Detroit city manager seeks $9 bln from suburbs for water dept

Reuters

By Nick Carey and Joseph Lichterman

DETROIT, Oct 30 (Reuters) - Detroit Emergency Manager KevynOrr has asked suburban counties surrounding the city to pay $9billion over 40 years to assume partial control of the DetroitWater and Sewerage Department (DWSD), an offer that OaklandCounty Executive L. Brooks Patterson called unacceptable.

Oakland County is home to around 1.2 million of the DWSD'sroughly 4 million customers.

"That offer is DOA," Patterson said. He said that the firstnews he had of Orr's offer came through a Detroit News articleon the subject.

Patterson added that Detroit has failed to maintain its owninfrastructure and 40 percent of the city's residents do not paytheir water bills.

"To ask us here in the suburbs to bail them out to the tuneof $9 billion is basically an insult," he said.

Orr's spokesman, Bill Nowling, declined to comment on theproposed deal as negotiations with the counties are ongoing.

The water department is one of the assets the city islooking to monetize as it attempts to restructure $18.5 billionin debt and liabilities in bankruptcy court.

Orr's $9 billion proposal asks for annual payments of $100million that would eventually rise to more than $200 million peryear, the Detroit News reported.

The Detroit Water and Sewerage Department serves Detroit and127 suburbs, which accounts for about 40 percent of Michigan'spopulation.

In his June 14 report to the city's creditors, Orr proposedleasing the department to a new Metropolitan Area Water andSewer Authority that would be controlled by the department'ssuburban customers.

Oakland County's Patterson said that at this point, MichiganGovernor Rick Snyder and the state legislature should step in toresolve the issue of a regional water authority.

"For something so big and important that affects more thanfour million people, this calls for the state to step in," hesaid. "This is more than we can do as a county."

The department has about $1.2 billion earmarked for repairsto the system's aging infrastructure. Though the city hasstopped paying certain debts, it has kept current on more than$5 billion in water and sewer bonds that Orr has determined aresecure.

Several private equity firms have also shown interest inpurchasing the department from Detroit if they could raise waterrates, Kenneth Buckfire, an investment banker hired by the cityto advise its restructuring, said Thursday during courttestimony as part of the eligibility trial to determine whetherDetroit can restructure its debts in bankruptcy court.

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