Correspondence among

Just one work of warning, the Saginaw-Midiand Municipal Water Sunnly Corporation had nurnerous private connections to their raw water transmission line from the late 40’s to the early 80’s. Eventually all the individuals were forced off the Hine anc were required ta cormect to a CWS providing finished water or install their own weil, Knowing the thought process of too many farmers, | would not put it past a few of them to use the KWA water service for ‘potable’ purposes. if adequate precautions are not taken, the COWMA will face the same headaches as the MBPH had with the ffarm owners and EPA,

I wasn't directly involved at the time but I believe Genesee County had initially including some possible nonpotable water uses when they were preparing their water withdrawal permit application. I believe they removed all mention of it in order to avoid some higher levels of scrutiny and possibly having additional requirements imposed to justify their request and receive a large quantity water withdrawal permit. I would think Brant may have the best knowledge on this complication and the implications. I believe the county obtained their withdrawal permit without using the public water supply option (by Act 399 construction permit) to avoid having to prepare construction plans. It costs a few thousand dollars but it also did not expire in 18 months as do PWS withdrawal permits if they haven't begun using the water. Therefore, WRD issued the permit and should be the lead in any discussion of a possible change in the intent of this permit. Interestingly, I don't know what restrictions or considerations the state would have if a public water system were to serve agricultural "customers" with finished water. But because this withdrawal permit application was contemplating providing nonpotable water for a separate sector, it came under review. I would include Brant and maybe you, me and/or Steve. Or have a pre-meeting and then decide who should represent the Office. Sent using OWA for iPhone

This is a little add since the Genesee County Drain Commissioner is the head of KWA. barn not currently aware of plans to shut down the DWSD pinetine, though no CWS use is anticipated West of Laneer. WA (Genesee County) has Water Withdrawal Permit 2009-001 through WRB and the water withdrawal program for 85 Sb. htto/ www michigan 200342 7 pdf he withdrawal permit application was not 1@ current plan for Genesee County’s WTF is to start at 30 MGD and expand to 45 MGD. Flint has a WTP capacity of 36 iG, though Hint has only purchased 18 MGD Annual Ave Day Demand in KWA. Lapeer has an option to connect into WA with a capacity of 4 MGB. 50 much of the 85 MGD ts already allocated. fie raw water Lake Huron Purnp station and intermediate booster station have a firm pumping capacity of 60 MGD with space for future pumps. WRE would nese to deal with the oermit any nermit limitations in regares to its decision process, htto://www. michigan. 290345 7 odf Was agricultural use inclucad as part of the application? Would any agricultural user be subject to water efficiency and conservation recndremants? if thase users are simply connecting te the Flint or Genesee County water distribution system then they would fall under the same requirements of any other water system customer. Stephen Busch, PLE. Lansing and Jackson District Supervisor Office of Drinking Water ancl Municipal Assis MDE 517-643-2514 Pag AACE

Your thoughts on whether and/or who should attend for ODWMA?

Importance: High FYI

Under GASB 34 old infrastructure (pre-1980) was not included in the required valuation of infrastructure assets. However, GASB 34 does provide two methods (Depreciation and Modified) for calculating the value of an infrastructure asset, Despite the 72 line being installed in 1965, perhaps one of these methods could be used to value the asset. In addition, to estimate historical cost of infrastructure, the government has to calculate the current replacement cost of the infrastructure asset, including the costs of materials, equipment and labor used for construction, It then must apply historical consumer price index values, deflating the current value and estimating the cost of the asset at the time it was placed in service. The only issue with an older asset such as this is what to do when the benchmark average lifecycle for that asset type is less than the actual age of the asset. Still trying to follow this approach would at least provide something in line with current accounting and asset management standards. Stephen Busch, P.E. Lansing and Jackson District Supervisor Office of Drinking Water and Municipal Assistance MDEQ 517-643-2314

