Correspondence between

My notes from a call yesterday where your names came up. Let me know if questions. thanks Steve Marquardt USEPA Region 5 77 West Jackson Blvd Chicago, Illinois 60604 (312)353-3214 xxxEND_PAGE:treasury01_b41_7622_7971_142 January 24, 2015 Call Notes Call arranged by Emily Barson — HHS Included representatives from Michigan Governor’s office, MDEQ, USEPA headquarters and Region 5 On the call the Governor's office requested information regarding press related to $80M in infrastructure funds going to Michigan. USEPA responded that this was the annual appropriation of Clean Water State Revolving Funds {CWSRF) and Drinking Water State Revolving Funds (DWSRF) and these funds are awarded to the state as a grant and then state provide these funds to communities primarily in the form of low interest loans. It would be up to the state to determine the amount of funds provided to Flint. There was then discussion of the state revolving fund and options under the fund to provide resources to Flint. The State asked about the eligibility of lead service line replacement and USEPA responded that they were eligible. The state also asked about eligibility of items inside the home and USEPA indicated that this would be investigated. Options discussed for further investigation: - Old Debt - The Michigan Finance Authority holds approximately $20M in DWSRF Flint Debt. The state should examine any savings that could be provided to Flint on this old debt including lowering the interest rate which is at 2.5% and possible extending the term of the debt from 20 year to 30 year. The extended term may make the semi-annual payments more affordable but costs more in the long run. Also, the State could pay off a portion of the debt. The Michigan Finance Authority may also have other ideas of actions that could be taken. - New Funding - FY15 USEPA Funding — In September 2015, the MI DWSRF program identified $35M in projects they plan to fund in 2016 and provide $5.5M in principal forgiveness for those projects. The FY15 USEPA funding allowed stated to provide 20%-30% of the grant to the state as principal forgiveness to communities. This would be approximately $5.5M-S8M. The state should investigate the ability to award Flint a DWSRF loan that provides principal forgiveness up to the maximum allowed. - F¥16 USEPA Funding — FY16 CWSRF and DWSRF allocations to states have not yet been released. It is anticipated that MI would receive a similar allocation to FY15 — in FY15 USEPA awarded approximately S60M in CWSRF and $27M in DWSRF. If Flint applies for funding, the state could provide a loan to Flint and provide principal forgiveness up to the amount allowed under the FY16 appropriation language which is 20% of the DWSRF grant. The issue is that these funds would not be available for some time if the normal state SRF process is followed. The state normally applies for the funds in summer and provides funds to communities in the fall. All options for new funding are dependent on Flint providing detailed information on needs, prioritizing the needs, and applying for funds. Action items: - USEPA look into eligibility options for SRF related to internal home plumbing replacement — Peter Grevatt (USEPA) - USEPA, Michigan Finance Authority and MDEQ to investigate SRF funding options listed above and any other possible options. — John Barton (Michigan Finance Authority), Sonya Butler (MDEQ), Steve Marquardt (USEPA R5) o Look for most effective, economic and efficient way to approach needs - USEPA Finance Center offered assistance — Jim Gebhardt (USEPA) - Investigate the ability to transfer funds from the CWSRF to the DWSRF and the pros and cons of approach - MDEQ requested the formation of a Municipal Finance Team - The USEPA Region 5 representative is Steve Marquardt and the request was made by EPA to have Sonya Butler from MDEQ and John Barton from the Michigan Finance Authority. xxxEND_PAGE:treasury01_b41_7622_7971_143 Workman, Wayne (TREASURY)

Importance: High John I'm not sure you saw this. Would we be able to make loans to communities to replace private service line? Let me know what you think

Ke does, Thank you. [did not want to speak for DEQ.

Date: Friday, March 27, 2015 12:46:31 PM It does. Thank you. | did not want to speak for DEQ.

