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Here it is Angela Dempkowski | Senior Executive Management Assistant/Treasury State of Michigan | 430 W. Allegan Street, Ist Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) dempkowskia@ michigan.gov = 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 21 xxxEND_PAGE:treasury01_b31_4719_5108_253 3500 (Rev 01-11} STATE OF MICHIGAN RICK SNYDER DEPARTMENT OF TREASURY R. KEVIN CLINTON GOVERNOR STATE TREASURER DATE: March 17, 2015 TO: Rick Snyder, Governor FROM: R. Kevin Clinton, Treasurer SUBJECT: Status of Financially Stressed Local Governments EMERGENCY MANAGER Flint Emergency Manager: Gerald Ambrose Appointed: January 13, 2015 Anticipated Exit: April 2015 Recent Developments - The City was awarded $2M through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance the City’s water system through improved waste management, leak detection, and pipe assessments. - AnEM Order is being prepared that will restructure Water System Revenue Bonds Series 1999 through 2002 and the Michigan Finance Authority. This would postpone principal payments and free up $2.2M, allowing the City to further improve its water system. - The Michigan Department of Environmental Quality (MDEQ) Testing Lab provided results to the City of Flint showing that the total trihalomethanes (TTHM) levels for the month of February are well within the Environmental Protection Agency (EPA) guidelines for safe water. However, because EPA regulations require that the four month average for all testing sites be within guidelines, the City is still considered to be non- compliant by the MDEQ. - The City hired Veolia North America to provide a preliminary analysis of the City’s water system. On February 18, 2015, Veolia North America presented a preliminary report to the City’s Public Works Committee. Recommendations included water plant improvements, distribution system improvements, new policies and procedures, and better communication with customers. The estimated costs of implementing Veolia’s recommendations will be determined after the second phase of the study is complete. - An International City/County Management Association (ICMA) comprehensive public safety study has been completed, and was presented to the City Council on January 22, 2015. Several recommendations for both police and fire are currently being reviewed by the City. Of the 16 major recommendations for public safety, the following four are most crucial: www michigan gov/treasury xxxEND_PAGE:treasury01_b31_4719_5108_254 Page 2 o Establish more aggressive protocols for responding to service demands from the public. o Equip a minimum of one marked patrol car with an automated external defibrillator (AED) and an automatic license plate reader, and equip every car with e-ticket readers and printers. o Develop a robust in-service training program. o Establish and publish a clear multiyear strategic plan that includes specific performance goals and objectives for all units. Significant Actions/Issues The General Fund accumulated deficit for FY 2014 was $9M. In FY 2013, the General Fund had an accumulated deficit of $12.9M. Noted areas of reduced expenditures within the governmental funds included Parks & Recreation reduced by $5.6M, Community Development reduced by $2.6M, Public Safety reduced by $1.8M, and Building Inspections reduced by $1.7 M. Issues to Resolve before EM Exit Eliminate annual operating/structural deficit, which is projected at $1.7M for FY 2017 and grows to $11.9M by FY 2019, if the City loses the lawsuit over retiree healthcare. The City’s current budget does not assume this potential additional $5M expense. If the City loses this lawsuit, it will permanently add $5M annually to the cost of retiree healthcare, which will grow at a rate equal to the general rise in healthcare costs. Lincoln Park Emergency Manager: Brad Coulter Appointed: July 3, 2014 Anticipated Exit: January 2016 Recent Developments The City was awarded $143.5K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance public safety through updated technology. A fire union collective bargaining agreement has been approved. The estimated cost savings is approximately $500K by achieving cost reductions associated with overtime and paid leave. A Firefighters and Police Officers Retirement Act, has been placed on the May 5, 2015 ballot. If approved by voters this will raise an additional 6 mills, or $3M, for fire and police pension funding and retiree healthcare. Due to retiree health care being completely unfunded, Emergency Manager Brad Coulter will utilize P.A. 436 (2012), Local Financial Stability and Choice Act, to change retiree contracts so that health insurance will be replaced by a lower cost stipend. This action is calculated to reduce retiree health care costs by $3M per year. FY 2014 ended with a General Fund accumulated deficit of $736K out of a total budget of $21M. This is a significant increase from the FY 2013 accumulated deficit of $89K. Noted areas of increased expenditures within the governmental funds included Public Safety by $1.1M, Public Works by $700K, and Culture and Recreation by $600K. xxxEND_PAGE:treasury01_b31_4719_5108_255 Page 3 Significant Actions/Issues The police and fire pension plan is 30% funded. The general employee pension plan is 22% funded. (any initiatives underway to address the underfunded pension dilemma?) This was moved to Recent Developments. I moved it back Issues to Resolve before EM Exit Expired collective bargaining agreements must be finalized for police. Increase and stabilize pension and other