Detroit water/sewer system is third largest in U.S., serves 40 percent of Michigan population
Environmental groups oppose privatization; union threatens strike
Bond manager SBS says rate increases are imperative, wants more debt
By Diane Bukowski
September 9, 2012
DETROIT – Despite adamant opposition from Detroit Water & Sewerage Department (DWSD) workers, environmental groups, and union leaders, the city’s Board of Water Commissioners (BOWC) unanimously authorized Phase II and III of a 5-year, $48 million consulting contract with the EMA Group, Inc. on Sept. 7.
EMA recommends the elimination of 81 percent of the DWSD workforce over the next five years, reduction of job classifications from 257 to 31, changes in business process and IT design, and outsourcing of “non-core” services.
A Minneapolis-based firm with offices throughout the U.S. and Canada, EMA claims DWSD will save $.9 billion over 10 years through their plans.
“We have a number of pressures, including increasing citizen expense, the deferment of infrastructure investment needs, mounting system debt, and rising personnel costs including health care and pension costs,” DWSD Director Sue McCormick, who has headed the Department for nine months, told the BOWC.
DWSD is the third largest water and sewerage system in the U.S. It provides water for 40 percent of the state of Michigan’s population, over 1,079 square miles including Detroit and six surrounding counties, and wastewater service over 946 square miles. (See DWSD website at http://www.dwsd.org.)
DWSD water has long been recognized as among the safest in the country, despite federal oversight since 1978, after the city’s first Black Mayor, Coleman A. Young, Jr., took office. The system is not running a deficit. Until recently, Wall Street rating agencies scored its bonds at top levels.
Susan Ryan is a senior Wastewater Treatment Plant (WWTP) worker with 15 years on the job.
“This reduction in staff will cause the complete failure of our sewage system,” she told the BOWC at its hastily-called “special” meeting. “They are selling you a fantasy. You are flushing $48 million down the toilet.”
She and Mike Mulholland, a 29-year WWTP worker and union representative, told the BOWC that lesser cutbacks in previous years have resulted in high levels of sewage contamination of the area’s waterways, among other problems.
After EMA spent 18 years advising and managing Toronto’s water system, that city experienced record flooding of its world-famed subway system, neighborhood homes, and streets in June, attributed to sewage back-ups.
“You have not shown any data explaining the need for these cutbacks.” Sierra Club member Melissa Damaeschke told the BOWC. “You have not shared the EMA studies. There is no transparency and this will cause public unrest. We fear this will take away public ownership of our system.”
DWSD has released power point presentations on EMA’s plans on its website. But it has so far refused to make public copies of “due diligence” studies on EMA which Fausone said back up the company’s reliability, reports by EMA, EMA contracts, and a huge notebook of documents on the EMA proposal provided to the BOWC Sept. 7.
Catherine Phillips is chief negotiator for the Detroit locals of Michigan Council 25 of the American Federation of State, County and Municipal Employees (AFSCME). She said DWSD management has also refused to give any of those documents to the union.
“DWSD has never been broke, it has all the money and resources,” she said. “We are angry. They want to take away everything that the people of Detroit have built. Now they want us to go sit at the bargaining table and in good faith negotiate an agreement to send our members out into the streets. Well, whatever they get from us, they’re going to have to take it.”
AFSCME Local 207, the largest DWSD local, has been mobilizing for a city-wide strike for several months.
Meanwhile, said Phillips, Council 25 will argue its case against orders by U.S. District Court Judge Sean Cox in an Oct. 9 hearing in the Sixth Circuit Court of Appeals in Cincinnati, Ohio. Last year, Cox changed the make-up of the BOWC so that ultimate control of rates and contracts rests with its suburban members, most of them connected to various corporations and banks.
He also instituted draconian anti-worker changes.
Suburban and out-state forces have long campaigned for control of DWSD, a racially-charged situation since Detroit’s population is close to 84 percent African-American, and the DWSD workforce is also predominantly Black. EMA claimed it will ensure “diversity” in future workforces at the plant, but refused to commit to any numbers.
During the Sept. 7 meeting, BOWC chair James Fausone tried to justify personnel cutbacks by pitting DWSD customers against the workers.
“Water rates are unaffordable for most of our customers,” he said. “Thirty percent of Detroit customers can’t pay their water bills on time. Sewage rates have gone up over the last 10 years in Detroit 10.1 percent, and in the suburbs 5.2 percent, with water rates rising 6.4 percent in Detroit and 7.2 percent in the suburbs.”
However, no written guarantees of rate reductions are included in documents that DWSD has made publicly available so far. On Aug. 29, a prominent municipal bond management firm told the BOWC that in fact customers must be prepared for more rate increases.
During a workshop that day, Siebert, Brandford, Shank & Co. (SBS) told the BOWC that to “enhance DWSD credit,” primary goals must include “educating the public about [infrastructure] projects and the need for water and sewer rate increases.”
SBS partnered with global giant UBS to get the City of Detroit to borrow a record $1.5 billion in “pension obligation certificates” in 2005, during the Wall Street profit bubble which burst in 2008. To stave off default on UBS-SBS debt in 2009, the city agreed to funnel all of its casino tax revenues through a trustee, US Bank NA, to ensure payment. Its state-revenue sharing funds have been similarly handed over.
Detroit additionally labors under the constraints of a “consent agreement” negotiated under Michigan’s Public Act 4. PA 4 hands dictatorial control of municipalities and school districts in deficit to unelected “emergency managers.” The “consent agreement” hands similar control to a “Financial Advisory Board” and state officials. In November, Michigan voters will decide whether to repeal PA 4.
The Mayors’ Water Council of the U.S. Conference of Mayors said in a blistering report in 2011 that what cities really need is increased federal investment in their water and sewerage infrastructures.
“The Federal government, (i.e., Congress and the relevant Federal Agencies) has performed one of the most sophisticated acts of avoiding responsibility for the policies it has imposed on the nation’s cities in modern history when it comes to public water and wastewater,” says the Mayors’ report.
“Local government was a willing partner with Congress in setting the lofty goals of the Clean Water and Safe Drinking Water Acts . . . but the Federal government has abdicated its role as ‘partner’ in this effort. Instead of sharing the responsibility to finance the necessary infrastructure Congress has taken the position that achieving the goals of the water laws is not a federal responsibility.”
The report goes on to say that the U.S. Environmental Protection Agency has instead assumed the role of “prosecutor” in situations related to compliance issues, much as it has done in Detroit.
It sets a “National Action Agenda to Renew and Strengthen the Intergovernmental Commitment to Water and Wastewater Structure.” (See sidebar.)
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