Who authorized the termination of Flint’s water contract?

OMAThe Flint water crisis is the result of a long chain of decisions and actions, culminating in a colossal failure by a state regulatory agency. But the first decision on the chain, the match that lit the fuse, was the decision by the Detroit Water and Sewer Department to terminate Flint’s contract two years before Flint’s new pipeline would be completed.

The paper trail – or absence thereof – suggests that decision may have been made illegally.

The notice of termination was delivered to Flint on April 17, 2013 – one day after Flint Emergency Manager Ed Kurtz signed the agreement with Karegnondi Water Authority, and a week after Flint’s City Council endorsed that agreement.

That termination is underscored by this resolution by the Detroit water board, adopted on Feb. 12, 2014. Its fourth “whereas:” “on April 16, 2013 the Board provided a one year notice of intent to terminate service under the December 25, 1965 agreement …”

But there is no record of an action by that board to give notice of termination of the contract. All the Detroit Water Board’s meeting minutes, agendas and director’s reports are available online. One would think – and the resolution noted above would confirm – that at a meeting somewhere in Feburary, March or April of 2013, the board discussed and voted upon a termination of Flint’s contact if, indeed, it signed with KWA.

There is no record that any such discussion, or vote, took place. Neither is there, going back well into 2012, any record of discussion or a vote to authorizing the director to terminate the contract.

If the resolution is true – that DWSD’s board took that action – it appears to have happened in violation of the Michigan Open Meetings Act.

Backing Flint into a corner

The media chasing this story have been buzzing the last week over the last-ditch offer DWSD made to Flint in April of 2013 – just weeks before Flint’s Council voted to join KWA and Kurtz signed the agreement. Detroit was offering Flint – and the KWA – a 20-percent reduction in its water rates to lock in a 30-year contract. It even had a nice little chartDWSD KWA Chart (left) showing DWSD’s projections that would save Flint millions of dollars over the KWA’s planned Lake Huron pipeline.

Except, as Genesee County Drain Commissioner Jeff Wright – the driving force behind KWA – told Jim Lynch of the Detroit News, Detroit would not guarantee to lock those rates in for more than one year. Which makes the projections pretty meaningless, given Detroit’s 10-year history of giving Flint an average 6.3-percent rate increase each year.

After a long history with Detroit, Flint may have felt it wise to turn the offer down.

I have said that Detroit – knowing their departing customer would not be able to draw from its new source for at least two to three years – gave them the one-year termination notice for one or both of two reasons. Spite. Or to back Flint into a corner so it could jack up its price for the interim supply.

We don’t know if the first is true; the News’ Lynch was planning to interview DWSD director Sue McCormick. But we know from the record that the second part is.

InterimRateOn April 15, 2014, Detroit made its final offer for interim water to Flint. After 10 years of an average 6.3-percent hike – and less than a year after offering more than a 40-percent reduction – they demanded a 10-percent increase.

And that rate was only for the remainder of Flint’s fiscal year – from the time the previous contract termination took effect, April 17, 2014 (two days!) until June 30, 2014. It doesn’t take much of an imagination to assume another increase would follow for 2014-15.

I get that the scale of the 2013 offer, which included other communities committed to KWA, and the interim supply for Flint makes a big difference in how you set rates. But part of the problem here is that Detroit has a great deal of excess capacity: high supply, low demand. This is one of those areas where the law of supply and demand, apparently, does not apply.

Detroit’s offer was accompanied by the resolution noted above. It’s not hard to read between the lines: “We took care of you for 35 years, and then some. But you cheated on us, so we’re booting you out. You can live here until you move into your new home, but it will cost you.”

When Flint got T-boned

The Detroit decision looms large in the Flint tragedy, but no larger than a number of other decisions that led Flint to draw its water from the river. The fact that this one may have skirted the law puts it in a different light – and, perhaps, a different class. Perhaps that’s why there are people working very hard to make sure DWSD’s role fades into the background. Either way, it doesn’t change where the major part of the accountability for this tragedy lies.

