Correspondence between

Eric In recent discussions with the DWSD Director, the new option of twinning the 72-inch main with another main was discussed. DWSD believes that that twinned line from the Imlay Station to FL-1 (master meter at Potter and Baxter) would be a Commont to All (CTA) cost and therefore allocated over the entire customer base. However, from FL~1 to the WTP would probably not count as a CTA cost. DWSD would consider rolling the cost of the extension from FL-1 to the WTP into Flint's rate. DWSD stated that for them to assess the rate impact of twinning the 72-inch water main, they would need an estimate of the engineering and construction cost. If you would like us to put together this estimate, please let me know. | believe we have the 72-inch pipeline profile in house and that will help us to better estimate the cost associated with river crossings, tunneling, etc. of the actual route. Dave xxxEND_PAGE:treasury01_b06_0561_0924_102 Koryzno, Edward (T. reasury)

Eric The purpose of this email is to request compensation for the effort that is in addition to the original scope of work. We have identified additional tasks below to describe the work and the level of effort required. The estimated fees for each task would be billed on a time and material basis, not to exceed the total shown for the work described. Task 3.3: This task would include the effort that has been expended thus far in analyzing and responding to additional comments and options presented by the KWA and DWSD. The work has included consultation with Treasury personnel, 96 xxxEND_PAGE:treasury01_b06_0561_0924_071 ie ee analyzing comments provided by KWA to the December 20" presentation, and our detailed response to the KWA comments. All documentation of this work has been provided to Treasury. Estimated Level of Effort: $7,000 Task 3.4: The Treasury has requested that TYJT perform a site visit of the Flint WTP and evaluate the plant as it relates to its capacity to sufficiently treat river water and proposed lake water. This effort would include the services of a process engineer and chemist with expertise in water treatment (see bio below). Work would include review of pertinent reports and documentations as well as monthly operating reports and water quality data. The scheduled site visit would be completed and then a memorandum of findings would be produced and provided to the Treasury. Estimated Level of Effort: $8,500 Task 3.5: This task would be used to cover other services that may be required until the determination is made by the Treasury regarding the best solution for supplying the City of Flint with potable water. This work would be as required and approved by the Treasury to include additional consultation, participation in meetings, and documentation of findings. Estimated Level of Effort: $10,000 Per the contract TYJT will continue to charge services on a time and material basis in accordance with the approved rate schedule, Approval of this additional work is requested. Thank you, Dave Ms. Janice Skadsen’s Bio: Ms. Skadsen is an environmental scientist and project manager with extensive experience in water quality issues, particularly as they relate to drinking water systems, including water treatment processes, source water issues, distribution water quality, and regulatory development and compliance. She was a water quality manager for the City of Ann Arbor for 13 years and has a thorough knowledge of water quality needs from the client’s perspective. As Ann Arbor’s water quality manager, Ms. Skadsen works for the national firm, CDM Smith and provides her expertise to their clients for projects throughout the country. 97 xxxEND_PAGE:treasury01_b06_0561_0924_072 a __ ee, Nathan priaine ae 2 *20km a Weta. _ —s oe pees wel “Hun lost. Aa ML —2fele yb DesecDine i. Fatt dtd te aged nw Dew oar cE ———————— Aceh "eA Us OT a VY THe an coe | IQ ad ol ih ad ! ee) nan Us, 0 xxxEND_PAGE:treasury01_b06_0561_0924_073 Flint Water Supply Questions Office of Fiscal Responsibility January 24, 2013 . Please describe your latest cost estimate of construction. When will the intake be let for bids? Is it still estimated to cost $23,000,000? Why is KWA the most cost effective option for the City of Flint? Please describe. . Identify the construction contingencies included in the project and why you believe your estimate is accurate than Tucker, Youngs? . How will Flint pay for any costs, overruns, or a delay in construction by KWA? . IF Flint joins KWA, do you still intend on purchasing Flint’s 72” main to supply the Genesee County System? . Will Flint be able to finance its water plant capital upgrades of approximately $5,000,000 by using Genesee County G.O. bonds? Will Flint’s share of KWA financing be provided by Genesee County G.O. Bonds? . What emergency power backup is provided by the KWA project? xxxEND_PAGE:treasury01_b06_0561_0924_074 7. Does Flint need to purchase 30% of the KWA capacity if Flint repairs the water leakage in other their distribution system (estimated at 30%)? 8. What does Genesee County believe will be their finished water cost to customers once its treatment plant is complete and online? How much cheaper is this than Detroit? 9, Can Flint’s water plant, if joined with KWA, treat both lake water and river water, which is extremely important if it is provided as emergency backup water to KWA? Will KWA provide funding for this? 10. Would KWA purchase Detroit’s 72” main if given the opportunity? Ifso, why? 11. How does Flint plan on paying the premium charge for water from DWSD while the KWA system is under construction? xxxEND_PAGE:treasury01_b06_0561_0924_075 Cline, Richard (T reasury)

