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Nick — attached are the info/presentations we talked about earlier. As we discussed too we have meeting @ 10 tomorrow morning. | would suggest maybe before John starts drafting that we go thru the attached first. Let me/us know if you are ok with that.

We've been asked to put together a couple of pages for the Governor on financing options for pipe replacement in Flint Let’s assume a $100m project 1 found the 1/19 document titled “water infrastructure improvements...” It’s a good start What I need is a memo that lays out the options for the Gov (1) SRO—basically just incorporate John’s SRO Federal government proposal (2) G.O options—CMI, GLWQ (quality of life bonds doesn’t seem big enough to mention) (3) Revenue bonds—bottle deposit, etc Are there other options we should discuss? Non-state dollars? For each, a short write up on pros and cons John—can you take the lead drafting something tomorrow? | know its short notice, but hopefully most of the work has been done already Thanks xxxEND_PAGE:treasury01_b39_6977_7316_143 suondg uoyeJsuey onusAdy pure usessoI1g sJUSWIDAOICUIT JINIONIJSLIFUT JOISAY xxxEND_PAGE:treasury01_b39_6977_7316_144 eet g Se Toh a Sei Sheree aBayiaud jueyo 0} joelqns “IVLLNACIANOD esodind SIU} JO} PSPUSLULUODSJ JOU a’e JNg paJojdxe useq sAey Spuog enuensd Alejo] pue uoHeziNoes OD9e QO} ‘sisAjeue siuj Jo uedsy < soBueyo jjlg ej}j0g J0/pue ebesn puny wsodeg ayjog «< suoijdo ssauaal6so} Vdq Jo/pue (,,4YMAAC,,) pun4 Bulajoasy s912A/A Buryuug (.V4W,) SAoujny soueul4 ueBIYsIyy OY} yo UONEZINN < (,LOMID,) Wesboid Ayjen® sayeqy Seye7}eAH - «SPuog ayI7 Jo Ayjend, se UMOUY OS|e “(,.dd3,,) WesHOlJg UONDS}Ol_ JEJUSWUOJAUZ GIND,,) Weibord aavenu| uebiYyoIWj ues} SPU0gG OD S}EIS < SJUDLUSAOIAUU! SINJONAJSEYU! JO}EM JOJ SPSsooud Jo S9OINOS jeUs}Od se paljjUSp! 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(T reasury)

xxxEND_PAGE:treasury01_b39_6977_7316_139 >> >> >> >> Either way, we are still left with a possible situation where we are through April, only spend $25m, and the water still isn't safe >> >> Would we have to stop? Wouldn't we want to spend the last $5m on May bills? >> >> How about saying something like "program continues until either the water is determined safe, or $30m is spent, whichever is first" >> >> >> >> -----Original Message——

>> >> >> Is there a way to find out what day of the month their billing cycles end on? >> >> Committee is still going, but | talked to Rep Poleski and feels pretty strongly about having an end date as his language contemplates. >> >> It would mean that bills containing April 14th would be the last bills covered. >> >> If the bill covers April 4- May 4 for example | think this would meet the April 2014 to April 2016 goal. If the last bill covered March 15- April 15th, there would be a two week portion of April not covered. >> >> Sent from my iPhone xxxEND_PAGE:treasury01_b39_6977_7316_140 Sampson, Jeremy (TREASURY)

