Importance: High
All,
Please see the attached TPs. | have also attached a couple pdfs noted in the TPs. They include the Treasurer's
conditional approval of the eventual move to KWA and the EM’s response to DWSD’s “last, best offer.”
Additionally, during my most recent interaction with Jerry Ambrose, he indicated that the water issue is critically
important and that he and staff are working on it every day. They have posted a host of information for residents on the
City’s website They have extended the deadline for the Water Quality Consultant RFP
to this Thursday, to ensure interested and qualified firms can submit comprehensive proposals and assist the city.
| have also attached the earlier talking points | had shared with Dave.
Let me know if you need anything else in the meantime...or before we speak again...
Terry
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CITY OF FLINT
OFFICE OF EMERGENCY MANAGER
EDWARD J. KURTZ
ELECTRONIC LETTER
April 16, 2013
Andy Dillon
State Treasurer
P. O. Box 30716
Lansing, MI 48909
Dear Treasurer Dillon:
Flint, Genesee County and KWA received an eight page letter from Detroit Water and
Sewerage Department (DWSD) offering a framework for a long-term agreement with
our region. Two scenarios were presented;
Scenario 1: Water from the Lake Huron Plant.
This offer was dismissed immediately because Flint would still be responsible for their
share of the KWA water pipeline delivery system estimated to be $79 million. In
addition Flint would not be able to operate the Flint Water Plant in which we have
invested over $40 million per MDEQ mandates over the past ten years. Finally,
although DWSD shows this as an option and supplied a per month cost projection for
the first year, no total costs over the life of the contract were provided.
Scenario 2: “Full Service” Water Supply
This offer was also rejected. DWSD would supply water to Flint/Genesee the same way
they currently are today. They would change the method of calculating our bill. The
offer would provide a $1.00 per ccf reduction on our usage for the first year, providing a
30 year contract is signed.
After review of the offer, Flint'Genesee has the following concerns:
City Hall
1101 S. Saginaw Street - Flint, Michigan 48502
810-766-7346 FAX: 810-766-7218 | www.cityofflintcom
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Andy Dillon, State Treasurer
April 16, 2013
Page 2
1. DWSD’s offer is a framework subject to negotiations and is not a firm offer.
2. DWSD's offer is based on 40.6 mgd, the KWA plan is based on 60 mgd.
Flint/Genesee last summer hit the peak of 40.6 mgd and this DWSD offer
provides no room for growth. Growth would result in penalties or added cost.
3. DWSD's offer does not include a guaranteed rafe for years two through thirty, nor
does it provide a maximum annual increase.
4. DWSD’'s offer does not provide a redundant supply for GCDC.
5. DWSD’s offer does not allow for the use of Flint's existing water plant.
6. The offer indicates that the total cost to Flint over the life of the contract would be
$587 ,990,665. No indication of what annual rate of increase was used in this
projection. Flint can only assume it is 4.4% based on the Tucker Young report. It
is also based on 40.6 mgds. KWA's proposal is for $649,775,166 based on
60mgds (33% more). Based on 60 mgds DWSD's proposal would be
$868,950,738.
On a final note, Flint‘(Genesee has great concern over the accuracy of the figures
provided by DWSD. Attachment 1 indicates that our joint annual cost to DWSD is $50
million; actual cost is less than $25 million. Attachment 2 indicates $800 million in
savings over the next 30 years. That is greater than the total cost we would pay DWSD.
Therefore, | will sign the resolution to join KWA at the close of business tceday.
Edward J. Kurtz
Emergency Manager
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89 (Rev 11-13)
STATE OF MICHIGAN
RICK SNYDER DEPARTMENT OF TREASURY R_ KEVIN CLINTON
GOVERNOR LANSING STATE TREASURER
Flint Water/KWA Decision Points and Timeline
In November 2012, all major stakeholders (city officials, EM Kurtz, county
officials, DWSD, DEQ & Treasury) met to discuss a regional effort to build a new
water pipeline from Lake Huron to Genesee County.
Flint and Genesee Co. had been getting water from DWSD under a 30-year
contract that, at that time had expired.
Genesee Co. was planning to build a new pipeline from Lake Huron (Karegnondi
Water Authority, KWA) and eventually provide service to the City of Lapeer,
Lapeer County, and Sanilac County.
County officials believed that continuing to buy water from DWSD would cost the
region more than $2.1 billion over the next 25 years but that building a pipeline
and developing the KWA would reduce regional cost by approximately $200
million over that time.
Genesee County officials said it was cheaper to build their own system than to
continue to pay more each year to the DWSD and the proposal was about
delivering the best quality water to residents in the least expensive way.
EM Ed Kurtz had been exploring options for water since his appointment in
August 2012 (to replace Mike Brown).
