Correspondence between

Mr. Dillon: We have reviewed DWSD's final offer to Flint/ Genesee County of April 24, 2013 and find it responsive to Flint's concerns and their water demand requirements. The offer appears to mitigate all the potential risks to Flint (joining K WA) identified by TYJT in our February 2013 Report to you and our subsequent meetings. We have one recommendation for consideration related to service redundancy (refer to bottom of page 2 and top of page 3 & Item 4, page 10 of the power point presentation material of DWSD's offer document): TYJT would recommend that Flint asks DWSD to construct the second redundant line from Imlay Station to Flint and possibly purchase the existing 72 inch Flint- Owned line from Baxter/Potter (FL~1) to the Flint WTP. This redundant line cost could either be allocated to the entire DWSD water system (common to all allocations) or the cost could be included under the new water rate to Flint (should push to be included in the common to all allocations). TYJT believes that this would result in the following benefits: 1, Since Flint is unable to cost- effectively bond capital, the cost of financing could be easily obtained by DWSD; 2. DWSD has detailed and unique engineering experience for large and lengthy transmission mains design and construction; and 3. Long term operation and maintenance of the piping would be the responsibility of one entity, thus mitigating in the future who may be responsible for water main failures (breaks, leaks, hydraulic transients, etc.). With the twin line, redundancy will be afforded to Flint's supply which will help in eliminating the dependency on the WTP/Flint River (except for the use of the high lift pumps) and thus generating tremendous O&M savings. Please let us know if need any additional support. Regards, George Karmo, P.E., BCEE TYJT/President (direct office) B (cell) [email protected] none Original Message-----

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This email was sent from DWSD to Flint yesterday; TYJT was requested to forward this information to the Treasury. Dave weno Original Message-----

Thank you. This is exactly what | am looking for. Sent from my iPad

Good afternoon Treasurer Dillon, As requested in our meeting on Friday, March 15th, I am attaching TYJT’s recommendation regarding Flint's alternatives for water supply. Please do not hesitate to contact us should you have any questions or wish us to look into anything further regarding this issue. Thank you, Dave xxxEND_PAGE:treasury01_b06_0561_0924_234 C STATE OF MICHIGAN CONTRACT NO. 271N3200089 CITY OF FLINT WATER SUPPLY ASSESSMENT At the request of the Treasurer, Tucker, Young, Jackson, Tull, inc. (TYJT) makes the following recommendation to the Department of Treasury concerning Flint’s water supply alternatives. Based on the financial analysis performed of the various options presented by DWSD to continue treated water service to Flint compared to Flint being supplied by the new KWA untreated water system, TYJT believes that several of the options presented by DWSD are lower in cost currently and over the long run than the one offered by KWA. TYJT also believes that DWSD’s most recent offer (subsequent to the submittal of our report} to build a smaller parallel water main from Imlay to Flint, funded by the entire DWSOD base of customers, is the best solution offering the least cost alternative and the required redundancy by MDEQ. Furthermore, since a majority of the KWA system has not been designed and none of the system has been constructed, there is an additional risk that the cost of the KWA system may actually be higher than estimated due to potential construction delays and unforeseen conditions. This risk to Flint could be substantial since the city is responsible for 30 percent of the KWA design and construction costs while still having to purchase water from DWSD during the construction period. Finally, there are other issues that were identified in our report that may result in risks to Flint if it were to join KWA that should be considered by the Treasury in determining how Flint’s potable water should be supplied. These issues are related to redundancy and reliability, other items affecting cost, and Flint’s desire to control its own destiny related to its water supply. These are described further below. = DWSD’s supply to Flint is via a 72-inch water main from Imlay City. This main also supplies Imlay City, Mayfield and the Greater Lapeer County Utilities Authority (GLCUA). The volume of water contained within the 72-inch main is approximately 30 million gallons. If Genesee and Flint move to KWA then the three remaining communities’ consumption would most likely not be large enough to maintain fresh water in DWSD’s pipeline (due to loss of chlorine residual). DWSD may consider shutting down the 72-inch line completely due to the water quality concerns, which would then create an additional burden for Imlay, Mayfield and GLCUA to finance treated water supplies. The KWA supply option is counter to the Treasury's Competitive Grant Assistance Program (Formerly EVIP Grant). This program has been put in place to allow for communities to consolidate their services and save money. Two existing customers of DWSD (Flint and Genesee County) along with the potential of others customers (GLCUA, Mayfield, Imlay City) separating from another water system is in contradiction to the program. e There is a concern over the ability of smaller systems (KWA) over larger systems (DWSD) to pay for future unfunded mandates and regulations. Obviously, identifying regulation requirements over 30 years is hard to determine. However, it is widely accepted that a large system has greater ability to respond to unfunded mandates because the cost can be distributed over a large customer base. e Although Flint will be responsible for 30 percent of the construction cost, they will only have a minority vote on the KWA board. Furthermore, there are other communities (Lapeer County, the City of Lapeer, and Sanilac County) that sit on the board and vote. However, they are not purchasing water nor contributing to the construction costs. Their position on the KWA Board will not provide them an ability to “control their own destiny,” as they have stated to the Treasury. xxxEND_PAGE:treasury01_b06_0561_0924_235 Lamphier, Wendy (Treasury)