Al Mooney seems to be diligently working the system. | have highlighted several updates from the City. We should talk in the morning before you meet with the Governor to review the issues. In addition, Jady may be meeting with the Mayor later this evening to discuss a couple of issues so | may have more updates. Larry xxxEND_PAGE:treasury01_b39_6977_7316_118 Flint Water Bill Relief-Top Implementation Issues Project Scope The Flint Water Bill Relief Project will distribute an appropriated amount of state funds to the tustomers of the City of Flint water system. The Project will focus on overcoming implementation hurdles, distributing the funds using equitable principles defined in the appropriation legislation and administrative guidelines, and provide detaited reporting to ensure accountability for all the funds received. ( Commented Pa ae tel ar Significant Challenges in Implementing Water Bill Relief *® Communications o Develop a plan which will include media notices, targeted mallings, web-based communications, and/or other communique. Commented [AM2}: Sight revision with added details far o Engage a point person to handle the plan to relieve strain on city staff. joan © BSA software-bullding credit generator and modeling relief Commented [AM3]: Note sever! entries have hart slight oCan the BSA software handle the relief as proposed? oBSA Is at work defining the project scope of the necessary changes. oNeed to also mode! relief on all or a portion of the water service and water commodity penalties. ° Need to tighten timeline for pout the credit senerator. oA date range ‘delimiter will be used to reduce the data set and define the records to integrate into the rellef process. oThe system changes should include the ability to create comprehensive reporting and provide a complete audit trail of all expenditures for water bill relief. BSA preliminarily has provided for d rate of $150/hour for the software modificationg fa ets) J rate testuced d fom their ; tate: charged) and ey © Timeline for relief oGiven the early stage of the defining the project scope, early April is the best placeholder date for when the software modifications will be available following development, testing, and finalization of the relief program. | Commented [AM4): Stight revision with aided detalls for Uighly dependent on the software changes managing the exception emg ceriication, fenr presented b 24,494 Pre-Ruling Balance recotds and 3,531 water/sewer balanced Can rellef be “fully provided by the deadline in the statute? Michigan Department of Treasury February 19, 2016 xxxEND_PAGE:treasury01_b39_6977_7316_119 How the credits are applied o Need to show the sewer bill on future months to make clear that relief was provided for the water bill. oRelief will be provided on active accounts In the form of credits on water bills, not refunds. oCan the 65/20 relief be provided on penalties or-ean-penalties be-waived-aitegether. Need to have this modeled In the credit generator to make sure it fits within the $30 million? Updating customer information prior to running the credit generator oDelinquent accounts that were on the lien list for 2015 need to be restored in the system (i.e. 3,531 water/sewer balances). offhose billings that are now collectible after Shears v. City of Flint amended brelminany Injunction order need to be moved back onto customer account history the statis of the settlement of the lawsuits? Commercial accounts that are residential dwellings o Should commercial accounts that are residential dwellings (4 or more units) receive 65 or 20 relief? o How can we be sure the resident received the relief rather than have the relief be kept by the owner? How many are there? oCan the credit generator model this relief to ensure it fits within the $30 million? Handling starts o The credit generator needs to calculate relief to ensure those starting service after April 2014 get the proper credits. |A determination needs to be made as to the specific start date for credit allocations after the April 24, 2014 Flint River cutover date (i.e. at what point was Detrolt’s treated water no longer reaching taps). As_ noted in our discussion by phone on 2/13, this Is not a hurdle. The generator should be more than capable of handling all accounts with activity during the designated period whether active or inactive and regardless of the start/stop date. Handling stops o Targeting relief If a customer has changed residences but is still a customer. o Targeting relief to other bills owed to the city by the customer o Development of a hierarchy for which balances get paid In what order from the rellef credits if funds are available after 100% of the water relief has been provided for the account {L.e. the sewer charges for the account owed to the city, the water/sewer Michigan Department of Treasury February 19, 2016 Commented [AM5}: Tha concept of walving all penalties should be jettisoned as it will become it creates programmatic and policy issues we want to avold, Commented UL6];: Lenguage regarding lien needs tobe | updated to more seeurately communicate delinquency year | of origin and tax year, Commented [AMI]; Updated to reflect the one year In question and added # of records. Commented [AM8): Updated to reflect the @ of records and # of payments made on the Pre-Ruling Balances to mid- February, Commented [JL9]: This 's active litigation. The City must defer to its Counsel on any disclosures. Commented [AM20]: Note the added detail on defining the Initlal dete th use ~there should be separate dates for different districts. A matrix will need to he developed to adjust far the lag time between when meters are read end when the bill calculation routine is processed for the billing district. [four water service staff belleves a billing period included any Flint River source water, the billing district will be granted the entire credit for the period in question. xxxEND_PAGE:treasury01_b39_6977_7316_120 charges owed on another account by the same customer, the water/sewer charges owed by the same customer at Genesee County). o There may need to be an effort to find customers that have left the system to issue a refund. Policy alsa needs to be designed in such a way that prevents or limits the number of customers who intentionally close an account to prompt the refund process and reopen immediately in the same or related party's name. * Lega! agreement with relief to forestall future claims o Local officials need to decide If they need or want to pursue a legal agreement with the customers as part of the relief. This would be an agreement that the customer accepts the relief and foreswears any other claims to rellef on their water bills. ® Payments to city OAs the city provides relief, the state will provide funds to the city. oA thorough audit trail is necessary. This might require the city to engage an outside firm to document all expenditures and create an audit trail, © DHHS clients olf DHHS paid the water bill, the customer should only get relief for that portion they paid. Can the credit generator handle this? have paid on behalf of a water customer Is anproximate of the total credi Michigan Department of Treasury February 19, 2016 As discussed in the meeting held on 2/12, this point may be immaterial for inclusion i bry further discussion, Any customer recelving assistance from DHS is limited to $179 process by which credit balances on Inactive eccounts wil Commented {AMI}: Further definition is needed on the be managed. requested to describe the potential waiver of claina ' Commented 1112}; input by the City's legal counsel is | discussed at previous meetings. " Commented [L13I: State and City must discuss the _tmpact of timing of disbursement from tha State to City. xxxEND_PAGE:treasury01_b39_6977_7316_121 Stanton, Terry A. (T Treasury)

