Correspondence between

Importance: High FYI. This is the contact information | had for Ed Kurtz. (do not know if these are still good but they were as of the time we were looking at the appointment of the Flint RTAB. Eric Cline | Department Manager | State of Michigan Michigan Department of Treasury | Local Government Financial Services Division | Fiscal Responsibility Section 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 Lansing Office (517) 335-2078 | Cell Phone (517) 243-8450 | Traverse City Office (231) 922-5228 E-mail chner 1 @michigan.gov CONFIDENTIALITY NOTICE: Tlus e-mail, and any attachments, 1s for the sole use of the intended recipient(s) and may contain informaton that 1s confidential and protected from disclosure under the law. Any unauthorized review. use, disclosure, or distribution 4s prohibited. if you are not the intended recipient, please contact the sender by reply e-maul, and delete/destroy ail copies of the onginal message and attachments Thank you. xxxEND_PAGE:treasury01_b40_7317_7621_218 Schafer, Suzanne K. (T: Teasury)

Can someone read these right away and do a summary quickly. Thanks Sent from my iPhone Begin forwarded message:

City’s usage is 14 MGD/Day Timeline is 9 months until June 2016 Fixed Cost is $662,100 for 9 months or $5,958,900 Commodity Rate is $501,383/month Total Monthly Cost is $1,163,483 Cost until June 2016 is $10,471,347 The City does not know the cost to move the water plant into stand-by mode. However, they have indicated that there might be some reduced costs as lower chemical costs will be incurred. Eric Cline | Department Manager | State of Mictugan Michigan Department of Treasury | Local Government Financial Services Division | Fiscal Responsibility Section 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 Lansing Office (517) 335-2078 | Cell Phone (517) 243-8450 | Traverse City Office (231) 922-8228 E-mail cliner 1 @muchigan.gov CONFIDENTIALITY NOTICE: This e-mail, and any attachments, 1s far 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 1s prohibited. If you are not the intended recipient, please contact the sender by reply e-mail, and delete/destroy all copies of the orginal message and attachments Thank you. 14 xxxEND_PAGE:treasury01_b35_5648_6098_032

Sent from my iPhone Begin forwarded message:

10 xxxEND_PAGE:treasury01_b37_6553_6782_169 Workman, Wayne (TREASURY)

Eric, Tom asked me about the status of the following questions: 1, Does the sale of the water main by Flint to Genesee County impede Flint reconnecting to DWSD/Great Lakes Water Authority? 2. What is the most recent estimated date of when Flint will be able to draw water from the Karegnondi water line? Ed Edward B, Koryzno, Jr. | Director - Bureau of Local Government Services State of Michigan | 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] wy 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 ts 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_b37_6553_6782_167 Koryzno, Edward (T Treasury)

fyi... | have not looked at it but Brad sent us some 'stuff' (attached). Please check to see if any of it is worthwhile in adding to our document.

Importance: High council approves re.html 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. 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.” “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.” xxxEND_PAGE:treasury01_b37_6553_6782_153 Stanton, Terry A. (Ti reasury)

Flint DEQ backgrounder. Some of the info may not be 100% accurate. Note the highlighted sections:

Fyi... see if the dates line up with yours. Basically the May ’14 date he refers to below is effect their ‘final final’ signoff on the use of the river. He had told us April of ’14.

Fyi I was also asked... somewhat related & in terms of the chronology you are working on: i) the City sold that section of pipeline to the County... would that impact an effort to reconnect to DWSD ? ii) confirm when KWA is going to be done. Anyway to pick up the schedule ? We can cover this when we talk @ 3:00

Proposed Flint budget would leave water rates unchanged, add 10 part-time cops FLINT, MI -- Water and sewer rates would remain unchanged and 10 part-time police officers would be hired in a proposed Flint budget unveiled Monday, April 27. The $51 million general fund spending plan for the fiscal year starting July 1 would put Flint in a positive financial pos Read More xxxEND_PAGE:treasury01_b24_3567_3629_50 Dempkowski, Angela (T reasury)

Let's try to get this approved by Monday. If you don't see anything wrong, I think going without bids is OK. This is an emergency. Prepare the appropriate papers and I will get it signed by Kevin or does it need the Gov signing? Have a meeting on Flint Tuesday am that I can get it OKd at. Sent from my iPad Begin forwarded message:

Importance: Low FYI — warn theyll go t.html xxxEND_PAGE:treasury01_b24_3567_3629_41 Jason Lorenz Public information Officer (810) 237-2039 For Immediate Release [email protected] City of Flint Moves Ahead with $5 million in Water Treatment Improvements Flint, Michigan — April 16, 2015 ~ Emergency Manager Jerry Ambrose, with approval from the Department of Treasury, has authorized a contract with LAN, the City’s consulting engineers, to immediately proceed with design and installation of granulated activated carbon filter for the Water Treatment Plant. Installation of the filter was one of the primary recommendations from Veolia and others as a means to help assure that City water will continue to be within EPA guidelines. Installation is scheduled to begin in Mid-June, with completion by mid-July. Other action steps are also underway at the plant, including cleaning plate settlers, repairing the clarifier, and adjusting chemical dosing and levels as also recommended. Additionally, a contract is being finalized for the water main leak detection project, hydraulic modeling and flushing is underway, and bids for the replacement of 2 miles of major pipe are being reviewed. Nearly $5 million has been budgeted to implement these actions, which in large measure are the ongoing types of action necessary to maintain the water treatment and distribution system. $2.1 million of this amount is budgeted for replacement of the pipe along Dupont St., and $1.6 million is budgeted for the GAC, with $900,000 budgeted for water main leak detection. Actual replacement of the pipe is scheduled to begin in June, and to be completed by early September. —CONTINUE- City Hall 1101 S. Saginaw Street - Flint, Michigan 48502 810-766-7346 FAX: 810-766-7218 | wwwacityofflint.com xxxEND_PAGE:treasury01_b24_3567_3629_42 These steps are all part of the action plan recently released by the City as it continues its work to maintain the safety of the water and improve its quality. Recent testing has shown that Flint’s water is meeting all regulatory safety standards, with TTHM levels being significantly below the maximum level accepted. The measures that have been taken to date by the Flint Water Plant staff have resulted in a significant improvement in the quality of Flint water since last summer. “Both the hardness and TTHM levels are at the lowest point since the switch to the Flint river last April,” said DPW Director Howard Croft. “Installing the GAC filter, in addition to these other steps, wiil further bolster the positive direction we are moving in to continue improving the quality of water in the City.” -END- City Hall 1101 S. Saginaw Street - Flint, Michigan 48502 810-766-7346 FAX: 810-766-7218 = www.cityofflint.com xxxEND_PAGE:treasury01_b24_3567_3629_43 Stanton, Terry A. (Ti reasury)

FYI Sent from my iPhone Begin forwarded message:

Thoughts?? Sent from my iPhone Begin forwarded message:

Maybe we can discuss this table idea Tuesday am while I am driving. It may be a good way to simplify things Sent from my iPad Begin forwarded message:

We will need to collect some water rate info from our files including the E&Y study. Questions will go to Jerry Ambrose. Maybe we can talk just before 9:00 or sometime in the am about what we need to do. Thanks, Wayne Sent from my iPad 101 xxxEND_PAGE:treasury01_b27_4112_4389_099 Widigan, Robert (TREASURY)

Can you figure cost and scope of work from ail this? Sent from my iPad Begin forwarded message:

Fallow Up Flag: Follow up Flag Status: Completed Per our discussion Edward B. Koryzno, Jr. | Director - Bureau of Local Government Services State of Michigan | 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] S Think Green! Don't print this e-mail unless you need to CONFIDENTIALITY NOTICE: This e-mail, and any attachments, ts for the sole use of the intended recipient(s) and may contain information that 1s confidential and protected from disclosure under the law, Any unauthorized review, use, disclosure, or distribution 1s prohibited. If you are not the intended reciptent, please contact the sender by reply e-mail, and delete/destroy all copies of the original message and attachments. Thank you

