5th Floor Board Room, Water Board Building 735 Randolph ... · 5th Floor Board Room, Water Board...

Audit Committee

Friday, May 20, 2016 at 8:00 a.m.

5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan 48226

GLWater.org

AGENDA 1. CALL TO ORDER 2. ROLL CALL 3. APPROVAL OF AGENDA 4. APPROVAL OF MINUTES

A. May 6, 2016 () 5. PUBLIC PARTICIPATION 6. OLD BUSINESS

A. FY 2017 and 2018 Financial Planning Update – (See Addendums #1 and #2) Including: - Review of GLWA Operations & Maintenance Budget - Review of GLWA Capital Improvement Plan - Review of GLWA Schedule of Charges Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer Proposed Action #1: The Audit Committee recommends that the Great Lakes Water Authority Board adopt the FY 2017 and 2018 Budget Resolution as presented. Proposed Action #2: The Audit Committee recommends that the Great Lakes Water Authority Board adopt the FY 2017 Schedule of Water Charges Resolution as presented. Proposed Action #3: The Audit Committee recommends that the Great Lakes Water Authority Board adopt the FY 2017 to FY 2021 Capital Improvement Plan Resolution as presented.

7. NEW BUSINESS A. Proposed CS-041- Underwriting Services Recommendation (Page 5)

Proposed Action: Audit Committee recommends that the Great Lakes Water Authority Board approve Citigroup as Bookrunning Senior Managing Underwriter and Goldman Sachs as Co-Senior Managing Underwriter on the inaugural GLWA bond issuance which is expected to include refunding and new money issuance with the understanding that the fees will be negotiated at the time of sale and to be paid from bond proceeds.

B. Proposed CS-1558 - Proposed GLWA Contract CS-1558, “Annual (Page 13) Financial Management Consulting and System Consultant Services – Related to Specific Bond Transactions” Services Proposed Action: Audit Committee recommends that the GLWA Board approve the Contract CS-1558, “Annual Financial Management Consulting and System Consultant Services – Related to Specific Bond Transactions” services with The Foster Group

8. LOOK AHEAD Next Audit Committee Meetings June 17, 2016 at 8 am Rescheduled Regular Meeting (FY 2016 Budget Amendments)

9. REPORTS A. CFO/Treasurer Updates

10. INFORMATION

A. None

11. OTHER MATTERS

12. ADJOURNMENT

Audit Committee Meeting

Friday, May 6, 2016 at 8:00 a.m.

5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan 48226

GLWater.org

MINUTES

1. CALL TO ORDER

Chairman Baker called the meeting to order at 8:04 am.

2. ROLL CALL

Chairman Brian Baker, Director Robert Daddow, and Director Joseph Nardone

3. APPROVAL OF AGENDA

Chairman Baker requested approval of the Agenda.

MOTION BY: ROBERT DADDOW SUPPORT: JOSEPH NARDONE ACTION: APPROVED

4. APPROVAL OF MINUTES

Chairman Baker requested approval of the Minutes of April 22, 2016.

MOTION BY: JOSEPH NARDONE SUPPORT: ROBERT DADDOW ACTION: APPROVED

5. PUBLIC PARTICIPATION

None

6. OLD BUSINESS

A. FY 2017 and 2018 Financial Planning Update – Including:- Review of GLWA Operations & Maintenance Budget

- Review of GLWA Capital Improvement Plan- Review of GLWA Schedule of Charges

AGENDA ITEM #4A

Page 1

Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer Proposed Action #1: The Audit Committee recommends that the Great Lakes Water Authority Board adopt the FY 2017 and 2018 Budget Resolution as presented. Proposed Action #2: The Audit Committee recommends that the Great Lakes Water Authority Board adopt the FY 2017 Schedule of Charges Resolution as presented. Proposed Action #3: The Audit Committee recommends that the Great Lakes Water Authority Board adopt the FY 2017 to FY 2021 Capital Improvement Plan Resolution as presented.

The Committee recommended a Resolution is presented for consideration by the full Board at the May 11, 2016 meeting, stating rates and charges will not exceed those that were presented to the Board and customers in February 2016.