Date: Thursday, August 08, 2013 12:16:26 PM Under GASB 34 old infrastructure (pre-1980) was not included in the required valuation of infrastructure assets. However, GASB 34 does provide two methods (Depreciation and Modified) for calculating the value of an infrastructure asset. Despite the 72 line being installed in 1965, perhaps one of these methods could be used to value the asset. In addition, to estimate historical cost of infrastructure, the government has to calculate the current replacement cost of the infrastructure asset, including the costs of materials, equipment and labor used for construction. It then must apply historical consumer price index values, deflating the current value and estimating the cost of the asset at the time it was placed in service. The only issue with an older asset such as this is what to do when the benchmark average lifecycle for that asset type is less than the actual age of the asset. Still trying to follow this approach would at least provide something in line with current accounting and asset management standards. Stephen Busch, P.E. Lansing and Jackson District Supervisor Office of Drinking Water and Municipal Assistance MDEQ 517-643-2314

Date: Monday, August 05, 2013 3:58:36 PM All — | recently spoke with Randall Byrne (Treasury) and agreed to try to help them with a couple of items. (Randy — sorry it’s taken me so long to get this note out). 1. Flint is considering selling the 72-inch pipeline. It was constructed in 1965 for $6.5M. How would you determine fair market price for such an item? | suggested getting quotes from a couple of contractors for what it would cost to install today and figure some kind of depreciation for a 50 year old pipeline. Other ideas? 2. Treasury is looking for contractors that could possibly operate a distribution system. Could you please provide a list of names/companies that are already doing this kind of work around the state? United Water and Earth Tech were the ones that came to mind. There must be others. Thanks much. Liane Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-373-9523 ** Effective August 12, 2013 my new number will be (517) 284-6543 xxxEND_PAGE:deq01_b026_1836_1836_1

All- | recently spoke with Randall Byrne (Treasury) and agreed to try to help them with a couple of items. (Randy — sorry it’s taken me so long to get this note out). 1. Flint is considering selling the 72-inch pipeline. It was constructed in 1965 for $6.5M. How would you determine fair market price for such an item? | suggested getting quotes from a couple of contractors for what it would cost to install today and figure some kind of depreciation for a 50 year old pipeline. Other ideas? 2. Treasury is looking for contractors that could possibly operate a distribution system. Could you please provide a list of names/companies that are already doing this kind of work around the state? United Water and Earth Tech were the ones that came to mind. There must be others. Thanks much. Liane Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-373-9523 ** Effective August 12, 2013 my new number will be (517) 284-6543 xxxEND_PAGE:deq17_b072_0871_0871_1

Date: Monday, August 05, 2013 3:58:00 PM All — | recently spoke with Randall Byrne (Treasury) and agreed to try to help them with a couple of items. (Randy — sorry it’s taken me so long to get this note out). 1. Flint is considering selling the 72-inch pipeline. It was constructed in 1965 for $6.5M. How would you determine fair market price for such an item? | suggested getting quotes from a couple of contractors for what it would cost to install today and figure some kind of depreciation for a 50 year old pipeline. Other ideas? 2. Treasury is looking for contractors that could possibly operate a distribution system. Could you please provide a list of names/companies that are already doing this kind of work around the state? United Water and Earth Tech were the ones that came to mind. There must be others. Thanks much. Liane Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-373-9523 ** Effective August 12, 2013 my new number will be (517) 284-6543 xxxEND_PAGE:deq03_b017_0020_0020_1

All- | recently spoke with Randall Byrne (Treasury) and agreed to try to help them with a couple of items. (Randy — sorry it’s taken me so long to get this note out). 1, Flint is considering selling the 72-inch pipeline. It was constructed in 1965 for $6.5M. How would you determine fair market price for such an item? | suggested getting quotes from a couple of contractors for what it would cost to install today and figure some kind of depreciation for a 50 year old pipeline. Other ideas? 2. Highland Park is looking at contracting out their water department for the near future. At this point, they would need a company that could manage their distribution system. Could you please provide a list of names/companies that are already doing this kind of work around the state? United Water and Earth Tech were the ones that came to mind. There must be others. Thanks much. Liane Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-373-9523 ** Effective August 12, 2013 my new number will be (517) 284-6543 xxxEND_PAGE:deq04_b575_5314_5665_260 Rennaker, Joanne (DEQ)

