Last Act of the Detroit Bankruptcy Stumbles Behind a Wall of Secrecy

The final Detroit bankruptcy plan established a 14 June deadline to reach an agreement transferring operating control of the Detroit Water & Sewerage Department’s (DW&SD) assets outside of Detroit to the newly created Great Lakes Water Authority (GLWA). The State of Michigan, Detroit, Wayne County, Oakland County and Macomb County all signed a Memorandum of Understanding (MoU) creating the GLWA late last year, subject to a 200-day due diligence period. Under the MoU, the City of Detroit would receive a $ 50 million annual lease payment from the GLWA while retaining full control of DW&SD assets and operations within the city. Erstwhile DW&SD customers outside Detroit were promised a 4% cap on annual water and sewerage increases for a 10 year period, which have been running above 10% per annum, in residential bills, in most Southeastern Michigan communities.

In point of fact, what has actually been occurring are secret negotiations over future tax increases across Southeastern Michigan. Water rates have become a surrogate form of incremental taxation. These negotiations will set tax fee increment rates for decades into the future. For taxpayers ratepayers who haven’t even been born yet. How are these negotiations going?

No one who knows is talking. Why?

U.S. Bankruptcy Court Judge Steven Rhodes issued a sweeping mediation confidentiality order – a ‘gag order’ – which covers all matters in the negotiations for the Great Lakes Water Authority. U.S. District Judge Sean Cox’s permission is even required to release information to the three county executives supposedly negotiating, as well as Detroit Mayor Duggan. Why is this important? Because the government class is gradually replacing taxes with ‘fees’ as a mechanism to support their spending habits. And Michigan is at the forefront of this covert government funding transformation, with DW&SD pioneering the rape of the public through outrageous, unsubstantiated ‘fees’. Why water shutoffs have become a radioactive issue within Detroit.

Open Meetings Act and Freedom of Information Act be damned, your future taxes fees will be decided behind closed doors, by people you didn’t elect. The infuriating Obama Trans Pacific Partnership model of government behind closed doors has come to Michigan.

At the conclusion of the Detroit bankruptcy, all the parties involved were promising that the transformation of the DW&SD into the GLWA would limit water rate increases to 4% annually for 10 years. This was actually an outright lie. What they really planned was a general water revenue increase of 4% per year, subject to the DW&SD providing “a reasonable level of service, satisfying its debt obligations, and adhering to the rate structure set forth in the Plan of Adjustment”. This allowed quite a bit of wiggle room, at least legally.

The ongoing population decline in Southeastern Michigan, coupled with the astronomical increase in water rates over the last decade, have markedly depressed DW&SD water sales. DW&SD rates have become so oppressive that the City of Flint – under the direction of their State appointed Emergency Manager Ed Kurtz, no less – left the DW&SD system entirely, taking with them much of Genesee County. At a great political cost within Flint, which is wracked by bitter protests over the quality of Flint River water. So the much-ballyhooed 4% annual rate increase cap became something more like an 11.3% increase in actual water bills, during 2015. As the Southeastern Michigan public gets billed for these appalling rate increases, their outrage will functionally term limit all but the most secure county politicians who acquiesced to this fraud. Every seven years, an 11% annual increase doubles your bills.

The first regional politician to publicly express displeasure with this fraud was Mark Hackel, the Executive of Macomb County, even before the Mackinac Policy Conference. By the time of the MPC, he had discovered that he was being excluded from the negotiations and fed an endless ration of lies. The real negotiating appears to be occurring between DW&SD and Oakland County which is represented by Robert Daddow, under the supervision of U.S. District Judge Sean F. Cox. Thanks to the gag order, we can’t even be certain of this. It is a best guess based upon a process of elimination.

U.S. District Judge Sean F. Cox inherited control of the Detroit Water & Sewerage Department from the late U.S. District Judge John Feikens in 2010 when Feikens retired from the bench. Judge Feikens had been running the DW&SD – and facilitating its corruption by relentlessly driving rate increases – since the U.S. EPA filed a Clean Water Act lawsuit against Detroit in 1977. Judge Cox officially released DW&SD from his Clean Water Act control in 2013, most probably due to embarrassment over the Kwame Kilpatrick ‘enterprise’ corruption convictions. These convictions alone suggested that the 35 year long Federal oversight was something less than proficient. Of course DW&SD never got much better at its stated line of business under Federal oversight, but that was never the real rationale. Federal Court oversight of DW&SD was always and only a mechanism to deliver suburban ratepayers’ dollars to corrupt Detroit city politicians.  Coleman and Kwame were much smarter than Judge Feikens.

Judge Cox is now using the gag order to manipulate the negotiations by denying financial information to disfavored politicians, the entire press, and the public at large. At the end of this week, Judge Cox will presumably release a ‘negotiated settlement’, which will take effect on July 1st unless two of the four regional parties disavow it. Yet only two of the four parties are actually negotiating.

Despite radical left opposition, Mayor Duggan will enjoy spending the additional funds stripped from suburban ratepayers. It won’t make the life of Detroit residents any better, or reduce their water bills, but it will hire a lot more six-figure administrators in his government. Napoleon also lavished gold and jewels on his Marshals, even if they also did not deliver ultimate success.

Wayne County Executive Warren Evans has made it abundantly clear that he will support the GLWA,deal regardless of the cost to his constituents. He is currying favor with Snyder Administration because it is pretty clear, even to him, that Wayne County will need a major bailout down the road to avoid bankruptcy and preserve his power. That bail out would have to be driven by the same actors in State Government who are greasing the skids for the GLWA with a blizzard of lies. And in the very worst case, he will need the good graces of the U.S. Bankruptcy Court’s judges.

Macomb County Executive Mark Hackel has stridently voiced his opposition to the negotiating process and the direction it is taking. Since he appears to be the Democratic Party’s best hope to recapture the Governorship in 2018, it wouldn’t do for him to be recalled by his County’s notoriously tax-adverse residents beforehand. He also doesn’t want a new furor to remind Michiganders of his tumultuous first two years as County Executive.

Ultimately, the GLWA and the parasitic drain it will impose on Southeastern Michigan will be the responsibility of one person: Oakland County Executive L. Brooks Patterson. Patterson used to be regarded as a radical right winger in his heyday, but the ravages of time, a serious automobile accident, and the huge leftward demographic swing in Oakland County have muted his conservatism. By Sunday Southeastern Michigan residents will know just how muted he has become.  Or else an extension of the June 14th deadline will be imposed.

There is a lot more to know about the Detroit Water & Sewerage Department, which routinely flouts Michigan’s Constitution and laws. More coming soon….

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