Water deal could be key to Detroit’s future

Commentary

Put a bunch of high-powered elected officials, business executives and policy-talkers on a resort island for three days and what do they discuss?

The economy and education are standard fare. And because this conference was Michigan’s Mackinac Policy Conference, you know Detroit’s bankruptcy and its trek to emerge from it were top of mind.

That’s the official agenda.

But the smart money knows that private conversation over drinks is where the serious discussion takes place. It’s where public displays of boosterism take a backseat to hard discussions.

My bet is the hottest off-agenda topic was water.

Specifically: How will Detroit and its neighboring counties deal with the Detroit Water and Sewerage Department in the bankruptcy proceedings? The department provides water and sewage service to a broad area and it’s in play in the maze of potholes and landmines of the bankruptcy process.

Proof that water was the it topic at the conference is demonstrated by Detroit Public TV’s interview with the three county executives who are asked to approve a regional water deal.

Oakland County Executive L. Brooks Patterson said all he’s talking about is Detroit’s water department situation. Patterson has been a powerful force in Michigan politics for decades with an influence stretching well beyond the boundaries of his county.

Here’s the issue:

Divesting of the water department would generate much needed money that could be used to help Detroit emerge from bankruptcy. But the bankruptcy process can’t force Detroit to sell assets like the water department.

That said, it probably needs to be rationalized to the judge overseeing the process and to creditors who are taking a financial hit. Spinning it off would accomplish that.

But here’s where it gets sticky.

Selling a public trust

This is water service we’re talking about, not trash pickup.

Water is essential for life and at least in theory is held in the public trust by the state or other government entity. It’s worth noting that Detroit’s water service is a not-for-profit entity.

However there’s nothing that says the water department can’t be divested in some form. It could be leased to a regional water authority involving the surrounding counties that use its services or even be privatized — sold to a corporation. Either could generate money to make the bankruptcy exit palatable to creditors and the judge.

That’s why Detroit Emergency Manager Kevyn Orr is shopping the water department around.

Wisely, Orr’s preferred path is to create a regional authority with the three surrounding counties — Wayne, Oakland and Macomb — that are the customers of the system. That would provide the needed cash infusion and keep the water department under public control.

But the county executives are balking at the price and social barriers along city and suburban lines still exist

Like any good manager, Orr has a backup plan and that’s to sell or lease the department to a corporation for a one-time cash infusion. It’s not only a plan. Orr has a fiduciary responsibility to explore that option.

Water as a tool for regional cooperation

The overseeing bankruptcy judge has ordered mediation between Detroit and the counties to see if they can come to an agreement.

Like many cities dealing with legacy issues like disinvestment, crime and population flight — Detroit has had a rocky relationship with its neighbors. That’s especially true with affluent Oakland County and the outspoken Patterson.

With Detroit’s bankruptcy now a national story, Patterson was recently profiled in a New Yorker magazine article that illustrated the divide between Oakland County and Detroit.

Patterson could be a linchpin in hashing out a water deal.

As Detroit has an opportunity through bankruptcy to clean up its balance sheet, the greater Detroit region also has an opportunity. It can set aside its ideological differences and take a key step toward creating a well-functioning region — to embrace that elusive regionalism concept instead of staying in me first silos.

What better way to start that process than by using a water agreement as the launch pad?

The facts are well-known but bear stating.

Michigan and Greater Detroit are water-rich. Detroit and its river connect the upper Great Lakes to the world and it borders the United States’ largest trading partner, Canada.

What land-locked, water-short region wouldn’t want to be in that position?

Who better to manage the water asset than regional officials accountable to the public, not shareholders?

Because the future of Detroit’s water department is linked to the bankruptcy process, determining its outcome won’t be easy or necessarily fair. I know this first hand.

As an employee of a large corporation that filed for bankruptcy protection, the first thing we learned was to forget about fairness. Bankruptcy doesn’t work that way.

Sacrifice for the greater good — that’s the theory — is necessary and if you don’t accept it, it’ll be forced on you.

Bankruptcy as opportunity

Greater Detroit’s three county executives have a decision to make.

They can help create a regional water authority that will benefit Detroit’s recovery in the short term and the region in the long term. It could be expensive and a tough sell to constituents — voters — who may not feel the need to help Detroit. But it’s in everyone’s best interests.

Detroit is riding a positive wave as it gets its financial house in order. But the wave could crash and dissipate in a nanosecond if disparate parties can’t agree on key issues like creating a regional water authority.

Can Detroit and its neighbors discard long held biases and embrace a new model of regionalism? If conference buzz is an indicator the answer may be yes. One conference attendee told me that there was a spirit of cooperation rarely exhibited in past years. Philosophically opposed folks were actually talking to each other.

Will that new found willingness to collaborate lead to a deal to keep Detroit’s water department in public hands while everyone benefits? That’s the test.

Everyone is watching because honestly, they expect Detroit and the region to fail.