post-employment benefits (OPEB) funding levels. FINANCIAL REVIEW COMMISSION (FRC) Detroit FRC Created: November 12, 2014 FRC Members: Bill Martin, Brenda Jones, Darrell Burks, John Roberts, Kevin Clinton, Lorron James, Mike Duggan, Stacy Fox, Tony Saunders Recent Developments The City of Detroit held its first statutorily-required Revenue Estimating Conference on February 20, 2015. The conference principals, Jay Wortley of Treasury, John Hill of the City of Detroit, and George Fulton of the University of Michigan, approved the consensus revenues as presented. The principals agreed that the revenue estimates were conservative. At the FRC’s February 23, 2015 meeting, the FRC approved, and referred to the newly formed Finance and Enterprise Resource subcommittee for further review, the City’s revenue estimates that were presented at the aforementioned Revenue Estimating Conference. The City will be incorporating the revenue estimates into its Four-Year Financial and Operating Plan (Pian) that will be presented to the FRC at its March 23, 2015 meeting for the Commission’s review. The FRC also approved the City’s debt service requirements report and several operational contracts. Treasury hired Ron Rose as the Executive Director (ED) for the Office of the FRC within the Department. His start date was March 2, 2015. Treasury is in the process of filling other key staff positions and has engaged the financial consulting services of UHY. ‘Treasury has also engaged Martha Kopacz and her team from Phoenix Management Services. Ms. Kopacz and her team acted as independent financial experts for Judge Rhodes in the City’s Chapter 9 bankruptcy proceedings. Among other duties, the consultants will provide assistance in reviewing and analyzing the Plan for the FRC. Significant Actions/Issues The City will be submitting its Four-Year Financial and Operating Plan to the FRC on March 23, 2015 for review, with FRC action expected on April 20, 2015. The City’s Plan will encompass the second year (FY16) of Emergency Manager Orr’s two-year budget and use this as its base year with no changes, plus three years (FY17, FY18, and FY19). Ensuring that the Plan is based on sound assumptions and that the City’s operational budgets and actual spending conform to the Plan will be one of the FRC’s most significant tasks. xxxEND_PAGE:treasury01_b31_4719_5108_256 Page 4 RECEIVERSHIP TRANSITION ADVISORY BOARD (RTAB) Hamtramck RTAB Appointed: December 18, 2014 RTAB Members: Deborah Roberts, Mark Stema, Cathy Square, Karen Young Recent Developments The City was awarded $622K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to complete a property reappraisal which will provide updated and accurate assessing records, upgrade City Hall security, and enhance public safety through improved street lighting. The Police Chief resigned on March 11, 2015. Deputy City Manager/Treasurer John Gabor started work on February 2, 2015. Significant Actions/Issues A complaint was filed in the federal court by Hamtramck retirees over changes to healthcare benefits in October 2014. The annual pension liability is anticipated to increase from $3.5M in FY 2015 to $4.3M in FY 2019. This increase occurred as a result of closing certain pension plans and the Michigan Employee’s Retirement System (MERS) policy of accelerating the required contribution for closed plans. These increases were included in Emergency Manager Square’s two-year budget. Allen Park RTAB Appointed: September 26, 2014 RTAB Members: Suzanne Schafer, Joyce Parker, Fredrick Frank, Karen Barann Recent Developments The City Council voted on January 27, 2015 to suspend City Administrator Karen Folks. This vote was taken despite two Emergency Manager Orders that prohibit termination until October 2015 and establish a process for termination. The City Administrator and City Council negotiated a separation agreement which was approved by the RTAB on March 12, 2015. The RTAB also approved the City Council’s appointment of the Finance Director as Interim City Administrator. A search firm will be hired to begin the process of selecting a new City Administrator. The City was expecting to issue a bond tender offer beginning in March to reduce the City’s outstanding debt. However, the tender offer has been delayed due to the uncertainty between the City Council and City Administrator. A timeline to complete the bond tender process will be developed by the various parties on March 19, 2015. Significant Actions/Issues Litigation was filed by retirees challenging the Emergency Manager’s authority to reduce other post-employment benefits (OPEB) liabilities. A motion for summary disposition is pending. No date has been set to hear this motion. City Hall will be relocating to a temporary facility in May 2015. xxxEND_PAGE:treasury01_b31_4719_5108_257 Page 5 Benton Harbor RTAB Appointed: March 10, 2014 RTAB Members: Larry Steckelberg, Bret Witkowski, Marvin Raglon, Sharon Hunt Recent Developments The City was awarded $910K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance the water system through water main replacements and fire hydrant repairs, and to complete a property reappraisal which will provide updated and accurate assessing records. Additionally, the City will provide community enhancement through blight management and sidewalk replacement. On February 2, 2015, the City Commission unanimously approved a one-year contract extension for City Manager Darwin Watson. Significant Actions/Issues Ecorse On January 20, 2015, the City Commission passed a resolution adopting a fund balance policy consistent with Government