7. NEW BUSINESS

None

8. LOOK AHEAD

Next Audit Committee Meetings: May 20, 2016, 8:00 am (Special Meeting Scheduled) (underwriter selection, consultant

contract, and Draft FY 2015 DWSD Audited Financial Statements) June 10, 2016 (Regular Meeting Cancelled) June 17, 2016, 8:00 am (Special Meeting Scheduled) (FY 2016 Budget Amendments)

9. REPORTS

A. Contract Extension with PFM Asset Management LLC– Deirdre Henry, Interim Treasury ManagerAction: Receive and File


Page 2

B. Wholesale Accounts Receivable Aging Report as of March 31, 2016– Presenter: Jon Wheatley, Public Finance ManagerAction: Receive and File


C. Water Residential Assistance Program Status Update– Presenter: Jon Wheatley, Public Finance Manager

10. INFORMATION

A. Flint Prepayment Reconciliation (Jon Wheatley, Public Finance Manager)Action: Receive and File


B. City of Highland Park Billings and Collections (Jon Wheatley, Public FinanceManager)Action: Receive and File


C. Wholesale Water Revenue Report - Variance Analysis (Jon Wheatley, PublicFinance Manager)Action: Receive and File


D. Cash Transfers to City of Detroit Water & Sewerage Department (Deirdre Henry,Interim Treasury Manager)Action: Receive and File

Page 3


11. OTHER MATTERS

None

12. ADJOURNMENT

Chairman Baker requested a motion to adjourn.


There being no further business, the meeting was adjourned at 9:23 am.

Page 4

Date: May 20, 2016

To: Great Lakes Water Authority Audit Committee

From: Jon Wheatley, Public Finance Manager

Re: Proposed CS-041- Underwriting Services Recommendation

Background: On February 5, 2016, Public Financial Management, Inc. (“PFM”) presented a timeline for the proposed issuance of GLWA refunding bonds. As part of that timeline, the Great Lakes Water Authority (GLWA) needs to select a senior underwriter for the refunding transaction as well as the new money issuance for the water capital improvement plan. Since this is GLWA’s inaugural bond transaction, a request for proposal was issued to create a pool of underwriters.

With the assistance of PFM and GLWA Procurement, a Request for Proposals (“RFP”) for Underwriting Services (CS-041) was drafted and advertised on the Michigan Intergovernmental Trade Network (MITN) on March 14, 2016. On April 6, 2016, fourteen responsive proposals were received as defined by the procurement policy. Of the proposals received, twelve were deemed to have met the minimum requirements identified in the RFP. Out of the twelve firms, ten were identified for consideration as senior managers and two for co-managers based upon vendor self-identification in the proposal response. The firms evaluated for underwriter are listed below.

Senior Managers:

Barclays Capital, Inc. Citigroup Global Markets, Inc. Goldman Sachs & Co. JP Morgan Securities, LLC Morgan Stanley & Co. Piper Jaffray & Co. PNC Capital Markets Ramirez & Co. Siebert Brandford Shank Wells Fargo Securities

Co-Managers:

Fifth Third Securities Robert W. Baird & Co.

Evaluation Team: In accordance with the GLWA Procurement Policy, the “evaluator shall be technically proficient in the field” and the “GLWA will strive to include evaluators from the customer base”. These objectives were achieved with a team of staff, advisor, and customer

AGENDA ITEM #7A

Page 5

representatives that all have some level of public finance and utility finance experience. The evaluation team was comprised of the following.

Nicolette Bateson, CPA, Chief Financial Officer/Treasurer, GLWA Kari Blanchett, PFM, Inc., GLWA Advisor Jon Wheatley, Public Finance Manager, GLWA Jeff McKeen, General Manager, Southeast Oakland County Water Authority Marina Neumaier, CPA, Finance Director, Northville Township

Evaluations: The evaluation team scored the proposals from the twelve underwriting firms which were received. The firms were evaluated based on their written responses to criteria as outlined in the request for proposal. This included their specific water and sewer financing experience, number and size of transactions, ability and willingness to hold bonds in inventory, firm financial capacity, analytical capabilities, and proposed strategies for marketing GLWA and its bonds and rating agency strategies. After the initial scoring, the five highest scoring firms were selected for in-person interviews with the panel. The interviews were held on May 2, 2016 at Detroit Metro Airport. Each firm was allowed up to six participants. They were allowed to make brief presentations followed by questions from the panel. Interview questions explored who would be assigned to the GLWA team and their overall responsibility, rating firm strategy, investor relations, developing the plan of finance, achieving diversity of the team including co-manager firms, and managing risk.

