Title
Resolution to Adopt the City of Detroit Water and Sewerage Department (DWSD) Water System Improvements Project Plan for Fiscal Year (FY) 2026 Drinking Water State Revolving Fund (DWSRF) Funding Consideration
Body
Agenda of: May 28, 2025
Item No.: 2025-137
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Suzanne R. Coffey, P.E.
Chief Executive Officer
Great Lakes Water Authority
DATE: May 28, 2025
RE: Resolution to Adopt the City of Detroit Water and Sewerage Department (DWSD) Water System Improvements Project Plan for Fiscal Year (FY) 2026 Drinking Water State Revolving Fund (DWSRF) Funding Consideration
MOTION
Upon recommendation of Nicolette Bateson, Chief Financial Officer/Treasurer, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA) approve the attached resolution to adopt the City of Detroit Water and Sewerage Department (DWSD) Water System Improvements Project Plan for FY 2026 Drinking Water State Revolving Fund (DWSRF) funding consideration; and authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
The Great Lakes Water Authority secures capital improvement financing on behalf of Detroit Water and Sewerage Department in accordance with foundational documents related to the establishment of GLWA. DWSD has selected the Water System Improvements project for submittal to the Michigan Department of Environment, Great Lakes, and Energy (EGLE) for FY 2026 DWSRF funding consideration. This project is comprised of replacing water mains and lead service lines in the city of Detroit. The impact of this project will be improved customer satisfaction and safe, reliable service delivery of potable water to customers. The total estimated cost of this project is $140 million.
• Water Main Replacement referenced as WS-Task 12 (Project A), in the neighborhoods of Eastern Market, Forest Park, North End, Islandview, West Village, & Medical Center. Estimated project costs: $20 million.
• Water Main Replacement referenced as WS-Task 13 (Project B), in the neighborhoods of Central Southwest, Springwells, Michigan Martin, Hubbard Farms, & Claytown. Estimated project costs: $20 million.
• Five (5) Lead Service Line Replacement Projects at select neighborhoods across Detroit. Estimated project costs: $100 million ($20 million each for the 5 lead service line replacement projects).
The deadline for submitting DWSRF project planning documents to EGLE is June 1, 2025, but prior to submitting the project plans, a public hearing must be held for the affected area. The public hearing notice and project plan were posted on the DWSD website. The project plan was presented at that DWSD public hearing on March 19, 2025 and adopted by the DWSD Board of Water Commissioners on the same date.
JUSTIFICATION
Pursuant to Section 7.2(b) of the Regional Water Supply System Lease between the City of Detroit and GLWA, the Authority shall cooperate fully with the City in the implementation of this Detroit capital improvement, including financing through the Authority. Therefore, GLWA will submit the local project plan as it will be the DWSRF loan applicant. Per notification from EGLE, GLWA does not need to hold a separate public hearing on the local project, however, the GLWA Board of Directors will need to act on the included resolution adopting the Project Plan. The resolution must be approved and signed to ensure the final project plans, forms, and attachments are assembled and submitted to the EGLE by the June 1, 2025 deadline.
GLWA concurs with the DWSD Water System Improvements Project Plan adoption, and as the DWSRF applicant, is seeking low interest loan assistance from the DWSRF program. Although the EGLE interest rate for FY 2026 will not be published until October 2025, the current 20-year and 30-year loan interest rate for a significantly overburdened applicant, which has been applicable to DWSD projects, is 1.00 percent. Compared to an estimated market-based rate of 4.5%, potential interest savings on a 20-year loan would be approximately $60.1 million for a DWSRF loan amount of $140 million.
Another advantage of the DWSRF is that interest costs are only incurred on the amount drawn from the loan as project expenditures are incurred. This results in additional debt service savings early in the term of the loan compared to market-based transactions. Further, the use of DWSRF funding as junior lien does not impact GLWA debt reserve requirements.
BUDGET IMPACT
GLWA will be the loan applicant on DWSRF loans issued on behalf of DWSD, and DWSD will be the DWSRF loan recipient as determined by EGLE. All project costs financed by GLWA on behalf of DWSD through the DWSRF program bonds, and resulting principal and interest payments on the bonds, will be directly allocable to the DWSD local system. Debt service is anticipated to begin on October 1, 2027 for this project and will be included as part of the FY 2027 - FY 2028 biennial budget.
COMMITTEE REVIEW
This matter was presented to the GLWA Audit Committee at its May 2, 2025 meeting. The Audit Committee unanimously recommended that the Great Lakes Water Authority Board of Directors approve the attached Resolution for the City of Detroit Water and Sewerage Department (DWSD) Water System Improvements Project Plan for FY 2026 Drinking Water State Revolving Fund (DWSRF) funding consideration.
SHARED SERVICES IMPACT
This item does not impact the shared services agreement between GLWA and DWSD.