Tucked into the Detroit Bankruptcy Plan released by the Emergency Financial Manager this month was a small section discussing the Detroit Water and Sewer Department (DWSD). At first it includes a plain description of the well-publicized negotiations between the City and its neighboring counties. Then it gets interesting. The plan provides that as a potential alternative to a deal with the Counties creating a regional authority, the City has been in contact with 41 potentially interested parties regarding a recent request for information (RFI).
According to the DWSD, 16 entities have expressed interest in pursuing some sort of public-private partnership to operate and manage the DWSD water and sewer systems. Per the RFI, this could be an operation and management agreement or it could be something else, including possibly a long-term lease and concession arrangement or a sale of the entire system. In any case, according to the RFI, such a private operator would have to maintain the systems and comply with applicable law while limiting rate increases to no more than 4% per year for the first 10 years.
In response to the DWSD’s troubles, as has been reported before, DWSD’s customer base has begun to splinter. In 2010, a new water authority, Karegnondi was formed by Genesee, Lapeer and Sanilac counties as well as the cities of Lapeer and Flint and it is exploring alternatives to the DWSD and now, the Oakland County Commission Finance Committee voted to recommend spending up to $3Million to explore alternatives to the DWSD. While this is troubling, reading the Oakland Finance Committee resolution sounds like grounds for a very ugly divorce. You can read it for yourself but here’s one quote:
“the DWSD is an aged, monopolistic system that is admittedly significantly over-staffed, is carrying some $5.5 billion in bond debt, is facing billions in unfunded pension and health care liabilities and, due to a combination of prior poor management, corruption and intentional deferred maintenance and upkeep, requires an estimated additional $2.5 to $5 billion … over the next ten years.”
Sounds pretty scary. Despite the fact that the DWSD: (1) recently got a new management structure; (2) got out from under federal supervision after over 25 years; (3) is reportedly planning to get serious about deadbeat customers, it sure looks as if we’re heading for a multiplicity of water and sewer providers rather than just one. What that means for infrastructure maintenance and pricing is anyone’s guess. This is heading in the wrong direction if you ask me because I suspect it means less infrastructure repair and higher rates. I wonder if the Judge will knock some heads together to see if he can’t get the parties to share information and make decisions that are smart for the entire region.