Eric To follow up on our discussion yesterday about Flint now not wanting to blend their water, | took a look at the rates assuming a parallel line was installed along the 72-inch route. If DWSD agrees that it is a Common to All (CTA) cost then there should be no impact on Flint’s rate directly. With this assumption | took out the cost of operating the Flint WTP, since it would no longer be needed for back up to the 72-inch line. The summary is shown below. As you can see, the 18 MGD option from DWSD would then be less cost than the KWA costs (their estimate or ours). Dave [| __ Option | Costs through 2042 Flint WTP Only 590,441,893 e DWSD 18 MGD Max Day at P&B DWSD 8 MGD Max Day at Imlay KWA 10/31/12 Update DWSD 8 MGD Max Day at P&B KWA-1 DWSD 12 MGD Max Day at Imlay DWSD 12 MGD Max Day at P&B KWA -2 wereuwnyyyYYyY uy wm 605,004,098 634,795,488 649,775,166 672,671,705 707,279,715 725,576,803 762,110,308 766,784,313 OAnNnN DHMH PWD 106 xxxEND_PAGE:treasury01_b06_0561_0924_058 Koryzno, Edward (Treasury)

Eric | ran some rough numbers and | would say that the twin pipe for Flint’s 18 MGD demand next to the 72-inch main would probably be a 24 or 30-inch pipe and approximately cost $50M. | hope this helps. Dave

Dave, Thanks for the information. | will be in-touch. 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] CONFIDENTIALITY NOTICE: This e-mail, and any attachments, 1s for the sale 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.

Eric 116 xxxEND_PAGE:treasury01_b06_0561_0924_023 Sorry for the delayed response; in addition to the holidays we also moved our office. We are just getting things organized. Below is my response to your questions. Please review and let me know if you have any questions. Additionally, as we discussed at the presentation. We will wait to hear back from you regarding the January 10° meeting with Flint and what adjustments will be needed to the schedule. However, we will begin drafting the report.