After the interviews, the scores were finalized by the evaluation team. The final scores for the senior manager underwriters are in the table below.

Percent of maximum possible

score

Firm Scoring Order

Firm Name Total Technical Score

96.3% 1 Citigroup 68.6

89.7% 2 Goldman Sachs 63.9

84.7% 3 Morgan Stanley 60.3

80.5% 4 JP Morgan 57.4

78.7% 5 Barclays 56.1

60.2% 6 PNC 42.9

59.3% 7 Wells Fargo 42.2

58.0% 8 Ramirez & Co 41.3

56.8% 9 Siebert, Brandford & Shank, LLC 40.5

52.0% 10 Piper Jaffray 37.1

Page 6

In addition to the technical proposals, the evaluation panel also reviewed the proposed underwriting fees submitted by each firm interviewed. Based on the attached summary of fees and the attached benchmark (provided by PFM) from similar transactions over $250 million, the final fee scale will be negotiated with the selected firm. The recommended firms have been advised that the fees will be negotiated and have accepted the GLWA’s position related to fees. Recommendation: Based on the deliberations and the final scoring referenced above, the evaluation team recommends selecting Citigroup as the Bookrunning Senior Managing Underwriter and Goldman Sachs as the Co-Senior Manager for the upcoming refunding and new money bond sale (see, “Roles of the Underwriter” below). In addition to these participants, other co-managers will be selected, as determined by the financing team.

It is also recommended that the pool of all ten qualified responses received be utilized to select senior and co-managers to use on the upcoming and future bond sales. The members of future underwriting teams will be determined by GLWA based on the specific details of the proposed transaction and market conditions at that time.

Proposed Action: Audit Committee recommends that the Great Lakes Water Authority Board approve Citigroup as Bookrunning Senior Managing Underwriter and Goldman Sachs as Co-Senior Managing Underwriter on the inaugural GLWA bond issuance which is expected to include refunding and new money issuance with the understanding that the fees will be negotiated at the time of sale and to be paid from bond proceeds.

Roles of the Underwritersi:

Senior (Book Running) Underwriter

• Manages the affairs of any underwriting syndicate formed in connection with a new issue;

• In a negotiated offering: o works with state or local government and municipal advisor to design the plan of

finance, develop the bond structure o assists in determining timing to sell bonds based on market conditions o assists in the development of the bond documents o assists in preparing any rating agency strategy and presentation o “runs numbers” providing quantitative analysis of financing structure – manages

the pricing process o executes pre-sale marketing – solicits price views from syndicate members,

which provides preliminary pricing indications among underwriters and customers about the offering range of a new issue

o prepares distribution analysis o works with the state or local government to determine how orders are filled

from the bond pricing order period – executes the bond purchase agreement with the municipal government on behalf of the syndicate

Page 7

• Provides proceeds at closing and obtains funds from investors

Co-Manager (also known as Underwriting Syndicate)

• Under the direction of the senior manager, purchases an initial bond issue from state or local government and offers it for resale to investors

• Provides sufficient capital to purchase an issue • Shares the risks of underwriting the issue with the senior manager • Distributes the bonds to investors

iFrom the MSRB website- Roles and Responsibilities: The Financing Team in an Initial Municipal Bond Offering http://msrb.org/msrb1/pdfs/Financing-Team.pdf

Page 8

http://msrb.org/msrb1/pdfs/Financing-Team.pdf

Great Lakes Water AuthorityProposed Underwriting Fees

$50 to $100 to $150 to $250 to $500 Underwriters $100mm $150mm $250mm $500mm plus

BarclaysCommission/Takedown Maturities Years 1 through 10 $2.000 $2.000 $2.000 $2.000 $2.000 Maturities Years 11+ $3.250 $3.000 $2.750 $2.500 $2.250

Citi Group (assumes 65% liability) Management fee at Authority optionCommission/TakedownUninsured $2.750 $2.750 $2.750 $2.750 $2.750Insured $2.000 $2.000 $2.000 $2.000 $2.000