Importance: High Ed/Randy: Attached is the Flint Water Report. Given the volume of information, | have kept the report focused upon the issues germane to the DEQ violation notice and the offer from DWSD. | have tried to keep technical jargon to a minimum, but some inclusion was necessary in order for some items to be clear. (also went back into our records to see what rate projections were assumed to be in order to cross-compare the City’s analysis of the DWSD proposal. However, | kept references to all of this at a minimum. If there are any questions, let me know. Eric Cline | Department Manager State of Michigan | Michigan Department of Treasury | Office of Fiscal Responsibility 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 Lansing Office (517) 335-2078 | Cell Phone (517) 243-8350 | Traverse City Office (231) 922-5228 E-mail cliner 1 @michigan.gov CONFIDENTIALITY NOTICE: This e-mau, and any attachments, 1s 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 1s 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. 26 xxxEND_PAGE:treasury01_b28_4390_4585_084 72 (Rev 11-13) STATE OF MICHIGAN GOVERNOR LANSING STATE TREASURER SUMMARY REPORT TO: Wayne Workman, Deputy State Treasurer FROM: Eric Cline. Department Manager; Office of Fiscal Responsibility SUBJECT: Summary of Flint Water System Issues DATE: January 22, 2015 Summary On December 16, 2014, the City of Flint received a violation notice from the Michigan Department of Environmental Quality (DEQ). This notice stated that the City water samples were in violation of Maximum Contaminant Levels (MCL), a violation of the Safe Drinking Water Act (PA 399 of 1976). The DEQ considers the violation period to have begun December 1, 2014. The violation was triggered when water sample reports showed that the City’s water quality, on average, exceed the total allowable level of Disinfection Byproducts during the first three quarters of 2014. Further, four of the City’s eight water sample site locations individually exceeded allowable MCL levels during the same period of 2014. These conditions are considered a Tier 2 violation and, as a result, the City was required to notify the public of these contamination levels by January 10, 2015 (which was done) and continue to notify them every three months until the violation is resolved. The City must also update its Operational Evaluation Report, which is on-file with the DEQ, as to how it will correct this issue by March 1, 2015. Causes & Possible Solutions According to information provided by the City, the high levels of Disinfection Byproducts, which resulted in the DEQ violation notice, can be caused by high levels of chlorine. The City is required to perform testing every three months and the yearly average exceeded allowable MCL levels. Some of the potential causes for this high level of chlorine include: Inefficient ozone system operation. A sewer leak discovered upstream of the intake, resulting in the need to increase the chlorine feed. An improper softening process. Unlined cast iron pipes in the distribution system. Recirculating water in the distribution system due to poor configuration of two pump stations. Broken valves resulting in stagnant water. High chlorine demand in filters. PO BOX 30716 » LANSING, MICHIGAN 48809 ww michigan govftreasury e (517) 373-3200 xxxEND_PAGE:treasury01_b28_4390_4585_085 Page 2 e High potential of impurities in the source water. © Less than optimal removal of impurities. The City outlined some potential remedies to this problem in its initial Operational Evaluation Report, dated November 26, 2014. These potential remedies are intended to be implemented in stages. Stage 1 consists of actions that can be implemented without any new construction within the distribution system and are due to be implemented by early March 2015. Stage | actions include: Troubleshooting of the ozone system. Implementation of different testing methods. Operational changes at the Water Treatment Plant. Increase water main flushing efforts to minimize stagnant water. Identify areas with high water age and implement preemptive measures. Stage 2 consists of long term actions that require major system construction and potentially include: Upgrades to the ozone system. Implement the use of polymer aids. Convert to lime and soda ash softening. Change the disinfectant process. Install a new feed at the intake to optimize disinfection. Implement advanced treatment for precursor removal. Increase main flushing based on water modeling results. Continue valve replacements. Emphasize cast iron pipes on water main replacement priority list. The projected cost of these options is unavailable. It should be noted that all of these potential remedies are intended to be utilized only until the KWA pipeline is operational in late 2016. Further, the City will be providing additional potential solutions when it updates the Operational Evaluation Report, which must be submitted to the DEQ by March 1, 2015. Also, the City’s Emergency Manager has committed to hiring an independent external consultant to assess the steps that the City has taken, to make recommendations as to other steps that can be taken, to oversee implementation, and to monitor operations until KWA is online. DWSD Situation Concurrent to the City addressing the aforementioned issues, on January 12, 2015, the Detroit Water and Sewer Department (DWSD) extended an offer to the City to reopen water connections that have been closed since May 2014 and resume supplying the City with drinking water. DWSD has offered waiving a connection charge if the City will consider a long term agreement. DWSD has offered the City a fixed monthly rate of $846,700/month ($10,160,400/year) plus a commodity rate of $14.92/Mef. DWSD stated that these rates will be guaranteed until June 30, 2015. Any future rate increases beyond the June 30 date are not identified, however, prior projections indicated that DWSD rates would exceed $16-million in 2015. xxxEND_PAGE:treasury01_b28_4390_4585_086 Page 3 The City’s analysis of this offer indicates that the total cost of purchasing water from DWSD would exceed $12- million annually (before any rate increases beginning July 1, 2015). These costs are supported by projections utilized by the City when the original decision to switch to KWA was made. The City’s current water system expenditures are approximately $11.7-million, with operations and capital upgrades currently running below projections. Therefore, the Emergency Manager has made the determination that the City will not be acting upon the offer extended by DWSD. If further information on this issue is needed, please let me know. Copy: Edward Koryzno, Director; Bureau of Local Government Services Randall Byrne, State Administrative Manager; Office of Fiscal Responsibility Oak Township\Consent Agreement\2015 Budget\State Treasurer Action Letter to Township.2015 Budget.v2.12-15- 14.doc xxxEND_PAGE:treasury01_b28_4390_4585_087 Stanton, Terry A. (T reasury)