Mayor Walling and City Council were fully supportive of the move to KWA,
though under the emergency manager Act, the State Treasurer had to approve deals
>$50,000.
Prior to the meeting, Treasury suggested a high-level response to media inquiries
about the meeting:
Treasury officials will be meeting with Genesee County and Detroit officials
tomorrow to get the details of the proposed pipeline plan. Until the ultimate costs
PO BOX 30716 e LANSING, MICHIGAN 48808
www michigan govitregsury « (517) 373-3200
xxxEND_PAGE:treasury01_b28_4390_4585_116
Page 2
are known and the various studies have been conducted, the benefits to the citizens
of Flint and Genesee County cannot be determined.
In December of 2012, then State Treasurer Andy Dillon requested an independent
review of the KWA proposal. Consulting engineers Tucker, Young, Jackson, and
Tull, Inc. conducted a review that supported the County and City preference to join
KWA (I’M AWAITING A COPY OF THIS REPORT TO ENSURE ACCURACY
ON THIS POINT).
In March of 2013, the City was pushing for a decision, given the need to hit tight
construction season timelines/deadlines.
In late March, Kurtz submitted a resolution to join KWA to the State Treasurer. It
was received on March 29, 2013. The Treasurer and DEQ staff thoroughly
reviewed the resolution (Under PA 436, the Treasurer must approve contracts
>$50K that were not competitively bid).
DWSD was allowed an opportunity to make a “last, best offer” to keep Flint with
the DWSD.
On April 11, 2013, the Treasurer sent his approval to Flint (attached). The effective
date for the approval was April 16, 2013 as a condition of the approval was Mr.
Kurtz’s consideration of the final DWSD offer.
On April 16, 2013, Flint EM Kurtz sent a letter to the State Treasurer, indicating
that the DWSD last best offer was not sufficient (attached).
Following Mr. Kurtz announcement of the City’s decision to join KWA, Treasury
worked from the following talking points.
e This is a decision made by the City of Flint and its elected leaders and is a
local decision that affects the local water supply.
e Flint EM Ed Kurtz kept the city’s elected officials involved throughout the
decision-making process and all agree this is best for the citizens and
businesses in Flint.
e The change is expected to save Flint ~$100m over the next 25 years, and
possibly as much as $300m.
e The Departments of Treasury and Environmental Quality have approved the
financial and environmental soundness of KWA’s plan.
e Flint accounts for only 2% of DWSD’s capacity.
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Talking Points:
The City, in conjunction with the Dept. of Environmental Quality, is working diligently...every
day...to ensure Flint residents have access to clean, safe water. To that end, the City has
issued an RFP soliciting expert assistance to assure the City is doing everything it needs to be
doing.
The city continues to work closely with staff from the Department of Environmental Quality
(DEQ) to ensure water meets safety guidelines, that water operations are managed properly,
and all regulations are met.
The city is committed to addressing the issue and continues to pursue Its strategy.
Background:
On December 16, 2014, the City of Flint received a violation notice from the Michigan
Department of Environmental Quality (DEQ), stating 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 outlined some potential remedies to the 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.
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.
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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.
To date, the City has taken the following actions:
As an integral part of the transition to the Flint River on a temporary basis, the MDEQ was
consulted about the City’s plans, and ultimately issued necessary permits to proceed. The
City also engaged the services of the LAN engineering firm to guide the city in installing the
necessary equipment to treat the water on an ongoing basis. This resulted in the development
of a comprehensive drinking water plan.
The City monitors its water quality on a daily basis to assure that water quality remains within
established guidelines. With the variances in water temperature and the leakage and
infiltration problems arising as the result of failure of parts of the distribution system, water
quality did exceed, for a time, some of the established guidelines. This resulted in the issuance
of the recent notices to the public.
Efforts taken to address non-compliance included increasing water flow through valve
replacements and hydrant flushing and optimizing treatment processes.
The City has committed to increasing communication with the public in order to inform water
users factually of the issues which have arisen, to alleviate unnecessary concern and to identify
steps being taken to address the issues. This is being implemented through detailed
educational materials being made available both online and at City Hall, as well as through
public informational meetings. Additionally, a full Water System Questions and Answers
document is available online.
Additional information:
State and city officials have said exposure to TTHM is a long-term concern for some if they drink
water with elevated TTHM for several decades.
Notices indicated that Flint water is safe to drink but warns those with a “severely
compromised immune systems or who are elderly” may be at increased risk and should seek
advice about drinking water from your health care provider.
The city and county are partners in the Karegnondi Water Authority, which is building a pipeline
to Lake Huron to bring lake water here for use by the end of 2016.
Returning to DWSD would add approximately $1 million (monthly) to the City expenses.
xxxEND_PAGE:treasury01_b28_4390_4585_119
Stanton, Terry A. (Ti reasury)