Tohn xxxEND_PAGE:deq21_b238_0784_0786_2 Here's information that you can share with Amy Hovey, staffer for Congressman Dan Kildee, regarding how Michigan has used principal forgiveness in the Revolving Loan Programs. EPA has talked with Congressman Kildee on this issue at least twice. Principal forgiveness came around with the American Recovery & Reinvestment Act (ARRA). All of Flint's drinking water loans were prior to ARRA. Tn May 2009, Flint submitted o project plan that comprised various prajects the city wanted to pursue. Flint had 2 projects on the project priority list to receive funding in 2010 thru 2013, Initially the projects did not rank high enough to receive funding. When funding became available for Flint, the city declined to move forward with the projects. Some principal forgiveness was offered as part of the funding. Annually EPA requires the state to describe how principal forgiveness will be used (Intended Use Plan) and then report at the end of the fiscal year (Annual Report} how the funds were allocated. EPA audits the data during their annual visit. In Michigan, we have used principal forgiveness to assist disadvantaged communities and for projects that ore water or energy efficient (Le. green) consistent with EPA quidance. There is no provision te randomly provide principal forgiveness to a project or use it to refinance a prior loan. The purpose of the funds are to revolve in perpetuity (as stated in federal statute} so that communities can continue to receive financial assistance. Michigan has never completely forgiven an entire loan as it would greatly reduce the capacity of the fund te offer assistance to future projects. T hope the above helps. [f there are additional questions, please let me know. Sonya T. Butler, Chief Revolving Loan Section Office of Drinking Water & Municipal Assistance Michigan Department of Environmental Quality 525 W. Allegan | Lansing, MI 48933 @ 517.284.5401 xxxEND_PAGE:deq21_b238_0784_0786_3

Date: Friday, March 27, 2015 12:45:18 PM John Here's information that you can share with Amy Hovey, staffer for Congressman Dan Kildee, regarding how Michigan has used principal forgiveness in the Revolving Loan Programs. EPA has talked with Congressman Kildee on this issue at least twice. Principal forgiveness came around with the American Recovery & Reinvestment Act (ARRA). All of Flint's drinking water loans were prior to ARRA. In May 2009, Flint submitted a project plan that comprised various projects the city wanted to pursue. Flint had 2 projects on the project priority list to receive funding in 2010 thru 2013. Initially the projects did not rank high enough to receive funding. When funding became available for Flint, the city declined to move forward with the projects. Some principal forgiveness was offered as part of the funding. Annually EPA requires the state to describe how principal forgiveness will be used (Intended Use Plan) and then report at the end of the fiscal year (Annual Report) how the funds were allocated. EPA audits the data during their annual visit. In Michigan, we have used principal forgiveness to assist disadvantaged communities and for projects that are water or energy efficient (i.e. green) consistent with EPA guidance. There is no provision to randomly provide principal forgiveness to a project or use it to refinance a prior loan. The purpose of the funds are to revolve in perpetuity (as stated in federal statute) so that communities can continue to receive financial assistance. Michigan has never completely forgiven an entire loan as it would greatly reduce the capacity of the fund to offer assistance to future projects. T hope the above helps. If there are additional questions, please let me know. Sonya T. Butler, Chief Revolving Loan Section Office of Drinking Water & Municipal Assistance Michigan Department of Environmental Quality 525 W. Allegan | Lansing, MI 48933 @ 517.284.5401 xxxEND_PAGE:deq04_b324_4501_4501_1

Date: Thursday, March 19, 2015 3:50:09 PM Sonya, The restructuring actually has a positive effect with respect to state match due to additional interest being paid by Flint over the remaining life of the loans. The restructuring is fairly simple in that roughly $2.2 million in principal payments due this calendar year are being spread over the remaining life of the loans. There is no extension of the final maturity and interest will still accrue and be paid this calendar year. It is also worth mentioning the $2.2 million deferral will be repaid in as near equal amounts as we could manage, rounded to a $5,000 increment. There is a small reduction in the pace of recycling and in turn capacity, but in the context of the overall program it has little to no impact. As mentioned, to effectuate the restructure, the loan repayments are being modified. Please let me know if you need anything else. Thank you John

