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Bankruptcy #2–The Water Dept.

Posted to MichiganNow.org on Monday, May 5, 2014

INTRO: Kevin Orr has portrayed the water department as Detroit’s problem. It’s part of Detroit’s $18 billion debt. But that’s not true…. according to a municipal finance lawyer who worked on Wall Street and knows Detroit. The city is $7 billion in debt or $2.5 billion in debt, not $18. Michigan Now’s Chris McCarus reports that the suburbs have more control over the water & sewer department than does the City of Detroit.

Wallace Turbeville was a vice-president at Goldman Sachs in the 1980’s and ’90’s. He left the firm long before it paid a record penalty of $550 million for selling sub-prime mortgages. He says he’s on the people’s side. He says the water & sewer department’s debt does NOT belong to the city. Turbeville says emergency manager Kevin Orr was wrong.

“It serves 4 million people. Not only is it payable from water and sewer revenues but the city’s share of water & sewer revenues that it’s payable from is less than 25%. You might think the emergency manager just got that wrong. My guess is that he understood that point.”

Click on Turbeville’s comprehensive report on Detroit’s bankruptcy.

Turbeville says the emergency manager twisted the truth to scare the public into accepting drastic cuts. The Detroit Water & Sewerage Department owes $6 billion. Mainly from bonds issued to pay for repairs. But the department is already regionalized. Water board commissioners are appointed by county leaders. City government is not obligated to pay that debt. Suburbanites will pay it by paying the water bills for their houses.

Joe Recchie agrees. He and Turbeville spoke recently at a conference on Detroit’s bankruptcy at Wayne State University.

Recchie calls for employee ownership. It’s the opposite of the 401K where your employer takes your earnings and invests them in OTHER companies doing business in other places around the world.

“So my recommendation was and is that the Water and Sewer District be turned over to an authority that is controlled by or for the benefit of the pensioners. Many of them built it. They would have the benefit of it.”

Recchie owns a real estate development company in Ohio. He disagrees with the emergency manager’s plan to sell off this public asset.

“So in ten days 41 companies from around the world lit onto Detroit with proposals to take it over. Whenever you get that much action, we’re talking about companies that have $30 billion a year in revenue. They want to swoop in. You know there’s something valuable there.”

Reechie says Detroiters and suburbanites would lose money if Kevin Orr sells the water department.

“The WSD generates $550 million a year in revenue. More than half of it comes from the suburbs. It’s the only part of Detroit that is fully integrated. If you look at the school districts, property values, the jurisdictions, it covers 130 jurisdictions. It’s the only integrated feature in the whole region. It can’t be given up to the private sector.”

The lawyer and former investment banker Wallace Turbeville grew up in Tennessee. Some of his relatives moved from the south to Detroit in the 1950’s. He says racism is mixed in with the water problem. He says it’s easy to do what’s wrong and hard to do what’s right.

“Race is a motivation, no question. Pure politics is a motivation and it’s not just the state it’s the whole nation. And none of this had to happen.”

Turbeville means the bankruptcy didn’t have to happen.

“Bail out the people not the banks.” Activists in Detroit have chanted this slogan for a couple years now. But some of them find friends from Wall Street. Their biggest enemies might be former Detroiters who became politicians in the suburbs.

Hats off to The MetroTimes for this first-rate history of how the suburbs forced the city to finance their new water system even though it was unsustainable then as it is now. That was the 1950’s and ’60’s. The article was published in 2002.

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Kevyn Orr included this map of the water system showing it serves all or parts of 7 counties. He made this request seeking operators of the system April 7, 2014. It would, in effect, privatize this public asset. Not only did the suburbs force the city into extending water to them in the 1950's and '60's, today they use the majority of  it.

Kevyn Orr included this map of the water system showing it serves all or parts of 7 counties. He made this request seeking operators of the system April 7, 2014. It would, in effect, privatize this public asset. Not only did the suburbs force the city into extending water to them in the 1950's and '60's, today they use the majority of it.

In 1950, Livonia Township voted to become a City.  Livonia grew from a population of 17,000 in 1950 to over 100,000 in 1998. This government document has in bold "You are missing a good bet if you pass up Livonia."

In 1950, Livonia Township voted to become a City. Livonia grew from a population of 17,000 in 1950 to over 100,000 in 1998. This government document has in bold "You are missing a good bet if you pass up Livonia."

Detroit River and City of Detroit seen from Windsor in 2012.

Detroit River and City of Detroit seen from Windsor in 2012.

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