Date: Monday, August 05, 2013 3:43:15 PM All — | recently spoke with Randall Byrne (Treasury) and agreed to try to help them with a couple of items. (Randy — sorry it’s taken me so long to get this note out). 1. Flint is considering selling the 72-inch pipeline. It was constructed in 1965 for $6.5M. How would you determine fair market price for such an item? | suggested getting quotes from a couple of contractors for what it would cost to install today and figure some kind of depreciation for a 50 year old pipeline. Other ideas? 2. Highland Park is looking at contracting out their water department for the near future. At this point, they would need a company that could manage their distribution system. Could you please provide a list of names/companies that are already doing this kind of work around the state? United Water and Earth Tech were the ones that came to mind. There must be others. Thanks much. Liane Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-373-9523 ** Effective August 12, 2013 my new number will be (517) 284-6543 xxxEND_PAGE:deq01_b025_1835_1835_1

Date: Monday, August 05, 2013 3:43:00 PM All — | recently spoke with Randall Byrne (Treasury) and agreed to try to help them with a couple of items. (Randy — sorry it’s taken me so long to get this note out). 1. Flint is considering selling the 72-inch pipeline. It was constructed in 1965 for $6.5M. How would you determine fair market price for such an item? | suggested getting quotes from a couple of contractors for what it would cost to install today and figure some kind of depreciation for a 50 year old pipeline. Other ideas? 2. Highland Park is looking at contracting out their water department for the near future. At this point, they would need a company that could manage their distribution system. Could you please provide a list of names/companies that are already doing this kind of work around the state? United Water and Earth Tech were the ones that came to mind. There must be others. Thanks much. Liane Liane J. Shekter Smith, P.E., Chief Office of Drinking Water and Municipal Assistance Michigan Department of Environmental Quality 517-373-9523 ** Effective August 12, 2013 my new number will be (517) 284-6543 xxxEND_PAGE:deq03_b016_0019_0019_1

See attached DWS5D news release with DWSD Director's statement on Flint’s decision ta commit to purchasing raw water frorn the KWA. In my discussion with Brent Wright, Flint WTP Supt., there is speculation {concern} of what may happen when the termination of the water service agreement with DWSD becomes effective on 4/17/2014. Current speculation is that DWS5D may attempt to recoup thelr “stranded costs” by adding it to Flint’s ready to serve and/or cormmodity rate for the remaining time that they need to purchase water from the DWSD (from 4/18/2014 — till KWA water can be piped to the Flint WTP}. [| will pass along any further updates concerning this matter. Michael Prysby, PE. District Engineer Office of Drinking Water and Municipal Assistance 517 335-6122

Date: Saturday, April 13, 2013 7:23:51 PM Importance: High FYI. A decision has been made. Stephen Busch, P.E. Lansing and Jackson District Supervisor Office of Drinking Water and Municipal Assistance MDEQ 517-643-2314 xxxEND_PAGE:deq01_b068_3612_3612_1

i plan to review Rowe’s report along with the TY report and the other documents for additional comments this afternoon. | am forwarding this report for your information and/or review as needed. Michael Prysby, PLE. District Engineer Office of Brinking Water and Municipal Assistance S17 335-6122

Great answers, Mike. The only camments/clarifications | have are in regards to the question on the use of the DWRE to operate the treatment plant fulltime. The DWRF may be used to construct facilities necessary to make full time operation feasible. However, it should be clear that “operating costs” are not eligible. Also, ary application to the DWRE requires 4 comprehensive, 20-year project plan, not a one-time, prohect specie request. The fact that the city of Hint recently turned down a DWRF loan even with a significant portion of it to be “forgiven” thet was intended to address high priority distributian systern needs cannot be overlooked. The city would have to inchide these needs in any revised/new project olan and satisfactorily explain any decision to not inchide these distribution improvements in this new loan anplication.