Finance Officers Association (GFOA) Best Practices. The RTAB approved the resolution on January 28, 2015. FY 2014 audited General Fund revenues exceed expenditures by $1M, out of a total budget of $6.1M. RTAB Appointed: May 1, 2013 RTAB Members: Edward Koryzno, Robert Bovitz. Joyce Parker Recent Developments The City was awarded $350K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance public safety through improved street lighting. The City signed a contract with UHY to provide part-time financial services until a permanent solution can be found. The RTAB approved the contract on January 13, 2015. The City Council cancelled the contracted City Administrator search with the Michigan Municipal League (MML) and appointed Wayne O’Neal as full-time City Administrator. On February 10, 2015 the RTAB approved the City’s resolution appointing Mr. O’Neal. The City continues having trouble filling higher level positions. Significant Actions/Issues The RTAB’s Annual Evaluation for the Governor was not favorable, citing a lack of local financial literacy, political infighting, and an inability to develop a balanced multiyear budget. For these reasons, the Board did not recommend removal of RTAB oversight at this time. Municipal Employee's Retiree System (MERS) pension contributions are anticipated to increase from $1.8M in FY 2015 to $2.4M in FY 2016 because of accelerated funding for closed plans. The City has been unable to balance their five-year budget. Significant expense reductions will likely be necessary in upcoming fiscal years. xxxEND_PAGE:treasury01_b31_4719_5108_258 Page 6 Pontiac RTAB Appointed: August 19, 2013 RTAB Members: Edward Koryzno, Louis Schimmel, Keith Sawdon, Robert Burgess Recent Developments The City was awarded $125K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used for community enhancement through blight management. In April 2014, the Final Emergency Manager Order was amended to create a Deputy Mayor position. A suitable candidate was not found through a Michigan Municipal League (MML) search. A new search firm has been hired to assist the City in filling this position. The General Fund’s accumulated fund balance for FY 2014 is approximately $5M, out of a total budget of $27M. After receiving a response from the Attorney General’s Office, the City Charter Revision Commission submitted a proposed Charter by the February 10, 2015 deadline. The proposed Charter will be placed on the May 2015 ballot. Significant Actions/Issues The General Fund is structurally balanced in FY 2015 but expenditures are projected to exceed revenues by $360K due to deferred projects from FY 2014. Oakland County Circuit Court Judge Michael Warren dismissed the City’s condemnation Jawsuit involving the Phoenix Center because the City failed to include compensation for the lien placed on the property. The City is preparing an appeal of the decision to the U.S. Sixth Circuit Court of Appeals. The City of Pontiac Retired Employees Association v. City of Pontiac lawsuit in the United States District Court was reassigned from Judge Lawrence P. Zatkoff to Judge Avern Cohn. The City of Pontiac and the Retired Employees Association are participating in facilitation. The General Employees Retirement System (GERS) Board proposal was submitted to the court on January 30, 2015. The lawsuit challenges former Emergency Manager Schimmel’s elimination and replacement of retiree healthcare with an annual stipend. The GERS Pension Fund is significantly overfunded and the parties are exploring options to use the overfunded portion to fund retiree healthcare. CONSENT AGREEMENT Inkster Date Executed: February 20, 2012 Consent Agreement Consultant: Mark Stuhldreher Recent Developments The City was awarded $855K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to complete a property reappraisal to provide updated and accurate assessing records, enhance the water system through fire hydrant repairs, and enhancing public safety through the creation of a multi-jurisdictional narcotics team, police officer training, deployment of an additional police officer, providing a backup power source, and updating technology. xxxEND_PAGE:treasury01_b31_4719_5108_259 Page 7 Significant Actions/Issues The FY 2014 General Fund accumulated deficit is $767K, out of a total budget of $11M. River Rouge Date Executed: December 15, 2009 Consent Agreement Consultant: N/A (P.A. 72) Recent Developments The City was awarded $592K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance public safety through improved street lighting, along with infrastructure replacements to City Hall. Deborah Hayes-Price has been promoted to Chief of Police to replace former Police Chief Jeffrey Harris who retired in January. Significant Actions/Issues U.S. Steel annual $1M tax settlement payment to the City has expired. General Fund revenues exceeded expenditures by $885K in FY 2014 and the accumulated fund balance was $1.9M. A reduction in healthcare benefits for active employees and retirees was implemented on November 1, 2014. The City estimates an annual savings of $400K. Royal Oak Township Effective Date: April 21, 2014 Consent Agreement Consultant: Robert Burgess Recent Developments The Township was awarded $274K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance public safety through improved street lighting and increased police services. The State Treasurer rejected a decision by the Township Board to extend the contract with the current Township Attorney, Pentiuk, Couvreur & Kobiljak P.C at a cost that was twice the amount of the lowest bidder. The Consent