Importance: High
Ed/Roger,
Per your request, here are some questions regarding the proposals by both KWA and DWSD that our review of the
information provided in the preliminary report from TYJT has raised. | believe it beneficial for the EFM team in Flint to
review these questions prior to our January 10 meeting. We are also trying to organize an internal meeting on Monday
to discuss this entire issue before we meeting with Flint.
© What is the current rate Flint is paying to DWSD for water? How many MGD is Flint currently purchasing? What
is the current cost for water that Flint is currently paying?
e Is there an estimated amount that the Flint water system is currently losing? How is this loss impacting current
or future purchases from either DWSD or KWA? My recollection from our meeting with Flint officials and TYJ&T,
the estimated loss is 25%
e Isthere a plan to address water loss? {s there a projected cost for these repairs? From the same meeting | recall
Flint officials stating that they have replaced 3,000+ of a total 4,000+ water meters.
© What is the City’s current repair/maintenance budget for the water system?
72
xxxEND_PAGE:treasury01_b06_0561_0924_004
* How old is the Flint Water Plant? What is its projected lifespan?
* How large is the current staff at the Water Plant? What staffing level would be required to run the plant at full
capacity?
e@ Does the City’s Water Fund have a budget surplus? Are any funds available for additional repairs, staffing, capital
improvements, etc.?
e@ What is the current maximum production capability of the Flint Water Plant? What is the current annual cost to
run the plant?
e Given the current financial situation, does the City have the ability to sell the bonds necessary to make the
improvements being proposed for the Water Plant?
e It appears that the overall expenditures required to cover any of the outlined options are going to require water
rates to rise almost annually. Has there been any analysis on what rates might look like and/or what the capacity
of the public to pay these rates might be?
® The December 21* letter from DWSD to Flint outlines some different options for Flint than what was presented
by TYIT. Is the EFM team aware of these changes? What are the potential impacts?
e Is the projected cost to acquire the 72” Line from DWSD $4.7-million? The December 21° Letter discusses a
“lease” of this line. Is this a true lease or a lease-to-own situation?
® What is the projected lifespan of this line? What is the annual maintenance cost? What is the replacement cost?
Does Flint have the capability to maintain this line?
e Has any consideration been given to if any of the options can provide Flint with water above the current
projections in the event that the City experiences unexpected growth? Do we know the maximum MGD DWSD
can provide? Do we know the maximum MGD KWA can provide?
e Has any consideration been given to the operational or financial impacts if decline continues in Flint and what
this will do to water purchases and debt payments?
® Given the very high O&M costs for the Flint Water Plant, could the City “mothball” the Water Plant and have
DWSD provide 100% finished water?
® Could the City partner with KWA to increase the size of their water plant and purchase 100% of water from
them? Could the City use DWSD as a backup? Could KWA purchase or lease Flint’s water plant for redundancy?
® Has any consideration been given by Flint to negotiate better terms with either KWA or DWSD?
If there are any additional questions or you wish to discuss this further, 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, MI 48922
(517) 335-2078 |
[email protected]
xxxEND_PAGE:treasury01_b06_0561_0924_005
ROWE PROFESSIONAL
SERVICES COMPANY
Large Firm Resources, Personat Attention. ,.
January 7, 2013
Mr Edward Kurtz, Emergency Financial Manager
City of Flint
1101 S Saginaw Street
Flint, MI 48502
Subject Review of December 21, 2012 Presentation — City of Flint Water Supply Assessment
Dear Mr. Kurtz
As requested, we have reviewed the analysis of water supply alternatives for the City of Flint which was
presented to the State Department of Treasury by Tucker, Young, Jackson, and Tull, Inc (TYJT) on
December 21.2012 Our review is attached and summarizes the primary differences between the TYJT
assessment and our previous studies and provides explanations of why we believe there are differences
We have also reviewed the options for continued DWSD supply included in the TYJT presentation. It is
not clear whether these are presented as specific offers on behalf of DWSD or included as examples for
analysis. but we have noted some items which we believe should be addressed and considered as these
options are compared.
If there are questions, please contact me
Sincerely.