You’re out of milk and go to the store. The checkout clerk is horribly slow, and it takes longer than you’d hoped to get out. Your spouse calls and asks you to stop at the pharmacy.

As you leave the pharmacy, you stop to wait for a pedestrian, an elderly lady who takes what seems like forever to cross. A few blocks later, a work crew has the street closed, and you follow the marked detour.

The detour takes you to a light, which is green. As you pass through, a car blasts through the red light and T-bones you.

Whose fault is the crash?

After all, a number of things happened to put you in that intersection at the exact moment the other driver came through. Is the accident the fault of the work crew? The old lady crossing the street? Your spouse? The slow clerk? Whoever drank the last of the milk?

The decision to draw water from the Flint River – made, according to evidence, by either then-Flint-EM Darnell Earley or then-State-Treasurer Andy Dillon – was a critical one. But so was the decision that led to it – Detroit’s to terminate the contract. So was the decision that led to that – Flint’s to join KWA.

Regardless of the decisions that led to that intersection of water and lead, though, the guy who blew the red light is the DEQ.

It maintained a culture – likely informed by the philosophy of its director and its governor – that “government regulation” is a bad thing, that DEQ should take a minimalist approach to compliance. It issued a permit to begin treating Flint River water that did not specify the right protocols. It arrogantly impressed upon Flint its own mistaken interpretation of the Lead and Copper Rule. It disparaged and discredited anyone who pointed to the increasingly apparent problems.

It’s amazing, in some ways, because the kind of arrogance we’ve seen here is usually practiced by people who are good at what they do. This combination of this level of incompetence with this kind of hubris is unusual – and tragic.

DEQ ran the red light. Detroit merely sent us to the store. But they may not have followed state law in doing so.

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8 Things You Don’t Know about Michigan’s Emergency Manager Law

CityDemocracy (2)The water crisis in Flint, Michigan has put the spotlight on Michigan’s Local Financial Stability and Choice Act (PA 436 of 2012) – better know as the emergency manager law.

The problem with a spotlight is that, with a tight focus on one part of something larger, it can be used to obscure or distort the whole. So here are some things you need to know about Michigan’s EM laws – good and bad – that you likely won’t hear about from the people with spotlights.

Yes, I said “laws.” The existing act, signed by Gov. Rick Snyder in 2012, is the fourth in a series of similar laws that date back to 1988. Let’s start with the most important, basic concept.

1. Michigan cities are not autonomous democracies

Michigan’s local governments — cities, villages, townships — are not independent and autonomous democracies. They never have been.

Municipal governments (and county governments) are subdivisions of state government. They are, in effect, the local branch offices of the state government, established to provide three services that state law mandates they provide. (Fun quiz: post your guesses at what they are in the comments. No fair peeking!)

The Home Rule Cities Act of 1909 allows cities to establish their own charters, develop procedural rules and provide other services. But they remain subdivisions of the state. And that means – ironically enough under the circumstances – that constitutionally, the Michigan governor is ultimately accountable for the actions taken by and the financial performance of local governments.

So let’s not compare the appointment of an EFM with the launching a coup and installing a dictator in, say, Iran. It’s more like a corporate head office saying to a local store manager, “If you can’t get your operation in order, we’re sending in a team to manage it until it is.”

2. It is consistent with the concept of ‘emergency’ powers

One of the greatest ironies of this situation came from the people most vociferous about taking action in Flint. They protested that Flint’s water problems were caused by a governor exercising emergency powers to override local control.

And what did they demand he do? Declare a state of emergency! That’s right: exercise his emergency powers to override local control.

That’s part of that being a subdivision thing: the governor has powers established by statute when there is a declared “emergency.” The only difference is that the EFM laws deal with a condition of financial emergency. And, like the aftermath of a natural disaster, there are certain criteria that must be met in order for a financial emergency to be declared.

Here’s the big difference: unlike the other emergency powers, the governor can’t simply declare it himself.