Agreement Consultant, Robert Burgess, issued an order requiring the Township to extend a contract for legal services to the lowest bidder, Giarmarco, Mullins & Horton, P.C. This is but one example of the difficulty the Consent Agreement Consultant has encountered in his efforts to have the Supervisor and Township Board comply with provisions of the Consent Agreement. Distribution of the Township’s Financially Distressed Cites, Villages and Townships Grant award has been placed on hold pending the Township’s compliance with the Consent Agreement. The State Treasurer approved an amendment to the Fire Services Contract with the City of Ferndale on March 11, 2015. This amendment is projected to reduce annual costs to the Township by $4K thru the end of 2015. xxxEND_PAGE:treasury01_b31_4719_5108_260 Page 8 Significant Actions/Issues The Michigan State Police continues to provide police services to the Township. The Department of Treasury and the Michigan State Police continue to work with the Township and are reviewing a proposal from the City of Hazel Park to provide police services to the Township. The State Treasurer approved the Township’s 2015 budget on December 16, 2014, with the requirement that the Township work with Treasury to implement additional budget amendments to improve its overall effectiveness. No additional actions have occurred to implement these additional budget amendments as the Township was without the services of a financial consultant from the time of budget adoption through March 1, 2015. The Township currently has an aging accounts payable in excess of $200K. NEUTRAL EVALUATION Highland Park Financial Review Team Appointed: December 2, 2013 Financial Emergency Declared: January 30, 2014 PA 436 Option Selected: Neutral Evaluation Recent Developments The City was awarded $2M through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance the City’s water system through meter replacement, leak detection, and system repairs. Cathy Square, former Hamtramck Emergency Manager, was hired to fill the position of City Administrator. Huron Consulting has been hired to prepare a request for proposal (RFP) to solicit firms to operate and maintain the City’s water and sewer systems, as required by the City’s Plan of Adjustment. The proposals are due on April 20, 2015. BenStaff has been hired by the City to make recommendations that will reduce healthcare costs. The law firm of Lewis & Munday has been hired to assist the City with the restructuring of the other post-employment benefits (OPEB). Significant Actions/Issues The City selected Tetra-Tech to prepare a water and sewer rate study. A draft study was completed on February 20, 2015. This study provides the City with proposed rates, which if adopted, will provide adequate revenue to operate and maintain the water and sewer system. Liabilities total $117.6M. Some of the major components are: $55.3M debt, including $20.7M owed to the Detroit Water and Sewerage Department (DWSD), $17.7M pension bonds, and $26.1M unfunded other post-employment benefits (OPEB) liabilities. Summary of the Plan of Adjustment for the City of Highland Park was adopted on August 28, 2014. o Fifth Third Bank has finalized an agreement and settled for 50 cents on the dollar for outstanding debt. o By June 30, 2015, Highland Park, as required by terms of the emergency loan, must have a third-party operator for its water/sewer systems. o After the selection of this third-party operator, DWSD and Highland Park will negotiate a long-term settlement for outstanding water and sewer debt. xxxEND_PAGE:treasury01_b31_4719_5108_261 Page 9 o The City must reduce retiree healthcare benefit costs. o In August 2015, an emergency loan of $16.4M, which includes the restructuring of $4.8M in existing loans, will be used to refund $2.7M in Fiscal Stabilization Bonds, $5.2M in Financial Recovery Bonds, and $3.7M in State Revolving Fund Bonds. OTHER COMMUNITIES Melvindale Recent Developments The City was awarded $88K through the Financially Distressed Cities, Villages, and Townships Grant Program. These funds will be used to enhance public safety through fleet replacement of police vehicles and updated technology. Significant Actions/Issues The General Fund deficit for FY 2013 is $1.9M, an increase of $248K from the FY 2012 deficit. The City’s fiscal year runs from January to December. The unrestricted annual deficit for the City-owned ice arena in FY 2013 is $1.9M out ofa total budget of $10M. This is approximately $160K more than what the City projected. Treasury issued a conditional approval of the City’s Deficit Elimination Plan. The City is timely submitting monthly financial reports to demonstrate adherence to the plan. City of Wayne Recent Developments The City has hired Plante Moran to provide accounting services due to the recent resignation of the City’s Finance Director. Significant Actions/Issues The City anticipates a General Fund deficit in the next two years. The City has approved a May 2015 ballot proposal that would establish a police and fire pension program to remove pension fund costs from the General Fund and approve three mills for five years to fund police and fire retirement costs. Wayne County Recent Developments The Michigan Supreme Court ruled unanimously in favor of retirees who receive a 13" check to offset inflation. The County is required to return $32M to the Pension Equity Fund. Significant Actions/Issues Cash reserves reached its lowest point in August 2014 with pooled cash falling to approximately $73M. The average balance is $170M. This number includes proceeds