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Ken, For the last question: yes, it is our understanding relief can be provided on the water portion only. We intend to verify and document that the relief was for water and not sewer. Larry

{ met with Rep. Poleski during House Session today. He is working on boilerplate to provide some additional guidance/ audit requirements for the money appropriated for credits. Will share the language when | get it, likely this afternoon or tomorrow. The plan is for the bill to be up in House Appropriations next Wednesday at 9 a.m. How do we want to handle that? Nick, do you want to testify? If Howard and | are to cover it we'll need to spend some time getting a better understanding of the details. Michelle Lange and Scott Starr were also present for the meeting, | told them we would coordinate with them, and DEQ for purposes of the hearing next week. About how we want to handle next week. But from my conversations with staff and members | think Treasury wil! be the subject of most of the questions on this. Finally, Rep. Poleski has been looking at the financial statements for the Flint water system and noted that water and sewer were accounted for separately. | know this came up in our previous meeting with house staff, but he was very interested whether bills were also segregated between water and sewer and whether we could ensure that credits were authorized only for the water portion of the bills. Ken Osborne Legislative Liaison Department of Treasury Desk: 517-241-2474 Cell: 517-388-0968 xxxEND_PAGE:treasury01_b39_6977_7316_041 Robert, Carla M. (T Treasury)

fyi

Fyi... see below

Just FYI, | have attached a larger document we put together on accomplishments in the EM communities. Fred highlighted a couple but this is a good resource for reference on some of our successes across the communities.

| would agree schools are more challenging because of the ‘academic side’ and the way they are funded... While it may be a pretty low bar in terms of gauging success | would say Muskegon Hts & HPS could be mentioned... The schools have stabilized. There was not the disruption associated with a dissolution. There is community support. The reason we have had to keep EMs place is somewhat tied to the fact they are psa districts. Pontiac schools has beena ‘success’. Again, when we first got involved they were a week or two from making payroll. That situation involves a consent agreement not a EM. The ‘jury’ is still out om BHS. DPS is in a category by itself.

