Great Lakes Article:

Water wars
A deep history runs beneath the battle for Detroit’s water department.
Russ Bellant
Detroit Metro Times
11/14/2002

The war over Detroit water has been going on so long you would think we lived in the parched Southwest, where insecurity about long-term sources of life-sustaining water is constant. While our entire region resists attempts to tap the Great Lakes in order to suckle Western states, we have a microcosm of that water-grabbing attitude right here in the metro area.

Amidst charges of high rates and a lack of representation, Detroit has been taking hits from suburban politicians who are once more trying to seize control of the system that pumps water throughout southeast Michigan and treats its sewage.

This uncivil war reached new depths in recent weeks as Warren’s city attorney threatened during a public hearing to have Detroit’s mayor and the director of its water department jailed. That hearing and others like it were held to debate the merits of legislation intended to wrest control of the water and sewer system — which serves 126 southeast Michigan communities spread across 1,031 square miles — from the city that built it.

While the high drama around the issue has received much attention, the legislation itself has been scarcely examined. Given even less attention is the historical context that frames the debate.

Water under the bridge

Detroit established its water department in 1836 and has provided service within and beyond its boundaries since then. As the region expanded, the city used its ability to sell bonds, with inherent risks, to finance expanding the system — facilitating suburban growth.

Perhaps inevitably, tension began to arise; the initial concern, however, was not suburban control of the water system but rather Detroit officials balking at the idea of subsidizing growth that would eventually drain away residents and erode Detroit’s tax base. The issue came to a head in 1955 when Detroit water chief Laurence Lenhardt said Detroit would no longer add new suburbs to its system, capping service at the 42 cities then buying Detroit water.

For the previous three summers drought had virtually dried up spigots in western Wayne County. Some areas had banned new housing, and industry would not locate in the area due to the shortages. Trucks were delivering water to residents. Lenhardt hung tough. He told them to build their own systems. Detroit, he said, was not going to sell them water that would facilitate the suburban exodus.

A firestorm ensued. Business, civic and suburban leaders as well as the three Detroit dailies began a several years long review of how to best serve the water needs of the region. A six-county committee of political leaders, aided by the National Sanitation Foundation and the Detroit Metropolitan Regional Planning Commission (later SEMCOG) concluded that the City of Detroit should build the water system. Summarizing the prevailing view at the time, the Detroit Times editorialized that “the reason for unification of the water supply in Detroit’s department is because the Detroit system has the economic base — its present facilities and paying customers — to finance expansion. No other apparent combination of communities has such resources.”

Under pressure from the combined force of these interests, Mayor Albert Cobo eased Lenhardt out and installed a manager who would build a regional system.

In the 1960s similar pressures came from Oakland and Macomb counties as they expanded. They faced development bans from the state due to limited sewer systems, so Detroit provided them sewerage services. Detroit also financed a new water treatment plant off Lake Huron to supply the growing northern suburbs of both counties, as well as the greater Flint area.

Shortly after these facilities were in operation, Oakland County Drain Commissioner George Kuhn began a 20-year campaign to take them from Detroit. In the 1990s alone, at least six regionalization bills were introduced in Lansing at Kuhn’s urging. Yet Oakland County communities, evaluating their own interests, ignored Kuhn, deciding that it was easier, safer and cheaper to buy Detroit water than to build their own systems. Now, the payback for Detroit providing this option to the suburbs is an attempt to take it from the city without compensation.

Footing the bill

The latest effort is House Bill 5788. Introduced by state Rep. Leon Drolet (R-Clinton Township), it is touted as merely giving more suburban say in operating the Detroit Department of Water and Sewerage. Much more is in the bill.

If passed into law, HB 5788 would require taking title of all Detroit Water & Sewerage Department (DWSD) treatment plants, booster stations and transmission mains from Detroit. Victor Mercado, DWSD’s newly appointed director, estimates this infrastructure to be worth $6 billion to $8 billion. Where would the money come from to compensate Detroit for losing the system it financed and built?

Supporters of the takeover say little or no payment would be required. They argue that money paid over the years for service entitles the suburbs to take control of the system. Unfortunately for them, legal precedent indicates otherwise. In a case comparable to the issue here, Illinois courts rejected the argument that Chicago’s suburbs could become owners of that city’s water system simply by buying water from Chicago.

The U.S. Supreme Court also rejected such arguments years ago in another utility case, Board of Public Utility Commissioners vs. New York Telephone Company. During a recent public hearing, Mercado called the bill “an illegal, unconstitutional taking of property.” In that regard, he has an ally in Genesee County Drain Commissioner Jeffrey Wright, who agreed that takeover of the system would require “billions of dollars” in compensation.