Finish what you have right now

Importance: High All, { just received the below from Liz. Rob

Please schedule a meeting with Jerry for tomorrow afternoon. 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] = 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

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)

Yes, after city council, please.

For the files 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

Given our conversation today about who approves what can we put the reference in each approval under PA 436 or the EM contract as to who can approve each transaction? Wayne Workman | Deputy State Treasurer State of Michigan | 430 W Allegan Street | Lansing, MI 48922

All: I spoke with Mr. Craig at the DEQ and he was working on the current version of the Consent Order when I called. Mr. Craig indicated that the order is intended to temporarily reopen the lime disposal area so the WTP upgrades can go forward. In the future the area would be evaluated for clean-up or capping (or other measures after an environmental assessment occurs). Mr. Craig stated that he hopes to send his comments back to the City’s attorney at Werner, Norcross & Judd either tomorrow or Monday. I requested periodic updates on the status of this project but if anyone wishes any follow-up, 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 | clinerl @michigan.gov 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. xxxEND_PAGE:treasury01_b19_2589_2633_07 CITY OF FLINT OFFICE OF THE EMERGENCY MANAGER Darnell Earley, 1CMA-CM, MPA Emergency Manager ELECTRONIC COMMUNICATION March 7, 2014 Ms. Sue McCormick Detroit Water and Sewer Department Detroit, Michigan RE: DWSD Water Rates Dear Ms. McCormick: Thank you for the correspondence dated February 12, 2014 which provides Flint with the option of continuing to purchase water from DWSD following the termination of the current contract as of April 17, 2014. Following DWSD’s April 17, 2013 notice of termination of the water service contract between the City of Flint and DWSD, the City of Flint has actively pursued using the Flint River as a temporary water source while the KWA pipeline is being constructed. We expect that the Flint Water Treatment Plant will be fully operational and capable of treating Flint River water prior to the date of termination. In that case, there will be no need for Flint to continue purchasing water to serve its residents and businesses after April 17, 2014. We are aware that Genesee County has been in negotiations with DWSD to purchase water from DWSD following the termination of our contract, and we understand that an agreement may be imminent. Should that occur, there would be no further need for the City to discuss with DWSD any continuing purchase of water. Should that not occur, however, we would be interested, if Genesee County were to so request, to purchase water from DWDS for some period of time. In such an event, our demand for water would be only for the amount necessary to provide Genesee County with water. That amount would be approximately half of the amount Flint is currently purchasing from DWSD. City of Flint ¢ 1101 S. Saginaw Street + Flint, Michigan 48502 www.cityofilint.com ¢ (810) 766-7346 « Fax: (810) 766-7218 xxxEND_PAGE:treasury01_b19_2589_2633_08 Ms. Sue McCormick March 7, 2014 Page 2 However, in the very unlikely event that the City of Flint is not able to draw water from the Flint River no later than April 17, 2014, then the City would like the option of continuing to purchase water from DWSD for a period of time, up to the time water is available from KWA. Consequently, I am requesting that you clarify your proposal for the City of Flint to continue purchasing water from DWSD under the following scenarios: e Flint, upon the request of Genesee County, purchases water for sale to Genesee County for up to 3 years, beginning April 17, 2014, in an amount approximately 50% of the volume currently purchased by the City; « Flint purchases water from DWSD in approximately the same volume as currently, for up to 3 years, beginning April 17,2014, with the ability to reduce that volume by up to 50% during that period, upon 30 days notice to DWSD e Flint purchases water from DWSD in approximately the same volume as curtently, for up to 3 years, beginning April 17, 2014, with the ability to reduce that volume by up to 50% during that period, upon 30 days notice to DWSD, and further, to terminate the reduced volume purchase should Genesee County and DWSD reach an agreement whereby Genesee County directly purchases water m DWSD. Thank you and please contact me if you have any questions. I look forward to your response. Sincerely, Darnell Earley, ICMA-CM, MPA. f Emergency Manager City of Flint xxxEND_PAGE:treasury01_b19_2589_2633_09 Koryzno, Edward (T reasury)