Randy, Wayne suggested referring to the attachment sent as part of today’s Flint call when Eric prepares the summary of this issue for the Treasurer. Ed Edward B, Koryzno, Jr. | Director - Bureau of Local Government Services State of Michigan | 430 W. Allegan Street, 3rd Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] BAS 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

Let's follow up with Gerry to discuss feasibility, options and increased cost. Sent from my iPad Begin forwarded message:

MEDIA ADVISORY: City of Flint Transition to Flint River Water Ceremony WHERE; Flint Water Treatment Plant, 4500 N, Dort Hwy, by Stewart Ave. WHEN: Friday, April 25, 2014 at 2:00pm Description: The City of Flint is holding a ceremony tomorrow to officially begin the transition to use of the Flint River by shutting the valve to the ititake pipé from Detroit, The DEQ has given Flint final authorization to begin water distribution from the Flint Water Treatment Plant, City, Genesee County, and Michigan Department of Environmental Quality officials will be on hand to witness this historic event and answer media questions, xxxEND_PAGE:treasury02_b4_231_338_009 000240 -dason Lorene Public Information Officar Cily of Flint (810) 237-2039 | p.co xxxEND_PAGE:treasury02_b4_231_338_010 000241 Darnell Earle Payne Walling ICMA-CM, MP. Moyor Emergency Manager Jason Lorenz Public Information Gfficer (810) 237-2039 jlorenz@cityofflintcom For ltimediate Release City of Flint Officially Begins Using Flint River as Temporary Primary Water Source Flint, Michigan — April 25, 2074 — For the firsi lime in fifty years, ive Gity of Flint is usina the Flint River—part of the Saginaw River watershed—as a primary water source for clty residents. Today the valve to the pipeline from Detroit was closed and the Flint River officially became Flint's Water supply. The temporary switchaver is scheduled to suppart the sily’s primary water needs forthe next two years While construction of the forthcoming pipeline from Lake Huron is completed by Karegnondi Water Authority. Officials from the City of Flint, the Genesee County Drain Carmmission and the Michigan Department of Environmental Quality were all on hand to witness the historic event. The Flint River was once the primary source of water for city residenis up to the 1960s, Over the past 40 years, it has provided water to city residents as a back-up to water provided to us by Detroit. During our partnership wilh Detroit, Flint has had to transition to the use of the Flint River for residential water on a few different occasions, With the most recant temporary switchover happening in 2009. Each temporary stint on local water proved iliree things to city employees and residents alike: That a transitiori to local river water could be done seamlassly, and that it was both sensible and safe for us to Use our own Water as a primary water source in Flint. -CONTINUE— City Hal) (701 S. Saginaw Street - Flint, Michigan 48562 §10-766-7346 FAX? S1-746-7258 WAVY CIES OFT Lette xxxEND_PAGE:treasury02_b4_231_338_011 000242 Darnell Earta Daye Walling loma-cm, pied Mayor Emergency Manager Even with a proven track fecord of providing pariectly good water for Flint, there still remains lingering Uncertainty about the quality of the water. In an effori todispel myths and promote the truth aboutthe Flint River and its Viability as a residential water resource, there have been numerous studies and tests conducted on its water by several different independent organizations. In addition to What has been found in independent studies, it isalso the responsibility of the City of Flint Water Service Center to continually test the water provided to city residents. Michael Prysby of the Michigan DEQ Office of Drinking Water verified that “the quatity of the water being pul cul meets all of our drinking water standards and Flint water is safe to drink,” Far nearly 10 years Mike Glasgow has. Worked in the laboratory at the City of Flint Water Service Center. He has run countless tesis on our drinking water ta ensure its safety for public Use Mike has not only conducted tests on