CHICAGO -- Flint Mayor Karen Weaver is dropping plans to shift the Michigan city’s water supply to a new bond-financed pipeline though she says the city will continue to honor its debt obligations for the project.
The announcement from Weaver on Tuesday recommending the city continue to purchase water from the Great Lakes Water Authority, or GLWA, marks a reversal from a decision last year to stick with plans to obtain city water from a Karegnondi Water Authority pipeline that is under construction.
The city is legally obligated to repay a portion of the $220 million 2014 bond issue that is financing construction of the authority’s 63-mile pipeline led by Genesee County, but credits from the GLWA will offset the ongoing commitment, Weaver said.
Weaver said sticking with GLWA supplied and treated water is more affordable while avoiding the risk of another supply shift. The city remains scarred by the water contamination crisis that ensued after a state-appointed emergency manager allowed the city’s contract with Detroit for Lake Huron-treated water to expire.
The Great Lakes authority assumed control of regional water management and Detroit’s Water and Sewerage Department bonds in 2016.
As Flint awaited the completion of the Karegnondi pipeline, it drew water from the Flint River and improperly treated it at a city plant, corroding pipes and causing contamination from lead.
“After months of research, analyzation and collaboration, I believe staying with GLWA as the city’s primary water source is the best option when you consider factors related to public health and when it comes to being fiscally responsible,” Weaver said at a news conference.
Weaver was joined by other city and state officials and representatives of GLWA, KWA, and the U.S. Environmental Protection Agency. They are all party with the city to a tentative agreement on the city’s future water usage. The city will hold a town hall meeting Thursday to receive public input before a permanent decision is made in May.
“Continuing with GLWA means Flint would not have to switch water sources again,” Weaver said. “This will help protect residents from any issues that could occur and it would eliminate the fears or anxieties people may have about another major change taking place with our water.”
The city was preparing to shift to KWA supplied, un-treated water in 2019 after making much needed upgrades to its treatment plant to meet federal standards.
Financially, the city will be better off, Weaver said.
By sticking with GLWA, the city can use federal funds from the Drinking Water Revolving Fund Program to update its damaged water distribution system. A 72-inch transmission line would be returned to the city and residents would also gain access to a low-income assistance program to help pay their water bills.
The city can also divert funds that would have gone to finance the required upgrades to its treatment plant to help speed up service line replacements.
Weaver began rethinking the previous decision to stick with KWA as a condition of $100 million in federal funding support.
“While Flint remains ultimately responsible for its 28-year, $7 million average annual bond obligation to the Karegnondi Water Authority, the burden of that debt service will be offset by contract credits Flint will receive based upon transfer of its raw water rights to GLWA,” Weaver said.
GLWA said it would provide a credit to Flint equal to the $7 million annual debt payment “as long as the city keeps current on its debt service payments.”
GLWA will receive the rights to the raw water that Flint has through the KWA and Flint will receive approximately $1.8 million in savings for the 30-year model contract, as compared to the non-contracted charges it otherwise would have incurred, according to a statement from GLWA chief executive officer Sue McCormick.
The crisis began in April 2015 after the city failed to properly treat the Flint River water. In the fall of 2015, it shifted back to Detroit-supplied water but the lead contamination of the city water continued because of pipe corrosion triggered by the improperly treated river water.
Weaver formally re-committed the city to the project last June after negotiations with Genesee County and the state.
At a public appearance Tuesday, Gov. Rick Snyder endorsed Weaver’s decision. "This is a major step forward in terms of long-term water supply for Flint,” he said.
The city will use pre-treated water from Genesee County as an emergency backup.
Flint is responsible for about 35% of the debt service on the KWA bonds, which are to be repaid over the next 28 years. In light of Flint's severe fiscal distress at the time, the KWA bonds featured a back-up pledge from Genesee County.
The bond deal was named The Bond Buyer's Midwest Region Deal of the Year in 2014.
The project participants expected to make their payments from the system's revenues, but the debt carried the limited-tax general obligation pledge of both credits. Genesee further pledged to cover Flint's payments within 15 days if the struggling city was unable to make its share of payments.
Michigan Attorney General Bill Schuette filed criminal charges in December accusing two former state-appointed emergency managers and two other ex-city employees with using false and misleading tactics to participate in KWA project. The charges were part of Schuette's ongoing investigation into the water crisis.
