Title
Revised Flint Master Agreement
Body
Agenda of: November 29, 2017
Item No.: 2017- 473
Amount: N/A
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Sue F. McCormick
Chief Executive Officer
Great Lakes Water Authority
DATE: November 27, 2017
RE: Flint Master Agreement
MOTION
Upon recommendation of William M. Wolfson, Chief Administrative and Compliance Officer, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA):
1) Receives and files the attached Resolution 1703354.3 of the Flint City Council which conditionally approved the Master Agreement by a 5 to 4 vote of the Council on November 21, 2017 (the Flint Resolution);
2) Notes that the Flint Resolution conditions Flint’s approval of the Master Agreement between and among GLWA the City of Flint The Department of Environmental Quality of the State of Michigan (DEQ), the Genesee County Drain Commissioner (GCDC), and the Karegnondi Water Authority (KWA )(collectively the Parties) for the purposes of effectuating the overall agreement described in the Statement of Principles for Long Term Water Delivery to the City of Flint signed by the parties and dated April 18, 2017 upon certain amendments to the Master Agreement, and the 30-year Water Service Contract between GLWA and Flint which is Exhibit A to the Master Agreement (the Water Service Contract); and
3) Authorizes the Chief Executive Officer (CEO) to execute on behalf of the GLWA the Master Agreement including Exhibits with her signature to be escrowed, subject to the CEO’s determination of the acceptable resolution of the following:
A) Finalization by counsel, consistent with the intent of the Flint Resolution and with the previous authorizations of this Board. of the necessary changes to the Master Agreement, including Section B of that Agreement and Sections12.04(B),(F),(G), (H) and Section 12.06 of Exhibit A within the Master Agreement, to remove additional language that was added following the October 31, 2017 expiration of the escrowed signatures of the parties to the Master Agreement and restore the Master Agreement to the previously escrowed form;
B) The Board has received correspondence from the Mayor of Flint dated November 27, 2017, and the Flint City Attorney dated November 22, 2017 (the Flint Letters) indicating Flint’s intention to defend the Master Agreement, including but not limited to Exhibit A within that Agreement, from challenges to its validity or effect. The CEO is authorized to seek additional clarification and memorialization of the commitments outlined in the Flint letters.
C) The Board is aware in taking this action that that the Flint Resolution provides for a one-time grant from the State to Flint of $750,000. In taking this action the Board is relying on confirmation from the State that no additional WRAP (Water Residential Assistance Program) or GLWA funds are requested or required by this provision. The CEO is authorized to seek additional clarification and memorialization by representatives of the State of its commitments referenced in the Flint Resolution;
D) Confirmation that all necessary signatures to the Master Agreement have been obtained;
4) Authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
On April 18, 2017 representatives of the Parties entered into a Statement of Principles for Long Term Water Delivery to the City of Flint. The Principles would provide benefits to all Parties and represented a regional approach to water planning. Perhaps more importantly the Principles if effectuated represented another tool Flint could bring to bear in its efforts to address its ongoing water crisis.
Immediately after signing the Statement of Principles, the Parties began work on a Master Agreement to effectuate and codify their common understanding. While there were many agreements between various members of the Parties necessary to effectuate the understanding, the Parties recognized the necessary interrelationship between these agreements and agreed that they should all become parts of a single Master Agreement. The Master Agreement would then provide third party benefits to each of the Parties in any of the agreements attached and incorporated as a part of the Master Agreement.
At the June 28, 2017 Board Meeting this Honorable Body, subject to certain conditions, authorized the Chief Executive Officer (CEO) to finalize and execute the Master Agreement with Exhibits on behalf of GLWA. Ultimately, the CEO and all Parties except for the State and Flint, executed the Master Agreement and placed their signatures into an escrow which expired on September 30, 2017.
Subsequent to the CEO’s signature being placed in escrow, the Master Agreement was presented to the Flint City Council (Council) and the Council refused to act upon it or propose a viable long-term alternative. Council’s inaction led to the State filing suit against Flint. Ultimately, Council intervened and the case of Michigan Department of Environmental Quality v City of Flint and Flint City Council, USDC Case No. 217-cv-12107-DML-SDD (the Litigation) is still pending.
While the GLWA is not a party to the Litigation, it has voluntarily participated in mediation proceedings related to the Litigation. As you were previously advised, the mediation proceedings did not resolve the Litigation. On October 17, 2017, the Court issued an Order, directing the Council to approve the Master Agreement or a viable alternative to the Master Agreement on or before October 23, 2017.
In response to the Court’s Order, the Council (1) filed a motion seeking the Court to reconsider its decision and (2) approved a two-year agreement for GLWA to provide water services to Flint.
In the face of the Council’s refusal to obey the Court’s Order and in response to Council’s Motion for Reconsideration, the Michigan Department of Environmental Quality (MDEQ) requested that court enforce the Order by compelling Flint to execute the Master Agreement. On October 27, 2017, the Court denied Council’s requested relief but noted that the escrow having expired and the Court could not order Flint to execute the Master Agreement without an Agreement with binding signatures of the Parties.
Faced with the Court Order, the Parties to the Master Agreement met to negotiate certain changes to the Master Agreement and the Water Service Contract reflected in the attached documents.
Subsequent to that action, municipal elections were conducted within the City of Flint and new Members were elected to the Flint City Council. On November 21, 2017, after deliberations, a majority of the Flint City Council voted to authorize the Mayor and the City to Clerk to execute the Master Agreement, including but not limited to the Water Service Contract. The Resolution contained certain Additional Terms and qualified Council’s approval and the Mayor’s authority to sign upon acceptance by GLWA of those terms.
JUSTIFICATION
The Board has been previously briefed in the benefits of this regional transaction to each of the Parties to the Master Agreement. Approval of this Resolution authorizes the CEO to finalize and execute the Master Agreement upon satisfactory completion of issues that remain outstanding.
BUDGET IMPACT
The projected revenue from the proposed Master Agreement was considered in the adoption of the budget for FY18.
COMMITTEE REVIEW
This item is being presented directly to the full Board of Directors.
SHARED SERVICES IMPACT
This item does not impact the shared services agreement between GLWA and DWSD.