Monday, March 31, 2014

What is KWA?

The Karegnondi Water Authority (KWA) is the pet project of Jeff Wright, the Genesee County Water Resources Commissioner.  “Karegnondi” is a Petan (Wyandot) Indian word meaning “big lake,”  associated especially with Lake Huron, the source of KWA’s water.  

The Authority is intended to provide potable water to communities in Genesee County and points eastward in Lapeer and Sanilac counties, along the pipeline from Lake Huron.  It was created to replace service from the Detroit Water & Sewerage Department (DWSD) in those counties. 

Wright and other promoters expect savings to residents and businesses in the service area to be significant, encouraging economic growth.

Construction of the water intake facility on Lake Huron just began.  The intake contractor is  L. D'Agostini & Sons Inc.

The entire project is scheduled to be completed in 2016.  In the meantime, water will be drawn from the Flint River and treated or purchased from DWSD.

Friday, March 28, 2014

Considerations in Breaking a Water Monopoly

Some wholesale customers of the Detroit Water and Sewerage Department (DWSD) worry about retribution in terminating (supposed) contractual obligations with DWSD.

I question whether a monopoly in essential services like DWSD even qualifies as a party to a contract.

The essence of a contract is agreement as the result of bargaining, more precisely arms-length bargaining.  Bargaining like that is impossible with a monopoly such as DWSD.

There may be an understanding as to which goes first, your left foot or your right foot, but there’s no contract.  One foot doesn't expect to sue the other foot over who goes first. They are both creatures of a greater whole.

Furthermore, when one party to an understanding robs the other parties blind, it would be insane to suggest that the victims are obliged to submit themselves to the risk of further abuses.

The rule should be that, where one creature of the state has a monopoly in essential services like water and acts dishonestly, another creature of the state which is a recipient of those services should be free to break the monopoly without retribution.

Indeed, that was the result in terminating the relationship between DWSD and Genesee County, Flint, et al.

Monday, March 24, 2014

DWSD to Borrow Again

Here we go again. Why didn't DWSD's own public affairs office announce the department's plans? Why does news like this sneak up on us? Why the secrecy?

Excerpt from The Bond Buyer (Caitlin Devitt), March 24, 2014: 

"The Detroit Water and Sewer Department plans to come to market in June with $150 million of sewer bonds — and possibly a restructuring of its entire $4 billion portfolio — in the midst of the city's tumultuous bankruptcy and talks to privatize the asset."

Tuesday, March 18, 2014

DWSD's Wastewater Process, History and Regulation

Perhaps the best summary (16 pages, including charts and maps) of wastewater treatment at DWSD, the city department's record the past few decades and how the State of Michigan enforces state and federal clean water laws can be found on the website of the Michigan Department of Environmental Quality (MDEQ):


"The sustained peak primary treatment capacity for wet-weather flows is 1,700 [million gallons per day (MGD)] and the sustained peak secondary treatment capacity for wet-weather flows is currently 930 MGD... All dry-weather flows and a significant amount of wet-weather flows receive full secondary treatment at the WWTP."  (p.3)

"There is currently no additional space at the plant where additional secondary capacity could be constructed. The DEQ has determined there are no feasible alternatives for providing secondary treatment to flows greater than 930 MGD."  (p.4)

[The National Pollution Discharge Elimination System (NPDES) permit] "... focuses on addressing three major issues. The first is providing effluent limits, solids handling requirements, and improved operations and maintenance through a robust Asset Management Program... The second is a reduction in the permitted total phosphorus loads to help reduce phosphorus loadings to Lake Erie. There are numerous sources of phosphorus loadings to Lake Erie, including the Detroit [Wastewater Treatment Plant (WWTP).]  Loadings reductions from point and nonpoint sources are likely needed to help reduce harmful algal blooms in Lake Erie.  The third is a new adaptive management [Combined Sewer Overflow (CSO)] Control Program that recognizes the significant achievements of the Detroit CSO Control Program over the last 20 years, sets forth schedules for completion of the core CSO Control Program, expands the use of Green Infrastructure, and moves forward with the remainder of the control program..."  (pp.10-11)

"The Detroit WWTP has had periods of violations of its NPDES Permit limits and conditions over the past 35 years...After one period of violations from 1997 through 1999, a second amended consent judgment was issued in 2000. These violations largely resulted from high solids inventories accumulating at the WWTP.  The high solids inventories resulted from ineffective operations to dewater solids and remove them from the WWTP...Violations again started in September 2009 and continued until November 2011...As was the case in the late 1990s, the immediate cause was high solids inventories in the WWTP."  (p.11)

*****     *****     *****

It may be as complete a picture of DWSD as you can get, as long as you overlook a page full of high crimes and misdemeanors.

Saturday, March 15, 2014

"Monetizing" DWSD: Blood from a Turnip?

In attempting to finance the future Detroit partly by reaching into the wallets of suburban water customers, is Emergency Manager Kevyn Orr channeling Wall Street titans who construct elaborate financial schemes in self-serving gibberish? 

Or do we understand him best as an alchemist, a medieval philosopher and tinkerer looking for a way to make gold out of base metals?

Or is he simply an overburdened state functionary running out of time, in desperation falling back on flim-flam and bullying?

No matter the metaphor, without legitimate, informed negotiations with suburban leaders and a fair settlement, a bankruptcy-court-endorsed Orr cram-down will result in a decade of litigation and appeals, city and suburbs meanwhile drifting in the dark.