Follow Up Flag: Follow up Flag Status: Completed 1. Any changes, please send directly to me PLEASE 2. Achievements in each community will be added and they will be listed first Angela Dempkowski | Senior Executive Management Assistant/Treasury State of Michigan | 430 W. Allegan Street, ist Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) dempkowskia@ michigan.gov = 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 copres of the original message and attachments. Thank you xxxEND_PAGE:treasury01_b15_1861_2098_005 EMERGENCY MANAGER COMMUNITIES: City of Allen Park Emergency Manager anticipated exit - September 26, 2014 Resolve retiree healthcare litigation Reduce OPEB liabilities by $550,000 annually Restructure movie studio debt; offers to purchase the Southfield lease properties (consisting of 104 acres and the occupied building having approximately 773,000 square feet) have been received and are under review Complete bond tender offer Property values are projected to increase by 5.29% City of Benton Harbor Emergency Manager exit - February 28, 2014 $2.3-million emergency loan approved to pay delinquent accounts payable totaling $2.3 million City Manager appointed City of Detroit e Emergency Manager anticipated exit - September 26, 2014 © Property values are projected to decline by 14.79% e Resolve Chapter 9 Bankruptcy e Restructure DWSD to a Regional Authority City of Flint Emergency Manager anticipated exit ~ April 8, 2015 Has reduced OPEB liabilities by $500 million; continue to reduce remaining $400 million Obtain favorable decision in lawsuit challenging changes to retiree healthcare; retiree healthcare cost is $5 million after the 6™ Circuit Court stayed the temporary restraining order Resolve Public Safety funding as a result of certain federal grants expiring during FY 15 Construct Karegnondi Water Authority pipeline; necessary to resolve ongoing and costly issues with current service provider CRIME 1S DOWN AT WHAT PERCENT? City of Hamtramck Emergency Manager anticipated exit - January 1, 2015 As part of its overall financial strategy, resolve $2.1 million liability to MERS through issuance of an emergency loan Hire City Manager xxxEND_PAGE:treasury01_b15_1861_2098_006 Pleyte, Beth (Ti reasury) ,

Importance: High Please use this version. Angela Dempkowski Senior Executive Management Assistant Michigan Department of Treasury xxxEND_PAGE:treasury01_b05_0504_0560_10 [email protected] (517) 373-4415

Thank you! Edward B. Koryzno, Jr. | Administrator - Office of Fiscal Responsibility State of Michigan | 430 W. Allegan Street, 1st Floor | Lansing, Mi 48922 (517) 373-4415 | (517) 373-0633 (fax) [email protected] fThink 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

Done. Rescheduled for 10 am on Friday, 2/8. | also declined your Talent Bank meeting so they would know that you will not be there today. Angela Dempkowski Senior Executive Management Assistant Michigan Department of Treasury [email protected] (517) 373-4415 ----Original Message-----

1 will do this as Shannon is also out sick. Angela Dempkowski xxxEND_PAGE:treasury01_b06_0561_0924_105 Senior Executive Management Assistant Michigan Department of Treasury [email protected] (517) 373-4415 -----Original Message-----

Thanks! Sent from my iPhone