Correspondence between

Ed , I did have that letter, it was sent the same day they made their final offer to us. That is what caused us to start considering other options. Ed

Ed, Thanks! Ed Edward B. Koryzno, Jr. | Administrator - Office of Fiscal Responsibility State of Michigan | 430 W. Allegan Street, ist Floor | Lansing, MI 48922 (517) 373-4415 | (517) 373-0633 (fax) KoryznoE@ michigan.gov Pom : a: oIN 8 15 a = 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 1s 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

Attached is the review from Rowe, Ed 114 xxxEND_PAGE:treasury01_b06_0561_0924_028 Review of TYIT December 21, 2012 Presentation City of Flint Water Supply Assessment Prepared by Rowe Professional Services Company DWSD Supply (Slides 7 through 9) 1. ROWE The 8 mgd maximum day supply by DWSD options can result in periods during the summer when most of the water to meet demands will be supplied by the City from the river. To aid in maintaining a consistent water quality, softening of the water from the river should be provided with this option, greatly increasing the City’s costs. Upgrades to Flint’s WTP and dams will be needed for options requiring blending, since the WTP will be required to provide continuous, reliable service and compliance with recent surface water treatment regulations. The rates for the options analyzed are shown on Slide 9 as “TYJT Estimates”. Options and rates shown are different than presented by DWSD previously. DWSD TYJT 11/29/2012 Estimates 18 mgd Maximum Day - P&B $16.24 $16.37 12 mgd Maximum Day - P&B $16.30 $16.31 8 mgd Maximum Day -P&B $12.68 12 mgd Maximum Day - Imlay $14.38 $14.38 8 mgd Maximum Day - Imlay $11.11 Since the rates used in the analyses are shown as estimates, are they actual offers or just presented as “what if” scenarios? We assume that the Imlay options are based on transfer of the 72” main through Lapeer County to Flint. The analyses show a capital cost of $4.7 million; we assume that this is the proposed purchase / lease cost to Flint. This should be clarified along with pertinent details. If the transmission main is transferred to Flint, what are Flint’s responsibilities regarding service to the Lapeer County customers? If they remain DWSD customers, then Flint should receive some revenue for the use the main. It does not appear this is included in the TYJT analyses. If the transmission main is transferred to Flint, we assume that the city will be responsible for the maintenance of the 50 year old main. The TYJT analysis did not include this. Do the rates shown include the credit for “reliability” which had been discussed with DWSD? If the point of commerce is changed from Baxter and Potter to Imlay, a new meter pit will be required. The cost of this does not appear to be included in the TYJT cost analyses. January 8, 2013 xxxEND_PAGE:treasury01_b06_0561_0924_029 Flint River Supply (Slide 10) 1. If any of the “blending” options are chosen, it will be necessary to upgrade the Flint WTP and dams to provide reliable, continuous service and compliance with recent surface water treatment regulations. Data Collected (Slide 14) 1. The slide notes that Flint blending is based on DWSD supplying 2/3 and Flint supplying 1/3 of 12 MGD ADD. For the maximum day demand (18 mgd), if DWSD supplies a maximum of 8 mgd, Flint will supply 10 mgd or 56% of the total. However, such a large portion will make it more difficult to blend and achieve consistent water quality. Flint will need to soften water for these options. Benchmarking Comparisons (Slide 16) 1. The slide subtitles are “KWA O&M Inflation Factor” and “DWSD and Flint Rate Inflation Factor”. It seems appropriate to benchmark O&M costs for the KWA, because future costs of service will be dependent on how operating costs are impacted by inflation. For Flint, it does not seem appropriate that “rate inflation” from other utilities be used to determine the impact of inflation on future cost of service. Rates are impacted by inflation, but also by other factors such as debt and customer base. O&M expenses and rates are different and care should be exercised not to mix the two during analyses. The TYJT analyses apply an inflation factor (based on rates