3. An EM can’t be appointed on a whim

Contrary to what’s been said by some in the media, the governor cannot “overturn elections, basically, wherever he wants to,” as it is described at about 1:50 in this segment.

Picture 11

If Gov. Rick Snyder “doesn’t like what you and your neighbors decided in your local election, he … has the power to step in and effectively void local election results,” says Rachel Maddow last December.        Powerful statement. Too bad it’s not true.

There are, as noted above, criteria that must be met before the appointment of a financial manager can even be considered. The process must starts with a request for a financial review, which can be done upon:

  • a request from the governing body or administrative officer – council, mayor or city manager
  • a petition signed by five percent of the unit’s registered voters
  • a request from a major creditor who has not been paid (and there is a threshold for payment size that is based on the size of the municipality’s budget)
  • completion of a fiscal year in a deficit condition (we’ll come back to this)
  • failure to file an audit
  • demonstration of any of number of indicators of very bad money juju: not making payroll, defaulting on bond obligations, too low a long-term debt rating

There’s also a provision for either the state treasurer (for a municipality) or the state school superintendent (for a school district) to initiate the process in light of a serious financial problem (most of which would be related to the bad juju mentioned above). Either way, that first step triggers a financial review.

That review is conducted by a team. The governor’s office and the treasurer’s office each have one appointment. The other two appointments come from the Michigan Speaker of the House and the Michigan Senate Majority Leader.

The review team issues a report, with recommendations. And then comes the interesting part.

4. The city gets to choose

That’s right. It’s right there in the law that lots of people complain about but nobody ever reads. (It’s right here, if you’re interested.) It says:

“… [U]pon the confirmation of a finding of a financial emergency under section 6, the governing body of the local government shall, by resolution within 7 days after the confirmation of a finding of a financial emergency, select 1 of the following local government options to address the financial emergency:

(a) The consent agreement option pursuant to section 8.

(b) The emergency manager option pursuant to section 9.

(c) The neutral evaluation process option pursuant to section 25.

(d) The chapter 9 bankruptcy option pursuant to section 26.”

The review team will make a recommendation. The municipality has an opportunity to appeal the determination. The appeal process was also contained in the predecessor law, PA 4 of 2011. Flint, for example, was found in a state of emergency under that law, but the mayor and council declined to appeal the finding of emergency or to request, as they could have at the time, a consent agreement.

Detroit entered into a consent agreement under the old law, then promptly failed to live up to its end of the bargain. Only then was an EM appointed.

The choice is one of the significant changes from the previous laws. More on this later.

5. The EM’s powers aren’t absolute

This one is tricky. The common perception, even by people who are in favor of the EM law, is that the emergency manager has virtual dictatorial powers. Elected officials are reduced to “ceremonial” roles. The governor can, on a whim, vacate elected officials from their office (we’ll come back to that one, too.)

Now, the powers granted the financial manager are, indeed, quite broad. But that’s because the city is in a state of legal receivership … and assuming custodial responsibility is the very essence of being a “receiver.” It’s very much like appointing a trustee to manage the inherited millions of an orphaned child or the affairs of an incapacitated adult.

This is important. In almost every case where a Michigan city has run aground financially, it has been because elected leadership would not make the tough call. Cutting programs, eliminating departments and outsourcing services pisses people off, and those people show up to vote in the next election cycle. The very concept behind the EM is to allow those tough decisions to be made by somebody who doesn’t have to fear political repercussions.

But even then, those powers are not absolute. The manager’s actions on collective bargaining agreements, sale of assets or borrowing money must be submitted for approval to the local governing body. The governing body can reject the proposal – but it must then submit an alternative plan, within a defined time frame, to a panel called the local financial emergency assistance loan board.

6. The governor could already remove a local elected official.

One of the provisions of Act 4 of 2011 and its successor that seems upset people the most: that it gives the governor authority to remove a local elected official from office.

