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Pontiac’s New Water World

Control of its water system has been lost, but massive costs remain

By Curt Guyette
Part 3 of 3

If you want to see just how far-reaching the powers of an emergency manager are, and what that can mean in terms of how the issue of water is dealt with, cast your eyes toward Pontiac.

The seat of government in one of America’s richest counties was placed under state control in 2009. Since then, the municipal workforce hasn’t just been slashed — it has practically been obliterated. Changes in the way water is delivered and sewage is processed have been a significant component of that effort.

In 2011, Emergency Financial Manager Michael Stampfler, exercising the authority granted under a new law that greatly expanded the power of state-appointed managers, privatized operation of the water and sewer systems by entering into a five-year contract with United Water, a company with a history of legal troubles.

Lou Schimmel

Lou Schimmel

One year later, Stampfler’s successor, Lou Schimmel, went even further.

Schimmel essentially sold the system to Oakland County for $55 million. The county was especially eager to gain access to Pontiac’s sewage treatment plant, which was operating at only 50 percent of capacity.

The money Pontiac gained from that deal was used to pay off municipal bonds decades in advance. Retired city workers, on the other hand, were hung out to dry as their health care benefits were first slashed, and then completely eliminated.

For proponents of privatization, such as the folks at the nonprofit Mackinac Center for Public Policy, it was a dream come true.

“Schimmel’s work helped yield a number of notable accomplishments during Pontiac’s time under emergency manager control, including a reduction in the city workforce from more than 500 non-court employees down to just 20 (a 96 percent reduction), the reduction of city debt from $115 million to $28 million, and lowering general fund expenditures to $30 million, which is half what the city was spending six years ago,” wrote the Mackinac Center’s Michael D. LaFaive earlier this year.

As a former adjunct scholar at the Mackinac Center and a former member of the Center’s Board of Scholars, you might think that Schimmel marches in lock step with the Midland-based organization.

In this particular case, however, he is an unlikely advocate of government, rather than private-sector control.

“What we’ve seen in Oakland County is that a private contractor is not nearly as good at doing the job as government,” Schimmel said in a recent phone interview.

Not that United Water is gone; its contract to staff operations remains in place until 2016.

Pontiac emerged from emergency management last year, but elected city officials still do not have free rein. An appointed board — which Schimmel sits on — has to approve the city’s budget before it can be implemented.

Kermit Williams

Kermit Williams

For Pontiac City Councilman Kermit Williams, the whole endeavor regarding sale of the city’s water and sewerage system has been a betrayal of the public trust.

“I think it was the worst deal ever,” said Williams, contending the city’s wastewater treatment facility was worth more than $100 million.

“We got pennies on the dollar for our most important assets,” he contended.

Schimmel disputed Williams’ claim, saying he got as much as possible for the facility.

What’s not disputed is this: Even though the plant was sold, the city still retained responsibility for maintaining the vast system of pipes that deliver water to homes and businesses, and take away sewage for treatment.

With significant parts of that system a century old, the cost of repairing and replacing leaking pipes will be borne by the city’s residents, business owners and industry. And that is a burden even Schimmel admits could be crushing. Certainly, there’s no easy fix to the dilemma.

Having lost more than 15 percent of its population since 1990, with more than of one-third of its 58,000 residents living in poverty, the question for Pontiac now is: How will people be able to afford the tens of millions of dollars in repairs and upgrades that are needed.

“It’s a real problem,” said Schimmel. “You can say you are going to shut off people’s water, but if they are really poor, then they aren’t going to be able to pay. Some other money is going to have to come from somewhere.”

Curt Guyette is an investigative reporter for the ACLU of Michigan. His work, which focuses on Michigan’s emergency management law and open government, is funded by a grant from the Ford Foundation. You can find more of his reporting at aclumich.org/democracywatch. Contact him at 313.578.6834 or cguyette@aclumich.org.

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