Debbie Stabenow, Michigan
U.S. Sen Debbie Stabenow, D-Mich., is among those proposing emergency federal funding for Flint, Mich.

WASHINGTON – State and federal authorities advanced efforts Thursday to bring more fiscal help to Flint, Michigan as its copes with a water contamination crisis that market participants say will reach far and wide.

At the federal level, Senate Democrats proposed legislation that would provide up to $400 million in emergency federal funding, which must be matched by the state, to help fix or replace corrosive water pipes that have exposed the 100,000 residents of Flint, Mich., to high lead levels.

At the state level, the Michigan Senate approved a supplemental spending bill for $28 million in emergency funding for Flint in a vote that followed House's passage last week. Gov. Rick Snyder, who is under fire for his administration's slow response to the crisis and decisions that contributed to the contamination, announced the funding in his recent State of the State address.

Snyder plans to announce additional funding in his budget address next month.

"The immediate needs will be met, but so will the long-term needs of residents with regard to public health, infrastructure replacement and community support," Snyder said in a statement after Thursday's vote.

Some have estimated that a solution requires new infrastructure with a price tag of up to $1.5 billion and Flint, which remains under the watch of a state oversight board, has few resources to cover the tab.

The funding approved Thursday will pay for bottled water, faucet filters, testing kits, school nurses, school fixtures, treat children with elevated lead levels as a result of the contamination, and provide water payment relief for residents.

The crisis began after the city, under oversight of an emergency manager, broke off from the Detroit Water and Sewerage System in 2014 to save money when its contract to receive Detroit-supplied water ended. The city began pulling water from the Flint River and intended to use it until later this year when it will get its water from a new pipeline being built by the partially bond-financed Karegnondi Water Authority. The river water wasn't property treated and corroded pipes throughout the system.

The city with state financial help reconnected to Detroit's system last year but it did not solve the city's problems because the delivery system's pipes had been contaminated with lead.

The federal legislation -- amendments that Michigan's senators, Debbie Stabenow and Gary Peters, and other Democrats want to add to a bipartisan energy bill pending in the Senate -- would require the state of Michigan to match the $400 million.

It would also provide for the forgiveness of loans obtained through the state revolving loan fund, estimated to be about $20 million, and for Flint to use that money to invest in new infrastructure to provide clean water.

The legislation would also set up a $200 million Center of Excellence on Lead Exposure to monitor the children exposed to high lead levels and coordinate services. The senators said Michigan is at fault and should contribute the matching funds to federal money as a result.

The $800 million of federal and state funds is about what the Republican governor told President Obama is needed for a permanent fix, the senators said.

"The government of the state of Michigan created this catastrophe," Peters said. "You had a state-appointed manager who was looking to save some money by going to the Flint River as a source of water."

The Environmental Protection Agency, made aware of the high lead levels, asked the state to take action, and it did not, Peters said. EPA officials have defended their actions saying they did not believe that they had authority to go public about the health threat because federal law says it must work with the state, he said. The EPA's top Midwest official resigned last week over the crisis.

Stabenow and Peters have introduced a bill and Rep. Dan Kildee, D-Mich., is expected to offer it in the House next week that will require the EPA, if aware of major health issues that remain undisclosed by a state, to publicly disclose them within 15 days.

Stabenow and Sen. Chuck Schumer, D-N.Y., said they hope to get broad support for the legislation, including from Republicans. Stabenow said she has talked with Sen. Lisa Murkowski, R-Alaska, chairman of the Senate Energy and Natural Resources, and that Murkowski is supportive of some provisions.

Murkowski's Energy Policy Modernization Act (S. 2012) has general support from the Obama administration. The administration said it had some concerns about the bill, but is working with Congress to address them.

The crisis poses issues for the municipal market even though no bonds are directly impacted.

As Flint has little ability to pay to fix its water pipes, the onus could fall on the state to absorb the expense in its capital improvement program. Local and state entities and officials also face lawsuits over their roles in failing to identify and manage the contamination problem all of which could "wind up costing Michigan far more than system replacement," Municipal Market Analytics writes in its weekly outlook.

The combined cost of the crisis and Snyder's proposal to restructure the faltering Detroit Public Schools at a $700 million cost to the state could "pose modest rating and credit pressure on State of Michigan bonds" over the next year, MMA says.

Support for the state's emergency management program for local governments faces possible erosion because Flint's water decisions were made primarily while under the oversight of an emergency manager. A transition board remains in place although it recently restored more powers to the city's mayor in a move backed by Snyder.

"This could imply a step back by the state from remediating its most mismanaged cities and thus worsening local fiscal distress, leading to higher in‐state default and impairment incidence," MMA warns.

The crisis could also drive away business, residents, and development exacting a greater economic toll on the region. More broadly, the crisis has triggered scrutiny of the nation's water and sewer infrastructure and little additional help expected currently at the federal level local financing will be needed, MMA adds.

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