Except, the governor has had that ability since PA 116 of 1954 (Chapter XV, Section 168.327, to be exact). Again, because the municipalities are subdivisions of the state, the governor can remove an elected official for “official misconduct, willful neglect of duty, extortion, or habitual drunkenness,” a conviction for “being drunk” or any felony. It’s also in article VII, section 33 of the Michigan constitution.

If anything, the financial emergency law adds to that list a “failure to abide by” that law. Local elected officials are required to provide the EM with the information and resources he or she needs, and to “assist” the EM in getting the job done.

But here’s an even more pragmatic perspective: Every local elected official is sworn in with an oath to uphold the local charter and the Michigan Constitution. That constitution – and the charter of every municipality in Michigan – requires a municipal budget to be balanced.

When local elected officials have allowed their municipality to get into a deficit situation, they have violated that provision of both their charter and the state constitution. Perhaps they should be removed from office. Nearly every time the EM law has been used, it’s because a local entity is deeply in debt. (No, I am not ignoring the role played by the Michigan legislature in creating the financial hardships of cities. More on that here, among other places.)

7. This isn’t new. In some ways, it might even be improved.

Michigan’s EFM law was not invented by current Gov. Rick Snyder. It actually dates back to 1988, when special legislation was drafted (and signed by Democratic Gov. Jim Blanchard) to help stave off a municipal bankruptcy in Hamtramck, a city that was even shorter on money than it was on vowels. That was quickly replaced by a more “permanent” bill, Act 72 of 1990, also signed into law by Blanchard. It was passed with broad bipartisan support. And under that bill, it was invoked in Hamtramck (a second time!), Flint (once before!), Highland Park, Three Oaks, Detroit Public Schools, Benton Harbor, Pontiac and Ecorse, under Blanchard, Republican John Engler and Democrat Jennifer Granholm.

The criteria for triggering a review have always remained largely the same. But the new law expands the review board by including representatives appointed by the legislature as well as the governor and treasurer. That said, putting those appointments in the hands of the speaker and majority leader is far less an improvement than having them made by legislators who represent the local unit might have been even better. (Of course, it could also makes things worse. It’s not unusual for a state representative from the troubled city to have previously been one of the local elected officials who helped create the problem in the first place.)

As I noted, this bill gives the municipality a choice. Two of those choices are opportunities for those local officials to man up and get the job done (as Detroit tried to do with its consent agreement, and failed). One is a total admission of failure. The third should be looked at as an opportunity to say, “we want to make it right, but we need help.”

Probably the biggest improvement in the new law over its 1990 iteration was who pays for the EM. In the old law, the governor appointed the manager for your city, but your city had to pay his salary and benefits. Under the new law, the EM’s compensation is handled by the state.

8. The most evil and undemocratic part of it has become standard operating procedure

The most insidious and undemocratic part of PA 436 is something that Michigan’s current Republican legislative majority has made standard operating procedure. It takes advantage of a quirk of the Michigan constitution to bullet-proof a bill that may be unpopular with voters.

Michigan residents have the power to enact and reject laws by referendum. So the predecessor to this law, PA 4 of 2011, was put to a referendum soon after it went into effect. Voters killed it.

However, the constitution says that any law passed by the legislature that contains a financial appropriation – doesn’t matter if it’s $20 or $20 million – cannot be the subject of referendum. So bills that Republican lawmakers know the largely Democratic voters won’t like contain (sometimes laughable) token appropriations. The Right-to-Work bill of 2012, for example, contained a $1-million appropriation for providing information and responding to public inquiries. They did the same thing late last year when they eliminate the straight-ticket voting option.

This practice is a blatant affront to the spirit of the constitution. But that’s a rant for another day.

 

The real tragedy in Flint

Disasters

We’ve all read and heard a lot about the water situation in Flint. We’re hearing most of it from Democrats, who are citing this as an example of the evils of Republican leadership and all sorts of other hyperbole.

Rachel Maddow, among others, has (nauseatingly endlessly) blamed it on Michigan’s emergency financial manager law.

