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

DETROIT Wed Oct 30, 2013 12:07pm EDT

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

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

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

Patterson added that Detroit has failed to maintain its own infrastructure and 40 percent of the city's residents do not pay their water bills.

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

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

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

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

The Detroit Water and Sewerage Department serves Detroit and 127 suburbs, which accounts for about 40 percent of Michigan's population.

In his June 14 report to the city's creditors, Orr proposed leasing the department to a new Metropolitan Area Water and Sewer Authority that would be controlled by the department's suburban customers.

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

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

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

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