Date: Wednesday, January 23, 2013 10:25:00 AM Great answers, Mike. The only comments/clarifications | have are in regards to the question on the use of the DWRF to operate the treatment plant full time. The DWRF may be used to construct facilities necessary to make full time operation feasible. However, it should be clear that “operating costs” are not eligible. Also, any application to the DWRF requires a comprehensive, 20-year project plan, not a one-time, project specific request. The fact that the city of Flint recently turned down a DWRF loan even with a significant portion of it to be “forgiven” that was intended to address high priority distribution system needs cannot be overlooked. The city would have to include these needs in any revised/new project plan and satisfactorily explain any decision to not include these distribution improvements in this new loan application.

| spoke with Mr. Randy Byrne from the Dept. Treasury — Office of Fiscal Resp. concerning the Flint WTP. Below is a brief summary of our discussion. | can fill you on more details this afternoon just prior or immediately after our KWA meeting. Ql1: The city of Flint has considered using the Flint River as a source of drinking water to be treated at their WTP; however, The city may be somewhat reluctant to use the river as their source, what is your assessment of this issue? A: The city could utilize the Flint River ranging from 100% utilization — to a certain percent blending (either Detroit or KWA) or zero percent utilization of the river. | agree that the city should have concerns of fully utilizing the Flint River (100%) for the following; the need to soften, the potential for more advanced treatment after next round of crypto monitoring, available capacity in Flint River at 100-year low flow, residuals management (disposal of lime sludge). As the percent utilization of the river decreases (blending options), the need for softening, residuals disposal, capacity issues do not pose as much of a concern. Q2: When comparing the treatment of Lake Huron water vs. Flint River water, are more treatment chemicals needed to effectively treat the water? xxxEND_PAGE:deq18_b170_1434_1436_1 A2: Flint river water will require a larger amount of primary coagulant (Ferric) due to poorer raw water quality than Lake Huron water. Also, a different type of primary coagulant (Alum) may be more suitable for the treatment of Lake Huron water. | can confirm that based on what the Detroit Lake Huron WTP uses. Also, since softening would need to be employed, treatment compounds including lime, soda ash, and carbon dioxide would be necessary. Q3: If the city needed to borrow money to be able to operate full time (KWA or blending), does the DEQ offer funding via the DWRF? A3: The city could apply for DWRF funding and their eligibility would be based upon how well they score in the overall DWRF ranking process. Also, the total amount of the loan and their ability to repay the loan would be considered. Q4: Flint has put forth a significant capital investment over the past 10 years to maintain their WTP, is the condition of the WTP sufficient for full time treatment of raw water from Lake Huron ? Are the operators qualified to operate the WTP? A4: The Flint WTP has demonstrated its ability to treat raw water (Flint River) and meet the drinking water standards based on quarterly test runs since 2009 and two pipeline emergencies that occurred in 2009 where water from the WTP was distributed to the city. Successful operation of the WTP on an intermittent basis is difficult. WTP operators face the constant challenge of maintaining WTP components in good working order while the plant is normally out of service over 90% of the time. The reliability of WTP and its components are better maintained through continuous operation. The operating experience and knowledge of the operators is also better established with full-time operation. WTP operators have the required operator certification and are very familiar with the operation of the Flint WTP, meeting drinking water standards, and troubleshooting operational problems. The Flint WTP is capable of meeting the drinking water standard if the plant was utilized to treat raw water