ROWE Professional Sent ; Compans
PE Aun. mo
‘James E. Redding, P.E.
Vice e President / Director of Engeermg—-
Attachment
R Oulanuary 7 Kurtz.docy
Engineering {| Surveying | Aerial Photography/Mapping | Landscape Architecture ] Planning
Corporate: The ROWE Building, 540 S. Sagmaw Street, Ste 200; F O. Bax 3748 + Tint, MI 48502 * O (810) 341-7500 © F (810) 341-7573
With Offices In: Lapeer, MI. * Mt Pleasant, Ml * Grayling, MI © Tri-Cities, MI * Myrtle Beach, SC
wiww.rowepse.com
xxxEND_PAGE:treasury01_b06_0561_0924_006
Review of TYJT December 21, 2012 Presentation
City of Flint Water Supply Assessment
Prepared by Rowe Professional Services Company
DWSD Supply (Slides 7 through 9)
1.
ROWE
The 8 mgd maximum day supply by DWSD options can result in periods during the summer
when most of the water to meet demands will be supplied by the City from the river. To aid in
maintaining a consistent water quality, softening of the water from the river should be provided
with this option, greatly increasing the City’s costs.
Upgrades to Flint’s WTP and dams will be needed for options requiring blending, since the WTP
will be required to provide continuous, reliable service and compliance with recent surface water
treatment regulations.
The rates for the options analyzed are shown on Slide 9 as “TYJT Estimates”. Options and rates
shown are different than presented by DWSD previously.
DWSD TYJT
11/29/2012 Estimates
18 mgd Maximum Day - P&B $16.24 $16.37
12 mgd Maximum Day - P&B $16.30 $16 31
8 mgd Maximum Day -P&B $12.68
12 mgd Maximum Day - Imlay $14.38 $14.38
8 mgd Maximum Day - Imlay SIL AL
Since the rates used in the analyses are shown as estimates, are they actual offers or just presented
as “what if” scenarios?
We assume that the Imlay options are based on transfer of the 72” main through Lapeer County to
Flint. The analyses show a capital cost of $4.7 million; we assume that this is the proposed
purchase / lease cost to Flint. This should be clarified along with pertinent details.
If the transmission main 1s transferred to Flint, what are Flint’s responsibilities regarding service
to the Lapeer County customers? If they remam DWSD customers, then Flint should receive
some revenue for the use the main. It does not appear this 1s included in the TYJT analyses.
If the transmission main is transferred to Flint, we assume that the city will be responsible for the
maintenance of the 50 year old main. The TYJT analysis did not include this.
Do the rates shown include the credit for “reliability” which had been discussed with DWSD?
If the point of commerce 1s changed from Baxter and Potter to Imlay, a new meter pit will be
required. The cost of this does not appear to be included in the TYJT cost analyses.
January 8, 2013
xxxEND_PAGE:treasury01_b06_0561_0924_007
Flint River Supply (Slide 10)
1. If any of the “blending” options are chosen, it will be necessary to upgrade the Flint WTP and
dams to provide reliable, continuous service and compliance with recent surface water treatment
regulations.
Data Collected (Slide 14)
1. The slide notes that Flint blending 1s based on DWSD supplying 2/3 and Flint supplying 1/3 of 12
MGD ADD. For the maximum day demand (18 mgd), if DWSD supplies a maximum of 8 mgd,
Flint will supply 10 mgd or 56% of the total. However, such a large portion will make it more
difficult to blend and achieve consistent water quality. Flint will need to soften water for these
options
Benchmarking Comparisons (Slide 16)
1, The slide subtitles are “KWA O&M Inflation Factor” and “DWSD and Flint Rate Inflation
Factor”. It seems appropriate to benchmark O&M costs for the KWA, because future costs of
service will be dependent on how operating costs are impacted by inflation. For Flint, 1t does not
seem appropriate that “rate inflation” from other utilities be used to determine the impact of
inflation on future cost of service. Rates are impacted by inflation, but also by other factors such
as debt and customer base. O&M expenses and rates are different and care should be exercised
not to mix the two during analyses. The TYJT analyses apply an inflation factor (based on rates