Thursday, March 13, 2014

New Wrinkle in Water Talks; EM Orr's Alternate Plan; Gov's Re-election Bid

Crain’s Detroit reports a new wrinkle in city/suburban water talks.  Chad Halcom wrote on March 9, 2014:

“Suburban businesses and residents could have to pay $60 million or more per year into the coffers that pay retired Detroit employees if their elected leaders cannot agree on the creation of a new regional authority…”

“The money apparently would pay the annual contributions of all city workers in the General Retirement System over the next 10 years, not just DWSD's own employees.”

“...another section of [the plan] authorizes Detroit to ‘begin planning a rate stability program for city residents’ in the system, which can in turn ‘provide for affordability of retail rates to be taken into account in the development of wholesale rates…’ ”

“In other words, regional leaders said, a post-bankruptcy DWSD would add nearly $67.5 million per year to its expenses, with little or no ability to raise capital for it in the bond markets and no significant new revenue coming from city retail customers. That really leaves only one other revenue stream.”

Halcom's article doesn’t raise the question, how much of this plan has Governor Snyder’s stamp of approval?  Are Emergency Manager Orr and the governor on the same page concerning these proposals?  

Presumably, in his re-election bid, the governor plans to raise a lot more campaign money and garner a lot more votes in the suburbs than in the City of Detroit.  Is EM Orr really going to torpedo the governor’s re-election plans?

Tuesday, March 4, 2014

Detroit's Emergency Manager Expects DWSD Ratepayers to Double Down

Want to take a closer look at DWSD, water rates and the infrastructure dilemma?

It’s not as if we haven’t paid enough for water services to be in a position to meet infrastructure needs as they come along; it’s that what we paid was so recklessly squandered.  I guess Detroit’s Emergency Manager, Kevyn Orr, thinks the ratepayers should double down with DWSD on infrastructure investments and tack on a stipend for Detroit’s general fund to boot.

We may have to pay more, but I think it should be on our own account, not Detroit’s.

First, let’s consider some of the decisions, practices and omissions over the years that have cost us millions:

(1)  Years ago, DWSD’s director was a professional engineer, with the attendant standards of ethics.  Those standards were sacrificed when the city made the directorship a non-engineer, politically appointed position.

(2)  For 33 years, the wastewater system was under the control of an elderly jurist who was the dupe of some corrupt city politicians to whom the judge gave plenipotentiary powers. Mayors were empowered to disregard city council in matters concerning DWSD.  The judge tossed out the requirement of competitive bidding for water services contracts for the sake of “efficiency” under “emergency” conditions that went on for decades.  The foxes had the keys to the henhouse.

(3)  The same judge piled on layers of additional bureaucracy, none of which made a significant dent in the corruption and mismanagement at DWSD.

(4)  City government in Detroit was a byzantine maze.  Coordination was lacking (a) internally between DWSD offices and (b) externally with other city departments.

(5)  Preventive maintenance was talked about frequently but practiced very little, mainly because maintenance people were in emergency mode most of the time.

(6)  Reports bearing upon clean water standards filed with state and federal authorities contained contradictory statistics.  There is evidence that some discrepancies were intended to mislead. (Copies available on request.)

(7)  Sewage sludge disposal was an unrelenting problem.  Incinerators kept breaking down.  Landfill capacity was limited.  Sludge inventories backed up, often resulting in sludge being recycled, a costly diversion, or being dumped only partially treated into the Detroit River and on to Lake Erie. The Vista calamity came and went at the expense of ratepayers. Ditto Synagro.

(8)  It often took months to get DWSD requisitions for replacement parts to be approved by the city purchasing department.  In some cases, the delay in acquiring new parts was as long as a year or two.  Sometimes this would result in parts being cannibalized from other inoperative equipment awaiting repair.

(9)  Preferential hiring requirements, conflicting union contracts and oppressive work rules complicated personnel administration in particular and management in general.  Hiring took too long.  Preparing replacements for those scheduled to retire was too slow.  Training for state licenses necessary for advancement was untimely.  The quality of training programs was suspect.  Procedures for improvements were cumbersome. 

(10) A consulting firm estimated that DWSD was over-staffed by 80 percent.

(11) Accounting has been hit and miss.  Whole categories of accounts seem to have been unattended.  We know about a few.  For example, storm run-off fees for city businesses went unbilled in some instances for years.  Water bill delinquencies in the city have sky-rocketed.  Some reports have estimated delinquencies at 40 percent.  (Who do you suppose makes up these shortcomings in revenues when costs are tallied at the end of the fiscal year?  You guessed it -- the other ratepayers.)

(12) Auditing?  DWSD responded to my recent request for a copy of its 2013 audit report, due last fall, with the statement that the city had not yet “released” the report and suggested that I not expect the report anytime soon.

(13) Cronyism at DWSD, as in the City of Detroit generally, has been troublesome. Old pals often have the edge in the employment line.

(14) Last but certainly not least, there is the long list of crimes with which most of us are familiar:  fraud, extortion, bribery, bid rigging,  etc., etc. The cost of these is incalculable.

When I have time, I’ll work up a more complete list.

To sum it up, money for infrastructure upkeep was dissipated through mismanagement and corruption.  It wasn’t there when the need arose.  Upgrades had to be postponed year after year, decade after decade.  The water systems (fresh and waste), like the city at large, were crashing faster than city poobahs could borrow to catch up.

The truth is that DWSD is just too big, too far into disrepair, and its processes too outmoded and inefficient.

The solution is to gradually replace DWSD with smaller, more efficient facilities employing the latest technology in locations throughout the region.

Instead, the emergency manager expects ratepayers to start shelling out for it all over again AND to give a bonus of nearly $50 million per year to the city’s general fund on top of it all.