water provided to us by Detreit, but also on local water from nearby rivers, lakes and streams including the Flint River. When asked if over the lasi decade if he has seen any abnormalities of major concer in the water, his response was an emphatic, “No.” In his words, “there has been nothing seen that was of major concem," during his angging tenure working in the lab, “The tests results have shawn that ourwater is not only safe, buf of the high quality that Flint customers have come to expect," announced DPW Director Howard Croft, “we are proud of the end result.” Apart from the water plant's devotion to ensuring that our water fs good, Flint is doubly blessed in having the Flint River Watershed Coalition as a separate organization —CONTINUE— City Hall ) 101 §, Saginaw Strent - Flint, Michigan 48502 3) 0-766-7346 FAX: 810-766-7218 © wyweeilyofflini com xxxEND_PAGE:treasury02_b4_231_338_012 000243 Dernalt Earle: Hayne Walling 1CMA-CN, MNP. Mayor Emerygoncy Monoger dedicated ta monitoring the overall welfare of local bodies of water, overseeing more than 30 different nearby locations. Rebecca Fedewa has been direclor of the walershed caalillan since 2008, By virtue of her passion for her work and her posilion on the board, she |s very conversant with the condition of the Flint River, In her words, ‘The Flint River is Increasingly healthy, sand completely sulfable as a drinking waier source." Fedewa and FRWC are working closely with the city “to mianitor flaws and habitats beiween the intake and the Waste Water treatment plant to ensure there are minimal to no impacts to the overall heatti of the river.“ FRWE alsa invites city residents to be a part of their monitoring exercises during this spring in order “fo gain firsthand knowledge in the health and vitality of our Flint River.” Mayor Dayne Walling invited everyone at today’s event to toast to Flint's water. "Ws regular, good, pure drinking water, and it's righi in our backyard,” said Mayor Walling, “this is the first step in the right direction for Flint, as we take this monumental step forward in controlling the future of our community's most precious resource.” —END— ; City Hall L101 S, Sagmmaw Street - Flint, Michigan 48902 310-766-7346 FAR, B10-766°7218 — wory-cityo Minicom xxxEND_PAGE:treasury02_b4_231_338_013 RAFTELIS * Hie 4 TOM awe y Rate Stud ye Wa nad:Wa Fi 201 Jun eport| “Water.a A a 2:79, nal R xxxEND_PAGE:treasury02_b4_231_338_014 000245 TABLE OF CONTENTS 1. EXECUTIVE SUMMARY .....ccccccccccsceseeee Jetiseie EES ae OT ny | 7.1 BACKGROUND OF THE STUDY he! 1.2 ADEQUACY OF EXISTING WATER AND WASTEWATER REVENUES .........ccu0 x 1.3 WATER AND WASTEWATER FINANCIAL PLANS wad 1.4 COST OF SERVICE STUDY AND WATER AND WASTEWATER RATES......-0-rere0s 4 1.5 TRANSITION FROM DWSD TO KWA 6 4.6 WATER AND WASTEWATER UTILITY OPERATIONS 4ND BEST MANAGEMENT PTR A eo FR Eada xe veceasbyecessv eb ties sndthanpemnerssGnupsasoe dndsvajesesussvuvin dgracbadaniy ua duis rnbapstiSWaTaNPr pied {eves TO 2. INTRODUCTION AND STUDY OBJECTIVES........., abesdatarivee 4 2 2.1 INTRODUCTION ...,.csseesee Fa smmesttissdis " SFB TS BUOY OB eis IVES cise iccssssspenmrvees ensvonnibges 12 3. WATER AND WASTEWATER UTILITY FINANCIAL PLANS. ........012 3.1 THE FINANCIAL PLANNING PROCESS.) ..ciuses WaAcaasbia Hitbna RINAAWTIGeuDATCNEeA bom ONES 12 3.2 WATER UTILITY FINANCIAL PLAN. 13 2.2.1 Forecast Water Units of Service and Revenue at Existing Rates... 3.2,2Forecast of Water Operation and Maintenance Expenditures , 3.2.3Water Utility CIP and GIP Financing... 3.2,4Water Gasti Flow Forecast ......ceenes WAdOt a Waxenemnegpoennn teens ‘ 3.3 WASTEWATER UTILITY FINANCIAL PLAN, itso’ 3.3.1 Forecast Wastewater Units of Service and Revenwes at Existing Rates... 6 54 3.3.2Forecast Wastewater Utility Operation anti Maintenance Expendltures ......cssesse 40 B,S.SWastewater Utility CIP atid CIP Fimancdng ee, sesiyy AZ 3,3.4Wastewater Cash Flaw Forecasts... den nanaacr tt cikeavabclresansus sone SS 4. WATER UTILITY COST OF SERVICE STUDY dT 4.1 WATER REVENUE REQUIREMENT FROM RATES 4? 