Date: Wednesday, January 23, 2013 10:01:30 AM | spoke with Mr. Randy Byrne from the Dept. Treasury — Office of Fiscal Resp. concerning the Flint WTP. Below is a brief summary of our discussion. | can fill you on more details this afternoon just prior or immediately after our KWA meeting. Q1: The city of Flint has considered using the Flint River as a source of drinking water to be treated at their WTP; however, The city may be somewhat reluctant to use the river as their source, what is your assessment of this issue? A: The city could utilize the Flint River ranging from 100% utilization — to a certain percent blending (either Detroit or KWA) or zero percent utilization of the river. | agree that the city should have concerns of fully utilizing the Flint River (100%) for the following; the need to soften, the potential for more advanced treatment after next round of crypto monitoring, available capacity in Flint River at 100-year low flow, residuals management (disposal of lime sludge). As the percent utilization of the river decreases (blending options), the need for softening, residuals disposal, capacity issues do not pose as much of a concern. Q2: When comparing the treatment of Lake Huron water vs. Flint River water, are more treatment chemicals needed to effectively treat the water? A2: Flint river water will require a larger amount of primary coagulant (Ferric) due to poorer raw water quality than Lake Huron water. Also, a different type of primary coagulant (Alum) may be more suitable for the treatment of Lake Huron water. | can confirm that based on what the Detroit Lake Huron WTP uses. Also, since softening would need to be employed, treatment compounds including lime, soda ash, and carbon dioxide would be necessary. Q3: If the city needed to borrow money to be able to operate full time (KWA or xxxEND_PAGE:deq01_b054_3596_3598_1 003597 blending), does the DEQ offer funding via the DWRF? A3: The city could apply for DWRF funding and their eligibility would be based upon how well they score in the overall DWRF ranking process. Also, the total amount of the loan and their ability to repay the loan would be considered. Q4: Flint has put forth a significant capital investment over the past 10 years to maintain their WTP, is the condition of the WTP sufficient for full time treatment of raw water from Lake Huron ? Are the operators qualified to operate the WTP? A4: The Flint WTP has demonstrated its ability to treat raw water (Flint River) and meet the drinking water standards based on quarterly test runs since 2009 and two pipeline emergencies that occurred in 2009 where water from the WTP was distributed to the city. Successful operation of the WTP on an intermittent basis is difficult. WTP operators face the constant challenge of maintaining WTP components in good working order while the plant is normally out of service over 90% of the time. The reliability of WTP and its components are better maintained through continuous operation. The operating experience and knowledge of the operators is also better established with full-time operation. WTP operators have the required operator certification and are very familiar with the operation of the Flint WTP, meeting drinking water standards, and troubleshooting operational problems. The Flint WTP is capable of meeting the drinking water standard if the plant was utilized to treat raw water from Lake Huron. Q5: Do you see any weak links in the WTP or significant improvements if the WTP were to be fully utilized? A5: | would not see any major treatment changes or additions needed if Lake Huron water was utilized; however, in order for the city to fully utilize its storage capacity, a pumping station would need to be added immediately after the WTP such that treated water can be pumped into the city’s 20-Mgal Dort reservoir. In the current configuration, water from Detroit flows by gravity through this reservoir and then into the WTP’s 3 Mgal reservoir followed by xxxEND_PAGE:deq01_b054_3596_3598_2 003598 pumping via Pump Station No. 4 into the city’s distribution system. Improvement in stand-by power may also be necessary. Finally, if a component of Flint River water were to be treated, then more advanced treatment based upon higher bin classification (UV disinfection, etc.) could be required based upon crypto. results. Michael Prysby, P.E. District Engineer Office of Drinking Water and Municipal Assistance 517 335-6122 xxxEND_PAGE:deq01_b054_3596_3598_3

Below is a summary of tems for discussion at tomorrow's KWA meeting. Michael Prysby, PLE. District Engineer Office of Drinking Water and Municipal Assistance 517 335-6122

Date: Tuesday, January 22, 2013 10:58:30 AM Below is a summary of items for discussion at tomorrow’s KWA meeting. Michael Prysby, P.E. District Engineer Office of Drinking Water and Municipal Assistance 517 335-6122