Importance: High Dave, Good afternoon. | hope you had a good holiday and are planning on a good New Year. Thanks for the presentation information. Just to follow-up, it appears that no additional presentation on the 15th is being asked for. Should that change, } will let you know. | have some additional questions | want to clarify with you. Some of these are just internal questions we have and want to make sure we are interpreting your presentation information correctly. | have highlighted my specific questions for clarity. ® You should have received a copy of a letter from DWSD to Flint dated December 21%. As | review the options that they provide Flint, | note some differences with what you outlined as the DWSD options for Flint. Have you taken these changes Into account? If not, what Is the impact these “latest” proposals will have? Yes, we did receive a copy from the Director dated, December 21%. The proposals appear to be similar to what we presented for the 18 MGD maximum day customer from P&B and from Imlay. However, the attached exhibits referenced were not attached for us to review the specific rates. Overall, | have some broad, “strategic” questions: e Anticipating a return of future growth to the City, what is the maximum MGD DWSD could provide to Flint? What about KWA? The overall question is whether either entity could provide more water to Flint than is anticipated if they needed to. Regarding the KWA, we do not have specifics on the route and profile so we can’t do a hydraulic analysis to determine the additional capacity that could be provided by their proposed system. However, prior hydraulic analyses of the existing 72-inch main has shown that in excess of 90 MGD can be supplied to Flint by DWSD. ® On the flip-side, if decline continues in Flint, what happens if Flint needs less water than projected? What would that do to the financial projections? Regarding both proposals we need to know the volume of water purchased to do a reasonable estimate. With regards to KWA, since the percentage of the water supplied would be reduced, we would need to confirm that their capital investment obligation would be reduced accordingly based on Flint’'s percentage of the total volume. 117 xxxEND_PAGE:treasury01_b06_0561_0924_024 e Given Flint’s current financial situation, did you analyze the City’s ability to actually sell bonds to make any of these improvements? As we indicated in our presentation, this is a concern. It has been assumed that the KWA bonds would be backed by Genesee County; however, Flint would still need to bond for the improvements at their WTP. 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? We were not requested to analyze the capacity of the public to pay the water rates, so | can’t respond to that question. However, we did include the rate increase in all of our scenarios. It is shown on our spreadsheets as, “Escalation/Inflation Rate.” Specifically: e What Is the total cost for Flint to buy the 72” line fram DWSD? | see a capital cost on that option of $4.7- million. Does that include the 72” line? Related to this, do we know what the projected lifespan of that line is? What would the replacement cost be? A question we are having is whether Flint would have the financial and/or operational ability to maintain this line. Also, am unsure, once you account for O&M costs and bond payments, if there is enough overall benefit to Flint owning that line is If they remain with DWSD. The $4.7M shown is for the purchase of the 72-inch line. It is the best estimate DWSD has provided so far, but the actual cost would be dependent on negotiations between DWSD and Flint. The bond payments are included in our analysis. DWSD has also offered to “role” the cost into the annual Flint water rate. Our analysis did indicate that the Imlay option was less expensive than for most of the other options. The pipe itself is a pre-stressed concrete cylinder pipe (PCCP) that has excellent life expectancy. Assuming that the water main was installed in the late 60’s | would suspect that the life expectancy to be beyond the planning period we analyzed. e It appears to me that the O&M costs for the Flint Water Plant are very high. If Flint were to continue to buy water from DWSD, other than for a back-up, is there any reason they could not avoid those costs by mothballing the plant and having DWSD provide 100% finished water to them? The issue has been related to MDEQ requiring that Flint have a backup supply in case their service is interrupted by a loss of the 72-inch main. Flint is supplied off a single line and that is why the redundancy is required. e Regarding KWA, perhaps | missed this explanation, but why are the options for KWA for 12 MGD as opposed to the option for 18 MGD? The 12 MGD is the daily average. KWA has indicated that their system can provide the maximum day demand to Flint as well. e Is there any financial sense for Flint to close its plant and KWA builds theirs bigger to accommodate them? That option was not investigated and we do not know the associated cost of the Genesee County plant. However, each community was pointing to an inter-agency agreement that wauld allow them each to provide a backup supply to the other. That would not be possible with just one plant. e Regarding your spreadsheet for the KWA Proposal 2, | note that it appears you are using numbers ($7.758- million) from Proposal 1 in calculating some of the capital costs. ts this correct? 118 xxxEND_PAGE:treasury01_b06_0561_0924_025 Yes, this is the $7.1M projected in the 2009 report that was adjusted for inflation at 3%/year for three years. | recognize what you provided was a preliminary report, but these are some questions | noted as your information was reflected upon. | would appreciate your comments on these questions. Please note that | will not be in the office again until January 3, so please copy Randall Byrne, OFR Manager, on any responses. Regards, 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] 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. aoenel Original Message---~