Goldman SachsCommission/Takedown $2.500 $2.500 $2.500 $2.250 $2.000

$1.000 to $0.750 to $0.500 to $0.500 to $0.350 to$2.000 $1.750 $1.500 $1.500 $1.000

$3.500 to $3.250 to $3.000 to $2.750 to $2.350 to$4.50 $4.25 $4.00 $3.75 $3.00

J.P. MorganCommission/Takedown $3.00 $3.00 $2.50 $2.50 $2.50

Morgan StanleyAverage Commission/Takedown $3.000 $2.750 $2.750 $2.500 $2.500

MAXIMUM 4.500 4.250 4.000 3.750 3.000MINIMUM-Non-insured, 11 years on 2.750 2.750 2.500 2.500 2.250

Management Fee

Total ($/bond)

Page 9

RECENT WATER AND SEWER UTILITY UNDERWRITING TAKEDOWNSISSUES > $250 MILLION

Page 1 of 3

IssuerMassachusetts Water Resources Authority

California Infrastructure & Economic

Development Bank Energy NorthwestLas Vegas Valley Water

District, NevadaEastern Municipal Water

District Hampton Roads DC Water SFWMD Santee CooperIndiana Municipal Power

Agency

Series

2016 Series B & 2016 Series C Refunding

(Green Bonds)

Clean Water State Revolving Fund

Revenue Bonds, Series 2016 (Green Bonds)

Electric Revenue Refunding Bonds, Series

2016A

Water Improvement & Refunding Bonds, Series

2016A

Series 2016A, Refunding Water &

Wastewater Revenue Bonds 2016A Series 2016A Series 2015 Series 2016A

Power Supply System Refunding Revenue

Bonds, 2016 Series ASale Date: 4/13/2016 4/12/2016 3/23/2016 3/10/2016 2/25/2016 2/24/2016 1/20/2016 1/13/2016 1/7/2016 12/10/2015

Par Amount: $514,615,000 $414,210,000 $483,165,000 $497,635,000 $209,455,000 $242,140,000 $385,610,000 $395,480,000 $526,230,000 $366,990,000Underwriter: Citigroup Morgan Stanley BAML Citigroup Citigroup BAML Loop Citigroup BAML Citigroup

Tax Status: Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax ExemptInsurance: NA

Insured Ratings: - - /-/- - - NR/NR/NR - - - -Underlying Ratings: Aa1/AA+/AA+ Aaa/AAA/AAA Aa1/AA-/AA Aa1/AA/NR Aa3/AA/AA NR/AA/AA Aa3/AA/AA- Aa3/AA/AA- A1/AA-/A+ A1/A+/A+

Sector Utility Utility Utility Utility Utility Utility Utility Utility Utility UtilityType Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed

Maturity Year Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown1 0.752 2.00 1.50 1.25 1.00 0.75 0.35 0.753 2.00 1.50 1.00 0.75 0.50 3.75 0.754 2.00 2.00 1.00 0.75 0.63 0.755 2.50 2.00 2.50 1.00 0.75 0.75 0.75 4.006 2.50 2.50 2.50 1.00 0.75 1.00 0.75 4.007 2.50 2.50 2.50 1.00 1.00 1.00 0.758 2.50 2.50 2.50 1.00 1.00 1.13 0.759 3.00 2.50 2.50 1.00 1.00 1.13 0.75 4.0010 3.00 2.50 13.00 1.00 1.00 1.25 0.75 4.0011 3.00 2.75 3.25 1.00 1.00 1.25 0.75 4.0012 3.50 2.75 3.25 1.00 1.00 1.50 0.75 4.0013 3.50 2.75 1.00 1.00 1.50 3.75 0.75 4.0014 3.50 2.75 1.00 1.00 1.75 3.75 0.75 4.0015 3.75 2.75 1.00 1.00 1.75 3.75 0.75 4.0016 3.75 2.75 3.25 1.75 1.00 2.00 3.75 0.75 4.0017 3.75 2.75 1.75 1.00 2.00 3.75 0.75 4.0018 4.00 2.75 1.75 1.00 2.00 3.75 0.75 4.00 3.7519 4.00 2.75 1.75 1.00 2.00 3.75 0.75 4.00 3.7520 4.00 1.75 1.00 2.00 3.75 0.75 4.00 3.7521 1.75 1.75 2.00 4.25 4.00 3.7522 1.75 2.00 4.25 4.00 3.7523 1.75 2.00 4.25 4.0024 4.00 2.00 4.0025 1.75 2.00 4.0026 1.7527 2.00 3.752829 1.7530 1.7531 4.003233 4.0034353637383940