Not in my view. The school districts that have had EFMs/EMs (Detroit, Highland Park, Inkster, and Muskegon Heights) have not fared well. Inkster was dissolved and the other school districts have had multiple EMs. Prior to 2011, I would have said the reason was that Act 72 drew an artificial distinction between fiscal matters and instruction/academics and granted EFMs authority only over the former. However, under both Acts 4 and 436, EMs have had control over both fiscal matters and 1 xxxEND_PAGE:treasury01_b38_6783_6976_164 instruction/academics and it appears to have made little difference in regards to lack of long-term success. It may be that because school finances are tied so closely to enrollments, that once enrollments begin a downward spiral, even an EM cannot cut enough, or quickly enough, to keep up.

Thanks Fred Any schools?

Here are three possibilities: 1, Village of Three Oaks. The EFM was appointed on December 1, 2008 and exited after only one year. The EFM resolved all financial issues (including cash flow and accounts payable), while working cooperatively with local officials. Indeed, so positive was the working relationship between the EFM and Village officials that for a number of years after the EFM’s departure, Village officials invited her back for annual events. City of Detroit. The EM was appointed on March 25. 2013 and was succeeded by a FRC on December 9, 2014, after guiding the City through the largest municipal bankruptcy in U.S, history in only 18 months. In doing so, the EM addressed three primary issues: first, a cash crisis that was projected to reach a cumulative deficit in excess of $100.0 million by June 30, 2013; second, recurring general fund deficits (the City had not experienced a positive year-end fund balance since fiscal year 2004); and third, long-term liabilities, including unfunded actuarial accrued pension liabilities and other post-employment benefits, that exceeded approximately $14 billion as of June 30, 2012. City of Hamtramck. The EM was appointed on July 1, 2013 and was succeeded by an RTAB on December 18, 2014. The EM addressed general fund operating deficits. In addition, unfunded liabilities (pension and other post-employment benefits) posed significant obstacles to long-term fiscal health. Actuarial evaluation had indicated the pension plan had $98.4 million in actuarial accrued liabilities, but only $55.8 million in pension assets (i.e., a funding ratio of only 56.8 percent). Fred xxxEND_PAGE:treasury01_b38_6783_6976_165