U.S. District Judge John Feikens has also weighed in on the matter. Because of persistent federal water quality violations that came to a head during the late 1970s, Feikens has overseen department operations for more than three decades.

The judge rejects claims that the suburbs have the right to seize control of the system.

“I determined that Detroit was going to administer DWSD and that is still true today and will continue to be true,” he insists.

Drolet dismisses Feikens’ position as an overreach of his authority and believes that the federal judge cannot stop the takeover. Nor is he convinced that the takeover would be unconstitutional, pointing out the state House Legislative Analysis Section, which considers pending legislation for lawmakers, is split on the issue. It can be argued, says Drolet, that because the state charters all cities, it can exercise the authority to pursue takeovers as it sees fit. “I guess the courts will have to decide,” Drolet concludes.

That is undoubtedly true. If the takeover bill passes, years of litigation will surely follow, with ratepayers and state taxpayers footing the bill.

Legal questions surrounding the bill aren’t the only cause for concern.

Legislative layering

HB 5788 creates a 125-member regional assembly of municipal representatives that incorporates a new regional system, sets water and wastewater rates, approves expansion and financing plans. Each city’s vote is weighted based on water usage. This group would take title of Detroit’s system.

In addition, a second body would be appointed directly by the counties with authority to hire personnel, control capital assets and enter into contracts. It will be, in effect, a bicameral legislature. A good way to run the state, but probably not the best way to run the most important public health agency in Michigan. Critics of this plan worry that, with great areas of overlapping decision making, the system will be plagued with conflict.

Taking all this into account, it’s ironic that one of the primary issues driving the regionalization effort is the cry that suburbanites are being gouged by the City of Detroit. What many customers don’t realize is that much of their bill has nothing to do with rates charged by the Detroit. Take, for example, the city of Warren, which has been a lead advocate of a takeover.

Effective January 2002, Detroit charged Warren $5.86 per thousand cubic feet of water, equal to about 7,500 gallons. Warren in turn charged its residents $13.14 for that water, a 125 percent increase; that’s according to the 2002-2003 Water Department report on budgets and rates prepared for the city by Black and Veatch, an international engineering consulting firm that specializes in water-rate analysis.

Most cities that buy Detroit water double, triple and even quadruple the water charges to their residents. The average markup is 146 percent on water rates and 168 percent on sewer rates. That means most of the money collected in the region for water bills stays in the local communities that bill the residents. It does not go to Detroit.

Moreover, the rates Detroit does charge are a relative bargain. According to Black and Veatch, of the 20 largest U.S. cities, Detroit’s rates are the fifth lowest.

This has largely been overlooked by the media as debate of the takeover legislation raged during a series of public hearings held in recent weeks.

Fueling commentary has been a series of stories in the Detroit News. Particularly explosive was a front-page story that said the Detroit water department was owed $59 million from city residents and businesses in uncollected bills.

The attention-grabbing piece prominently featured the views of Oakland County Executive L. Brooks Patterson, who declared that Detroit was ripping off the suburbs by not collecting the money. A Warren official agreed.

Despite those claims, the article itself made note of the fact that the city’s fund is separate and the whole operation is independently audited, ensuring that the suburbs aren’t saddled with Detroit’s debt.

As Mercado recently pointed out, the story completely failed to mention that nearly half of the $59 million debt can be attributed to abandoned residential and commercial properties going back as far as 20 years. The only reason these debts remained on the books was that the city, hoping to eventually collect, didn’t follow the standard accounting practice of writing off bad debt. As a result of the bad press, that practice is about to change.

The article also failed to point out that, according to city records, much of that $59 million isn’t owed by deadbeats, but rather by people who are simply late in paying their bills. In fact, about 30 percent of the total debt can be attributed to bills that are only one day to three months in arrears. These bills, say city officials, will be collected, as is the case every year.

The impression, however, is one of a bureaucracy gripped by dysfunction — an image the bill’s supporters hope to capitalize on.

With the Legislature entering a lame-duck session, Drolet says there is “a ways to go before I feel secure that the bill has majority support.” He said House Speaker Rick Johnson has been “cooperative” but has not promised to make HB 5788 a high priority. The bill, however, appears to have the support of one powerful ally: Susan Shafer of Gov. John Engler’s office says her boss supports the bill.

Strange things can happen in lame-duck sessions. Now is the time for those suburban residents and communities who have benefited from the Detroit system to go beyond sensational headlines and take a realistic look at the financial, legal and ethical implications of what this bill proposes.

An author of two books investigating the influence of the political right, Russ Bellant is a former Detroit water plant operator who now oversees apprenticeship programs for the city.