Sonya, The restructuring actually has a positive effect with respect to state match due to additional interest being paid by Flint over the remaining life of the loans. The restructuring is fairly simple in that roughly $2.2 million in principal payments due this calendar year are being spread over the remaining life of the loans. There is no extension of the final maturity and interest will still accrue and be paid this calendar year. It is also worth mentioning the $2.2 million deferral will be repaid in as near equal amounts as we could manage, rounded to a $5,000 increment. There is a small reduction in the pace of recycling and in turn capacity, but in the context of the overall program it has little to no impact. As mentioned, to effectuate the restructure, the loan repayments are being modified. Please let me know if you need anything else. Thank you John

Matt & John T understand that the Flint loans will be restructured per the Governor's office. I am concerned about the impact this will have on the DWRF especially the capacity available in the fund to use for state match. Can you share the details of how the loans will be restructured such that the available capacity is not affected nor the loan repayments? Sonya T. Butler, Chief Revolving Loan Section Office of Drinking Water & Municipal Assistance Michigan Department of Environmental Quality 525 W. Allegan | Lansing, MI 48933 @ 517.284.5401 xxxEND_PAGE:deq04_b409_4652_4653_1 xxxEND_PAGE:deq04_b409_4652_4653_2

Date: Thursday, March 19, 2015 3:27:58 PM Matt & John T understand that the Flint loans will be restructured per the Governor's office. I am concerned about the impact this will have on the DWRF especially the capacity available in the fund to use for state match. Can you share the details of how the loans will be restructured such that the available capacity is not affected nor the loan repayments? Sonya T. Butler, Chief Revolving Loan Section Office of Drinking Water & Municipal Assistance Michigan Department of Environmental Quality 525 W. Allegan | Lansing, MI 48933 @ 517.284.5401 xxxEND_PAGE:deq04_b088_3239_3239_1

John We had an email from Flint earlier today, declining DWRF funding for the current fiscal year due to their current finoncial status. T have asked my staff to determine if the praject can be reduced in scope (currently water main and pump station) & cost such that it is easier te finance a project this fiscal year. In cur opinion, the scope can be reduced. Thus, further discussien is necessary with the city’s enginger and staff regarding this option. This may require additional time te get the Part I application submitted (today is the deadline}, Our expectation is to provide principal forgiveness te this project as Flint qualifies as a disadvantaged status community. The original project estimate was $13 million with approximately $5 million expected as principal forgiveness. The EFA in Flint has to clear projects requiring bond financing with Treasury. T wanted to alert you te the situation so that you can ensure thet the appropriate staff in Treasury have complete information regarding the project. Sonye T. Butler, Section Chief Revolving Loan Section Resource Management Division Michigan Department of Environmental Quality 525 W. Allegan Street, Lansing, MI 48933 op SUP373.4737 ff: 5I7.338.0743 xxxEND_PAGE:deq26_b046_0524_0524_1

Date: Thursday, May 24, 2012 2:39:59 PM John We had an email from Flint earlier today, declining DWRF funding for the current fiscal year due to their current financial status. I have asked my staff to determine if the project can be reduced in scope (currently water main and pump station) & cost such that it is easier to finance a project this fiscal year. In our opinion, the scope can be reduced. Thus, further discussion is necessary with the city's engineer and staff regarding this option. This may require additional time to get the Part I application submitted (today is the deadline). Our expectation is to provide principal forgiveness to this project as Flint qualifies as a disadvantaged status community. The original project estimate was $13 million with approximately $5 million expected as principal forgiveness. The EFM in Flint has to clear projects requiring bond financing with Treasury. I wanted to alert you to the situation so that you can ensure that the appropriate staff in Treasury have complete information regarding the project. Sonya T. Butler, Section Chief Revolving Loan Section Resource Management Division Michigan Department of Environmental Quality 525 W. Allegan Street, Lansing, MI 48933 p: 517.373.4737 f: 517.335.0743 xxxEND_PAGE:deq01_b085_3630_3630_1