Correspondence between

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

Andy; The rate setting process used by the Detroit Water and Sewer Department (DWSD) is as follows: (1) DWSD has a series of internal meetings with the other governmental units to which it supplies water. These meetings are not required, but have become customary. This series of meetings occur on an annual basis. (2) Based upon these meetings, DWSD recommends proposed water rates for the ensuing year (July 1 to June 30) to the Board of Water Commissioners. In turn, the Board of Water Commissioners recommends proposed water rates to the City Council, which has final approval. (3) Rates tend to be based upon factors such as usage, distance, and peak usage levels. If the contract with the City of Flint is characteristic, termination would require one-year’s advance notice for a governmental unit to leave. Since rates are set annually, the departure of any governmental unit would result in rates for the next rate setting cycle being adjusted commensurately among remaining customers. Valerie Brader, with whom I spoke this morning, was very helpful and provided much of this information. xxxEND_PAGE:treasury01_b04_0379_0503_036 CITY OF FLINT OFFICE OF EMERGENCY MANAGER EDWARD J. KURTZ ELECTRONIC LETTER April 16, 2013 Andy Dillon State Treasurer P. 0. Box 30716 Lansing, MI 48909 Dear Treasurer Dillon: Flint, Genesee County and KWA received an eight page letter from Detroit Water and Sewerage Department (DWSD) offering a framework for a long-term agreement with our region. 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 KWA water pipeline delivery system estimated to be $79 million. In addition Flint would not be able to operate the Flint Water Plant in which we have invested over $40 million per MDEQ mandates over the past ten years. Finally, although 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. Scenario 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 30 year contract is signed. After review of the offer, Flint/Genesee has the following concerns: City Hall 1101 S. Saginaw Street - Flint, Michigan 48502 810-766-7346 FAX: 810-766-7218 | www.cityofflint.com xxxEND_PAGE:treasury01_b04_0379_0503_037 Andy Dillon, State Treasurer April 16, 2013 Page 2 1. DWSD's offer is a framework subject to negotiations and is not a firm offer. 2. DWSD’s offer is based on 40.6 mgd, the KWA plan is based on 60 mgd. Flint/Genesee last summer hit the peak of 40.6 mgd and this DWSD offer provides no room for growth. Growth would result in penalties or added cost. 3. DWSD's offer does not include a guaranteed rate for years two through thirty, nor does it provide a maximum annual increase. 4. DWSD's offer does not provide a redundant supply for GCDC. 5. DWSD's offer does not allow for the use of Flint's existing water plant. 6. The offer indicates that the total cost to Flint over the life of the contract would be $587,990,665. No indication of what annual rate of increase was used in this projection. Flint can only assume it is 4.4% based on the Tucker Young report. 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, Flint(Genesee has great concern over the accuracy of the figures provided by DWSD. Attachment 1 indicates that our joint annual cost to DWSD is $50 million; actual cost is less than $25 million. Attachment 2 indicates $800 million in savings over the next 30 years. That is greater than the total cost we would pay DWSD. Therefore, | will sign the resolution to join KWA at the close of business today. Sincerely, Nuxeo Edward J. Kurtz Emergency Manager xxxEND_PAGE:treasury01_b04_0379_0503_038 Stanton, Terry A. (T reasury)

xxxEND_PAGE:treasury01_b04_0379_0503_031 Received by Flint yesterday evening.

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

Service Agreement 12201965.pdf Fred — The City of Flint believes that if (when) they move ahead with KWA, that DWSD will sue over the issue. See his email below. DWSD has been in the media talking about a “termination penalty” which the City of Flint does not believe exists in anything they have signed, Attached are the historical agreements. Can you blast through and see if there is anything you see that would suggest a termination penalty would be allowed? Frank — this is just FYI for you.

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: