Thursday, February 6, 2014

Bankruptcy Receiver Covets Suburban Money Machine

I’m rebooting my argument about the relationship between Detroit and its suburbs concerning water services.

The suburbs are the source of 80 percent of DWSD’s revenue stream, which amounts to the better part of $1 billion every year.  It’s the only foreseeable security for the financing needed to rebuild dilapidated infrastructure.

It’s possible that the bankruptcy court has the authority to nullify any present equitable interest of the suburbs in DWSD or its successor, but where is the authority of either the court or Kevyn Orr (in either of his roles) to require future lease payments by the suburbs to the City of Detroit for the use of water facilities?

Consider the analogy of a corporate reorganization in bankruptcy.  The bankruptcy court can wipe out the stockholders’ equity, but it would be ludicrous to suggest that the court could then order the former stockholders to begin purchasing stock in the reinvigorated entity coming out of bankruptcy.  

If suburbanites want water and sewer service from Detroit, they can continue to pay the costs of such services, deferred to the following year, same as they do now.  But if they so chose, any of the suburban communities (or combination of them) could acquire those services elsewhere or build their own, more efficient facilities utilizing the latest technology.  It’s their choice, not Orr’s or the court’s.

The billion dollar money machine in the suburbs doesn’t belong to DWSD, Kevyn Orr or the bankruptcy court.  A 700k Detroit tail doesn’t wag a 3000k suburban dog.

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