJT. The information provided by TYJT makes no mention of DWSD reserving the right to serve existing customers on the 72” pipeline, if purchased). Nor is there a mention of the wheeling charge (paid to Flint) in the TYJT information. DWSD estimates Flint would not begin utilizing a blending option until 2018. Until then, it is assumed that DWSD would provide 100% of water to Flint. This is not referenced in the TYJT information. This is my first analysis. If you wish additional analysis to be done, please Jet me know. Eric Cline | Unit Operations Specialist - Office of Fiscal Responsibility State of Michigan | Michigan Department of Treasury 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 (517) 335-2078 | [email protected]

This came in the mail from DWSD on the Friday before Christmas. | have not reviewed it to know whether the proposals it contains match up to those presented by TYJT last week. 76 xxxEND_PAGE:treasury01_b06_0561_0924_003 Koryzno, Edward (Ti Treasury)

Some suggestions