4.2 WATER REVENUE REQUIREMENTS BY CUSTOMER CLASS 4g 4.2.1048M Allocation to Function Categories OO 4.2,.208M Allacation to Cost COMPOMEMES iecorcerseeeerseeee 4,2,3Capital Cost Allocation to Funtétional Companents........ ioveababviad 4.2 4Capital Cost Allocation to Cost Component «63 4.2.5Non-Rate Reveniie Allocation to Cost Component... ~§3 4.2.8Determination of Maximum Day and Hour Peaking Factors... SA City of Flint xxxEND_PAGE:treasury02_b4_231_338_015 000246 4.2.7 Calculation of Units of Service Sie G2, BU ei Cost of Service i.e citi hla tinct Sa 4.2.9Revenae Requirements by Customer Class .........., 7 MS’ MYA TER FATE DESIGN a cesescarsescusesetce te ID 4.3.1 Volumetric Rate Calculations OO 4,3.2Fixed Charge Caloulatlois........ 44.3Summary of Existing and Forecast Water Rates 43, AProjected Residential Water BUNS .. sera seer OB WASTEWATER UTILITY COST OF SERVICE STUDY. * 6.1 WASTEWATER REVENUE REQUIREMENT FROM RATES .............. ane 5.2 WASTEWATER REVENLIE REQUIREMENTS BY CUSTGMER CLASS ....... cece 69 5.2,108M Allocation to Function Catagories pesipimeoiapehig Oe 5,2. 208M Allocation to Cost Camm PonBits ....-crncaeeernnercen — ipaieeenieianisibtcecet 5.2.3Capital Cost Allocation to Functional Components .....—ncernreernrnene sarah etetnatioectonsanieed D 6.2.4 Capital Cost Allocation to Cost COMmpOme|ntts EM 5.2,5Non-Rate Revenue Allocation to Cast COMpPONeNts —..ccarecwenenrr epcguaatatinnt L B.2.SPlant Satan ce Araalysis TE §.2.7 Calculation of Units of Service sun 5. Z.BUnit Cost Of Service... ebb ins seeoniowareuiiiniba kD 5.2.9 Revenue Requirements by Customer Chab, Gi reduvn stan vised neebccacessytithcewedisy areotadien ttle 74 5.3. WASTEVVAT ENC RATE DESIGN i sessta sors yersevesiniecd sure 75 5.3.1 Volumetric Rate Cain ulations nies pachshinchviapianeiiin te 5.3,2Fixed Charge Calculations... rssrresetesnes See eet are er een eet eee aasvoneeseieabaanss TO 5.3.3Summary of Existing and Forecast Wastewater Rates... asc BO 5.3,4Projected Residential Wastewater Bills cc BO DISCUSSION OF BEST MANAGEMENT PRACTICES (BMP).,.,,,,....83 6.1 FINANCIAL PROFILE.......... 6.2 DEBT PROFILE RELATED... 6:3: OPERATING PROFILE RELATED 5. reer eterer etter eoriiit iii reer serene Water and Wastewater Rale Study xxxEND_PAGE:treasury02_b4_231_338_016 000247 This page intentionally left blank to facilitate two-sided printing, City of Flint xxxEND_PAGE:treasury02_b4_231_338_017 000248 4 EXECUTIVE SUMMARY ti BACKGROUND OF THE STUDY On November of 2015, the City of Flint ("City") engaged Raftelis Financial Consultants ("REC") to perform water and wastewater utility rate studies: Tha scape of services Included the following: 3.2 Evaluate the adequacy of existing water and wastewater revenues ta meet each Utility's projected revenue requirements Develop comprehensive water and wastewater financial plans based on sound financial Mahagement practices fora | 0 year forecast period Determine water and Wastewater rates which adequately recover the cost of operating the water and Wastewater utilities under the existing rate structures and provide alternatives based on.a comprehensive cost of service study Analyze the impact of transitioning from the ase of purchased potable water from the Detroit Water and Sewerage District {“BWSD") to the treatment of raw water from the Karegnondi Water Authority (“KWA"}. Review the City's water and wastewater operations in comparison to Best Management Practices criteria, ADEQUAGY OF EXISTING WATER AND WASTEWATER REVENUES Charts ES-1 and 2 below summarize our ‘conclusions with respect to the adequacy of water aid Wastewater reyenu# at existing rates; As the charts indicate, beginning in FY 2015, water and wastewarer utility revenues are insufficient te recover tach utility's revenue requirement Key drivers uf this disparity are: Amarked decrease in tilled usage, the cause of which is currently being evaluated ly RFC ulider a separate contract. A sormal pattern of declining per customer usage for both utilities overall due to conservation, efficient appliances, etc. Increases in utility revenue requirements associaced with the financial plans lactuding operating cost inflation, capital improvements and policies. which