So much noise. So much misinformation. So little time.

If you’d like to know what really happened here, read on, but be warned: it’s long. If you’re the TL;DR type (Too Lazy; Don’t Reach), skip to the last subhead. The conclusions won’t make sense to you, but then maybe you don’t want it to.

The Tragedy’s Roots

For more than 50 years, Flint bought its water – treated and ready to serve – from Detroit. In recent years, Detroit has – like most cities with wholesale water customers, like Saginaw – has raised its rates to reflect the rising costs of maintaining aging systems. Detroit, according to Flint (and most of its other wholesale customers) was really jacking prices up.

Keep in mind that all of Saginaw’s wholesale customers say the same thing at every rate increase, and some – Frankenmuth most recently – have, over the years, threatened to build their own systems or find another source.

In order to be able to control its own water destiny, Flint’s city council and its mayor voted to join the Karegnondi water authority. It’s something they’d been talking about – and tried once before – since the 1960s. They finally got enough municipalities behind them to make the deal work. They announced the deal in 2013, with a target of getting water from Lake Huron through the new system sometime in 2016. Council voted 7-1 on the decision, which was later signed off on by the city’s EFM.

The Kiss-Off

The very next day Detroit’s water and sewer board notified Flint that it was exercising its right to terminate Flint’s 50-year-old contract in one year. Two years before their new source would be completed.

Why did Detroit do this? Because they were pissed off and thought, apparently, it would a nice F-U with which to send off their largest water customer.

Flint, realizing it was high and dry, needed to find an interim water source to keep things going until the new system was up. They hired a consulting firm, which looked at several options. One of them was to continue with Detroit, and there were negotiations over interim rates. The only news report of that process simply says “negotiations broke down.” Which tells me that Detroit wasn’t offering enough K-Y for what they were asking Flint to take when it bent over.

The study concluded that the best bet was to draw from the Flint River.

The Flint River, where the water gets drawn from, isn’t terribly “polluted.” As Michigan rivers go, it’s fairly typical. A little industrial pollution, but a ton of silt and agricultural runoff – it’s draining more than 1,300 square miles, most of it farmland. But it’s water that’s very treatable with modern treatment technology. And it’s always been the backup source.

The final decision to use the Flint River as an interim source rather than Detroit appears to have been made by the EFM (at this time, Darnell Earley. He claims the decision was made by the state; former Mayor Walling says it was made by Earley). Earley note at the time that it would save Flint $12 million over the two years of the contract. Not much of a bargain in hindsight, but nobody had foreknowledge of the screw-up and cover-up to come.

So Flint’s water department is asked to start treating its own water – something it hasn’t done regularly in at least 40 years, if ever. The water guys told the mayor and Council and Earley, “sure, we can do that.”

The First Screw-Up

Apparently, they couldn’t. I’m speculating here: They had little or no experience in treating raw water. I don’t know if they read a book, took a seminar or watched a how-to on YouTube, but either way, they started treating the water as if it were being run through a modern distribution system of plastic and copper pipes.

It’s not. It’s running through a 100-plus-year-old system of cast iron mains and lead service lines.

This is common. It’s what nearly every older city in Michigan has. I have a lead service line in my house – probably in every house I’ve lived in, in fact – but have never shown elevated lead levels, nor have my kids.

And that’s because something interesting happens with lead water lines. The inner surface of the lead pipe builds up a layer of lead oxide — the “lead” that makes “lead crystal” as clear and brilliant as it is. While still toxic itself, it is less prone to leaching. It coats the inside of the pipe and prevents elemental lead from leaching into the water.

But only if the pH balance of the water is just right. If it’s not (and I’ll not go into the chemistry involved except to say pH is an indicator of free ions that can create the galvanic activity), metals will start to corrode.

There are well-documented protocols for corrosion control for municipal water systems. They were not followed in this case – from what I can see, because the agency charged with monitoring that activity, the Michigan DEQ, simply didn’t require it.

