Tom and Wayne:
This is as revised based upon additional notes from Eric. This is ready to go.
Fred
He ae Nee
Summary from September 15, 2015, conference call between Treasury and City of Flint officials.
The participants were: Tom Saxton, Wayne Workman, Fred Headen, and Eric Cline, from Treasury, and Dayne
Walling, Natasha Henderson (City Administrator), Pete Bade (City Attorney), Tony Chubb (Assistant City
Attorney), and Jody Lundquist (Finance Director) from the City.
Issues discussed:
e The City of Flint is involved in two lawsuits regarding water and sewer rates: Kincaid and Shears. Kincaid
was decided by the Michigan Court of Appeals on June 11, 2015, The Court held that a 35 percent increase
in water and sewer rates imposed by City officials on September 16, 2011, violated the City charter and that
EM Mike Brown had no statutory authority to later ratify those rate increases in May of 2012. The Court of
Appeals remanded the case to Genesee County Circuit Court. City officials intended to appeal the Court of
Appeals Kincaid decision to the Michigan Supreme Court, but missed the filing deadline by one day.
« Shears was decided by the Genesee County Circuit Court by a non-final order on August 17, 2015. Among
other things, the Court enjoined City officials from any longer imposing the 35 increase in water and sewer
rates; from disconnecting water or sewer service due to delinquent bills dating back to September 16, 2011;
and from placing liens on property due to delinquent bills dating back to September 16, 2011. City officials
have filed an appeal with the Michigan Court of Appeals seeking, among other things, a stay of the Genesee
County Circuit Court injunction.
e In the interim, City officials are complying with the Court’s order in Shears. City officials estimated that
removal of the 35 percent increase in water and sewer rates from future bills will cost roughly $600,000 per
month, or $7.2 million annually, Therefore, if the Court orders either refunds or credits against future water
and sewer bills, retroactive to September 16, 2011, the cost would be roughly $28.8 million to date (i.¢.,
$600,000 per month times 48 months to date). The City Administrator indicated that City officials have not
developed a plan to issue a refund of this magnitude because the City lacks sufficient funds to do so and they
believe the City would be unable to operate at that point.
e The City Administrator noted that the accounts receivable for water and sewer operations that are over 30
days old has increased from $7.8 million to $8.4 million since the Shears order. She also noted that, because
xxxEND_PAGE:treasury01_b37_6553_6782_089
City officials are prohibited from disconnecting water or sewer service for non-payment, they expect this
number to continue to increase.
e The City Administrator noted that the measures taken to preserve funds within the water and sewer system to
address these issues have delayed needed capital improvements, which has further exacerbated problems
within the system. However, City officials cannot address capital needs without additional revenue.
© The City Administrator brought up and stressed the importance of the State assistance sought by the Mayor
in his September 14, 2015, letter to the Governor. The Mayor requested $30.0 million for infrastructure and
capital improvements related to the City’s water and sewer system. Wayne indicated that the Mayor’s request
had been received and promptly disseminated within Treasury and was being reviewed. However, he also
indicated that, in his opinion, existing funding options were limited without additional legislative action.
ae He He ok