The votes are in – now comes the hard part

13 Oct 2014

Photo Credit: Christine Cousins, www.christinecousins.com

Photo Credit: Christine Cousins, www.christinecousins.com

Each of the major players (Detroit and Wayne, Oakland and Macomb counties) have now all approved joining the newly formed Great Lakes Water and Sewer Authority; so, we’re good to go and everything is fine, right?  Well, not so fast.  All the votes mean so far is that the Authority exists and that it has four members under the terms of a Memorandum of Agreement and Articles of Incorporation.  Frankly, there wasn’t much doubt that it would be approved and the only question was Macomb.  Once Detroit and Wayne approved it (which was fairly certain), if Oakland or Macomb didn’t, the governor would appoint their representatives and  they could be charged more than those who joined. Landlocked Oakland was a “gimme.” Macomb, with access to Lake St. Clair could have opted to develop its own system – as others have done.

Now begins a 200 day due diligence and negotiation period.  If any of the following happen, the deal may be off and it could be back to the “drawing board”:

1.   the Board for the Authority (which now needs to be appointed) fails to approve and execute leases with Detroit for the City’s water supply and sewage disposal systems;

2. the leases differ materially from the Memorandum of Understanding;

3. the Authority’s consultant, Veolia, determines that the system cannot be operated with a cap on rate increases of 4% per year;

4. the Authority cannot reach a deal on funding currently underfunded pension obligations it will be assuming.

Even after these hurdles are satisfied, the 6 person board needs to get 5 to agree on such things as:  appointment of a management team, approval of rates and rate-setting protocols, issuance of debt, an annual budget, a 5 year capital improvement plan and a procurement plan.  This sort of process worked for the Cobo Hall Authority which required 100% unanimity.  Here, getting to  83% may just be harder. In short, it’s good that the process is on track but it isn’t in the station yet.

 

 

Leave a Comment to “The votes are in – now comes the hard part”

  1. Tony Anthony 15. Oct, 2014 at 10:04 am #

    Arthur,

    When do you think these issues will be resolved?
    One month, three, or more?

  2. Arthur Siegal 17. Oct, 2014 at 3:03 pm #

    I expect 3 months – they’ve got a tight timeline and the Bankruptcy Judge will be pushing this forward.

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