support the sound financial management of each utility in accordance with best manapeniant practices. Consequently, the preposed increases in rate revenue are pecessary to ensure aach utilicy can adequately furd its operation and maintenance expenditures, make payments on existing debt seryice, provide funding for needed capital improvements end ensure adequate operating reserves: Water and Wastewater Rate Study | | xxxEND_PAGE:treasury02_b4_231_338_018 000249 ES-1; Water Utility Revenues at Existing Rates $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 515,000,000 $10,000,000 $5,000,000 S55 Total Gross Revenue Requirements ——— Grand Tote! Water Revenue at Existing Rater ——— Proposed Rate Revenue ES-2: Wastewater Utility Revenues at Existing Rates 340,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,060 S$ FY 7014 Fe 291s FY 2016 FY 2017 FY 2018 FY 2019 tsa) Total Gross Revenues Requirements ——— Grand Total Wastewater Revenue et Existing Rates —- Proposed Rate Revenue = | City of Flint xxxEND_PAGE:treasury02_b4_231_338_019 000250 1.4 WATER AND WASTEWATER FINANCIAL PLANS Tables BS-3 and ES-4 below summarize the proposed water and wastewater financial plans and rate revenue increases for the first'5 years of the forecast periad, The financial plans and proposed increased in rate revenues are driven by the following factors: * Inflationary increases in O&M expenditures (or both utilities * For the water titility: o Decreases in revenues associated with the cessation of service to Genesee County © Decreases in O&M expenditures associated with an elimination of DWSD water purchases o Tnereases in C&M expenditures associated with transitioning from backeuw to primary operation of the Flint WTP oO Increases in capital expenditures associated with improvements to the Flint WTP in Preparation for the treatmeny of raw water from KWA o Increases in debt service associated with Flint’s share of projected KWA debt service + Necessary cash funded recapitalization of wastewater utility assets * A build-up, for each utility, of operating reserves equivalent to 90 days of projected O&M expenditures acd debi-service payments, the minimum, according to Anancial management practices ("BMP"), ES3: SUMMARY OF WATER AND WASTEWATER FINANCIAL PLANS Fon Mate vu a a Se Fn red Nave wv thar ae erating (ee sities | Rast t2feisrs = wmins & (Haim + Aw SNe ee ese i ‘ AUgI nd) Me eeive Hm Hele liisreeer eo ' ul LS ws F sorte Ss eran ¢ ' ’ | ee st | oe a | a eee er | {earn serben TEN PHP waa = JGR = Tee F varinn = Tee ara (bara aan es + aoc q2MOn F Dawe 4 ne, 8 TT ek orzo § Wrest ihren = ‘ofan & Woon wWheag (36 fecal ‘ Cer 797 EF Expekt ES FOIE snsen 4 324,002 £ i WaT a os [Craw Vite Wnstewstar avenue at Bo cieg Mates ‘ JAMad banat The veny Ream ively liverreet ! CNM (toa Anrwmruies i he rst on in tor dense Ftc Lia are bial (Goi AEVEwUE TEOUINEMENTE © wis & nm < f 2,033,208 gasore 3 som cs sme eer = mea rn ame 3 oar = los 8 0e3.090 some Amo £ eam F 2024. > 1. Thin = sarta & saasiyans Tas) & 50000 & vO & ntsarsth & aoe kab) THF NT © Water and Wasiewaler Rate Siudy | 3 xxxEND_PAGE:treasury02_b4_231_338_020 000251 ES-4: Annual % Rate Revenue Increases F¥ 2015 PY 2g16 FY2037 FY 2018 FY 2029 Water Ublity Wastewater Utility As indicated in the previous section, water and wastewater uillty revermas at existing rates are not adequate to recover the projected costs: gach utility will incur over the forecast period. Consequently additional rate revenue will bs needed to ensure adequate récovery of each ucility’s revenue requirements. {4 COST OF SERVICE STUDY AND WATER ANG WASTEWATER RATES Table ES-5 below summarizes the results of the water and wastewater cost of service studies, The customer classes included are those which are recognized in the City's existing customer information system ("CIS"). While the City does not currently have etther a water or wastewater rate structure which recognizes these customer classes, rates by customer class have been calevlated and are included as appendices A and B to this report. The totals for each customer class represent the contribution of that class to