Um testifying tomorrow on DPS, and | know the topic of EM’s is going to come up Can you give me one or two great success stories of locals or schools with an EM? When has it worked really well? Why? xxxEND_PAGE:treasury01_b38_6783_6976_166 DRAFT v5 — 2-8-16 Emergency Manager Accomplishments Receivership Communities — Emergency Manager Option Source: Emergency Manager Exit Letters Allen Park — Exit Date - September 24, 2014 The city’s structural and cumulative deficits were eliminated and FY14 ended with a positive General Fund balance of $3.2M. Employment contracts and/or Emergency Manager (EM) Orders were in place with all bargaining units. Additional cost savings had resulted from the implementation of a 10% reduction in pay for active employees, the elimination of vacant positions, the consolidation of healthcare plans from five to two}, an increase in co-pays and deductibles, and the implementation of other pension related changes. These savings amounted to approximately $54M. The establishment of the Allen Park Advisory Committee to assist with engaging the community and the development of a Visionary and Strategic Plan. Benton Harbor — Exit Date - March 10, 2014 The city’s structural and cumulative deficits were eliminated and FY14 ended with a positive General Fund balance of $2.3M. The city met its recommended pension contribution during FY14 for the first time in 10 years. Through the use of Data Driven Policing, crime had fallen while arrests and closure rates had increased. Ecorse — Exit Date - April 26, 2013 The city eliminated a $14.6M cumulative deficit and a $5M structural deficit. Also, the city reduced operating costs by $4.3M and increased revenue by $2.3M. The city reorganized several city departments to combine the Police and Fire departments into a Public Safety Department, and privatizing Emergency Medical Services. Included in the reorganization plans are the Public Works Department, the Controller's Office, and the Building Department. The city worked with State Legislature to develop special legislation that allowed the city to re- enter the bond market to borrow money to pay off outstanding judgment levies against the city. The special legislation increased the city's bond rating from a "junk" rating to an "A" rating. Flint — Exit Date - April 28, 2015 The Water Fund deficit was addressed and the Water Fund is solvent but not at the level indicated by city policy. The $7M General Fund deficit was eliminated by June 30, 2015, through a loan authorized by the Emergency Loan Board. Long-term liability costs had been reduced significantly. Approximately, $850M in OPEB liabilities have been reduced to $240M, and new employees were given a contribution towards future healthcare costs at retirement instead of the promise of retiree healthcare. xxxEND_PAGE:treasury01_b38_6783_6976_167 DRAFT v5 — 2-8-16 Hamtramck — Exit Date - December 18, 2014 Savings were made in healthcare for current employees and retirees, and by eliminating non- contracted payments to healthcare retirement and savings accounts. In addition, drastic pay cuts were negotiated with both union and department heads at the city that resulted in substantial savings. Included was the elimination of minimum staffing requirements and some services, such as EMS, which will allow the city more flexibility in managing its financial and personnel resources. These cuts totaled $1M. Jobs previously outsourced were brought back into City Administration, including the City Controller and the City Assessor. The sale of surplus vacant land and tax reverted properties totaled $358k. Lincoln Park — Exit Date - December 21, 2015 In July 2014, the city had an unassigned General Fund deficit of $1,007,245 for the fiscal year ending as of June 30, 2014. The unassigned fund General Fund balance, upon the EM departure, is a positive $186,901. A contract with firefighters was renegotiated to eliminate minimum manning and place restrictions on the number of staff per day that can take time off. Restrictions on sick time were also put in place to stem sick time abuse. As a result, overtime dropped from over $600k per year to a budgeted $50k in FY16. In addition, the Fire Chief and Fire Marshall positions were combined for a payroll savings of $65k per year. In FY15, the city spent $4.3M in retiree health insurance. With the move to a monthly stipend, in FY16, the city was spending $600k per year on the retiree healthcare. Of the savings, $3M per year was shifted to funding the pensions systems while the remaining $700k provided cost savings to the General Fund, Water Fund, and Road funds. Pontiac ~ Exit Date - August 16, 2013 With the implementation of healthcare and benefits reform by consolidating 87 benefit plans into one, the city no longer pays retiree health insurance. Selling excess capacity in the sewage treatment plant to Oakland County for $55M allowed the city to significantly reduce its debt of $87M and eliminate its structural deficit of $9.2M. By creating a regional fire department (merger with Waterford Township), the cost of fire services had been reduced by $3.6M annually. Genera! Fund expenditures were reduced by nearly $30M from six years prior by closing the defined-benefit pensions systems, contracting nearly all city services, eliminating money losing enterprise activities, consolidating departments, and hiring qualified employees. The city contracted with the Oakland County Sheriff's office for police services, which saved the city $2.2M annually. xxxEND_PAGE:treasury01_b38_6783_6976_168 Stanton, Terry A. (Ti reasury)

Adam Carlson in Pscholka’s office asked if we could have someone walk them through how the proposal would work at 3 p.m. today. This would just be staff, but they want to be prepared for action next week and asked that someone who could walk through it in a pretty detailed fashion be available. Adam, Josiah Kissling, Hassan Beydoun from HRPO expected to attend along with SBO. Ken Osborne Legislative Liaison Department of Treasury Desk: 517-241-2474 Cell: 517-388-0968 xxxEND_PAGE:treasury01_b38_6783_6976_137 Robert, Carla M. (T reasury)

Importance: High Rich was cc’d but | don’t know if anyone else knows in the Gov’s office.

FYI, These folks are wanting to do consulting engineering on Flint’s water system. They have an excellent reputation and are wondering if there is an RFP process. Wayne L. Workman Deputy State Treasurer Michigan Department of Treasury

I’ve sent the request and we should have some information in the morning. We can add to the fact sheet as new ideas arise

Perfect Thanks Also, talked to Tom about getting me some background facts tomorrow, i.e. number of water customers, total revenues of the system, current uncollectables, etc \'m out all day tomorrow, but just email a second page of facts Thanks

New one page with edits.

Yes please xxxEND_PAGE:treasury01_b41_7622_7971_146

So you want this converted to one page ?