As soon as they started running that water through the system, the free hydrogen and hydroxyl ions started eating the lead oxide from the lead service lines, and causing the iron mains to rust. That’s why you see so many pictures of brown water from Flint – it’s rust from the iron service. When it leaves the tower, it’s perfectly clear (and perfectly, safely drinkable). It’s just either too acid or too alkaline.

The Cover-Up

Evidence suggests the DEQ did not check to see if a corrosion control program was in place. When people started complaining, the DEQ shrugged. Maybe somebody knew they had screwed up. Maybe nobody did, although the chain of evidence seems to suggest they were just too arrogant to pay attention to anyone who had anything to say about it. This isn’t surprising, coming from an agency whose director has a degree in food science, an MBA in finance and spent the previous few years of his career managing a entrepreneurship incubator. That’s what happens when you give important cabinet-level jobs to people who help you politically … but that’s another story.

DEQ is responsible for overseeing testing of water supplies. And when Flint tested its water, DEQ staff made Flint fudge the results. They threw out samples that had high lead levels.

And, I’m going to guess, told the Governor and his staff, all along, that everything was fine, this was much ado about nothing: “Look, Mr. Governor, Flint’s testing says the water’s fine.” The US EPA, charged with oversight of the whole shooting match, also dropped the ball.

The Recap

  1. Flint’s elected leadership makes what is actually a solid, sound decision that will, in the long run, save the city millions of dollars and give it more control over its destiny – and, because it positions Flint as a wholesale supplier of water, possibly enhance revenues for them.
  2. Detroit Water Board decides to be spoiled and pissy and leaves Flint with no good options for the two years before its pipeline is built.
  3. Flint’s leadership and GOP-appointed EFM make a well-deliberated decision to draw water from the Flint River.
  4. Flint’s water staff – the people in Flint who are the experts on this sort of thing – apparently aren’t up to the task. And the people they count on to oversee and help them …
  5. The Michigan DEQ, is completely asleep at the switch. And once they discover their mistake, they lie about it and ask Flint to help them lie.
  6. US EPA is aware of a problem, but apparently trusted the kids playing in the DEQ sandbox to fix things.

Personally, I think Detroit needs to be held accountable for starting the snowball down the hill. And I think there are people in the DEQ who should be prosecuted for reckless endangerment and fraud.

The Governor? His accountability lies in the creation of the corporate culture that allowed DEQ’s hubris to let it happen.

The Detroit Water Board members, I’m guessing, aren’t Republicans. The Flint water department staff who were in over their heads weren’t Republicans. The DEQ staff is probably a mix.

The Even Larger Tragedy

This is a huge public health disaster. And we Americans like our big, bad disasters in black and white. We want to blame it on one bad guy and reward one good guy. We’re not real good at nuance and chains of events … especially if they clash with our political beliefs.

Every Democrat in the country is calling for Gov. Snyder’s head and blaming it purely on the Republican governor and his emergency financial manager law. And not only are they ignoring the guys in the black hats who actually caused the problem, they’re really ignoring the victims. Worse, they’re using them as a tool to gain a political advantage. And that’s even larger tragedy.

That’s not what Flint’s children need right now. People need to focus on them, and not on their hatred of all things Republican.

Update 1/19/2016

This has been updated to reflect new information. And let me be very clear: I am not paid to be an investigative reporter, and this is not a news outlet. This is strictly my opinion, and it is based on news accounts. Some facts are not known, in large part because of the lack of transparency in the office of a governor who promised to be transparent. And as I learn new facts that contradict information I had in here, I will so note them. 

None of this changes my overall point. There is a big difference between blame and accountability — and which you use will have a lot to say about the results you get in the end. Blame and outrage will help Hillary Clinton in the primaries, and it will help Michael Moore sell his next film. But the people of Flint can’t drink blame, and they can’t bathe their kids in outrage. We know exactly what the problem is. Let’s get the best people to work on fixing it. After that, we can start the floggings. And there are people here who should be flogged.