the overall costs of each utility. This is based on rhe allocation processes described in sections 4 and 5 of this report. Given the transition fram KWA to DWSD the City will not be making any rete structure changes at this time. Itis our opinion that che current water and wastewater rate structures are reasonable. The declining block water rates generally recognizing the fact that higher volume customers (Je. large commercial and industrial) contribute less to peak demand, and overall water utility costs. Additionally, the relatively high propertion of fixed charge revenue recovery provides a less cimarically variable revenue stream, which given that the majorlty of the urillty's ensts are fixed, is entirely appropriate. 9 | City of Flint xxxEND_PAGE:treasury02_b4_231_338_021 000252 ES-5: SUMMARY OF COST OF SERVICE STUDY RESULTS es rT CUSTOMER CLASS Allocated Cost of Service 18,345,672 16,412,799 15,283,704 13,378,697 370,646 Total Outside City Residential COS Total Outside City Cammereiallindusinal COS Total Outside City Lawn OGS Total Outside Clly COS Total Systam Gost of Senice Tables 5-6 and ES-7 summarize the projected fixed and volimetric rates for the first 5 years of the forecast period, given financial plans and rate revenue incraases proposed above. Far every dollar uf rate revenue generated by each utility appraxmately 2.66 is derived from Volutjetrit charges and $,34 js derjyed Tom fixed charges. Ibis typical For water and Wastewater utilities to design fixed charges Which recover, at a miniramm, the costs of métér reading, billing and collection and custamer service, Additonally, hxed charges may also relate to.fixed investment in utility assets associated Wath providing service which is available at all times regardless of usage levels by City customers, These costs, known as readiness (o serve costs, have also been incorporated into the water and wastewater fixed charges. Volumetric rates recover the variable costs associated with operacing the water and wastewater utilities, For the water uulity variable costs are asseciated with water treatment, transmission and distribution, pumping, and storage and are driven primarily by the design requirements associated with peak water usage. For the wastewater utility variable costs are associated with wastewater treatment, collection, and pumping, and are driven by the wastewater yolume and strength, Water and WastewaterRate Study | 6 xxxEND_PAGE:treasury02_b4_231_338_022 000253 Peni! S Increcew bn Rake Ravenuea Varn) inside City Al) Clenene fade Ciry Block § @35 CCF jscer) 5 7a nse City Breck 2 SMM COF OCF) § a Viti Clty Biel 3 abreROI OCF (OCF) 4 4.79 ou! Oued de City Ail Clanvon ‘Cuistte Cy Bleek | oascor (siccry | 3 ues Oviside iy Block ¥ MDM CCR SICK) oS “OTF ‘Mnside Chy Block 5 ow 200CCr OTFA § ae ANtusl % Increase [n Rate Neyonios Tomnt indie City Al Claes Tota) Guede City All Clagsoe 4 City of Fim xxxEND_PAGE:treasury02_b4_231_338_023 000254 ro meee omer es hoes eo p20 vue dese? yeure ge iee 00 it's was raters vonez pray ogee OC ote wee ocnet Of Po we aaa pana aa spews. Se Ce ee ore en or me oe ey Rteise svar rope 1 L00'» efavoe is os oe | um me aie sy FY dort ane 4o0 ole ua ua a8 ordt weet ip ee Great mice weet mith ice Hens 1NGLE am w't5 ter wn re'eay) Weis deere WheREL icone #2 5u6 al epee 6S Our Abba va ved’ TLTANT was! witee al tetetttatatntal nen he ne nee 4 | Ape ary oyemaise ad plterejenh ee a ak it ee or nr me re Ce ed eee eee eee aan io ye ade ese dae We ot0r ite Lise (oats sagt Sutsey 92009 Wwreee sere wee nw Some e400 Tran re ee re — EPSR yHtD GFL gS PART UWA SS9uVHO O3x14 HAL ree Ole ore oeee moe wo tee Ae snes ye seit Mi aba" daeace ® some Hevge's & PS aeht OF hee Leite ae Spb ve a wey a wy ae ed +e weet Pi bac's a's eb cahr St ons wey tee) ie Sr dee ate aa aoe od “Varn ewewe ene we aD * aft at 7 4 at 6 are -t wt ae Hae mara 3 42 toa ENE = the « ey ae wenepe ay 413 APS) Az tt atl oF a “ ” at wes enverpey Alc semi xxxEND_PAGE:treasury02_b4_231_338_024 000255 1.5 TRANSITION FROM OWSb'TO KWA A key aspect of this study involved analyzing the impact of the anticipated Apri) 1, 2014 transition