Page 10


Page 2 of 3

Issuer

SeriesSale Date:

Par Amount:Underwriter:

Tax Status:Insurance:

Insured Ratings:Underlying Ratings:

SectorType

Maturity Year123456789

10111213141516171819202122232425262728293031323334353637383940

Ohio Water Development Authority St. Louis MSD

City of San Antonio, Texas Electric & Gas

SystemsLIPA - Utility Debt

Securitization AuthoritySan Diego Public

Facilities Financing Kansas Development

Finance Authority Charlotte, NC WaterAllegheny Co, PA

Sanitary AuthCity of Chattanooga,

TennesseeHonolulu, HI Wastewater

Sys

Series 2015A Series 2015B New Series 2015Series 2015

Restructuring Bonds Series 2015 Series 2015H Series 2015 Series 2015

Series 2015 A & C, Electric System

Refunding Revenue Bonds Series 2015A&B

12/2/2015 12/2/2015 11/3/2015 10/15/2015 8/24/2015 8/11/2015 8/10/2015 7/27/2015 7/21/2015 7/20/2015$210,000,000 $224,310,000 $235,000,000 $985,300,000 $300,605,000 $1,005,435,000 $459,585,000 $265,270,000 $245,475,000 $462,585,000

RBC Wells Fargo Wells Fargo BAML BAML BAML Wells Fargo Boenning & Scattergood BAML BAML

Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Taxable Tax Exempt Tax Exempt Tax Exempt Tax ExemptBAM

- - - - - - - A1/AA/NR - -Aaa/AAA/NR Aa1/AAA/AA+ Aa1/AA/AA+ Aaa/AAA/AAA NR/AA/AA Aa3/AA-/- Aaa/AAA/AAA A1/A/NR NR/AA+/AA+ Aa2/NR/AA

Utility Utility Utility Utility Utility Utility Utility Utility Utility UtilityFixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed

Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown1.25 0.50

2.50 1.25 1.25 1.25 1.95 1.002.50 1.25 2.50 2.50 1.95 1.252.50 2.50 2.50 2.50 1.95 1.502.50 2.50 2.50 2.50 1.95 1.752.50 2.50 3.75 2.50 1.95 2.002.50 0.75 2.50 3.75 2.50 1.95 2.002.50 3.75 0.75 2.50 3.75 2.50 1.95 2.003.75 3.75 0.75 2.50 3.75 2.50 1.95 2.003.75 3.75 0.75 2.50 3.75 2.50 1.95 2.003.75 3.50 5.00 0.75 3.75 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 1.95 2.503.75 3.50 5.00 3.75 1.95 2.503.75 3.50 5.00 3.75 1.95 2.503.75 3.50 5.00 3.75 3.75 1.95 2.503.75 3.50 5.00 3.75 3.003.75 3.50 5.00 3.753.75 3.50

3.503.75 3.75 1.95 3.00

3.75 3.75 3.75 3.75 3.00

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Page 3 of 3

Issuer

SeriesSale Date:

Par Amount:Underwriter:

Tax Status:Insurance:

Insured Ratings:Underlying Ratings:

SectorType

Maturity Year123456789

10111213141516171819202122232425262728293031323334353637383940

City of San Antonio, Texas City of Austin, Texas

Lower Colorado River Authority,TX Riverside, CA Sewer

Los Angeles, CA Wastewater System

Miami-Dade Co, FL Water & Sewer

NYC Muni Finance Auth Water & Sewer

Salt River Project Agricultural

Improvement & Power District Austin Electric

Electric & Gas Systems, Series 2015

Water & Wastewater System Revenue

Refunding Bonds, Series 2015A Series 2015 Series 2015A Series 2015A&B Series 2015 Series 2015HH 2015 Series A Series 2015A

7/14/2015 7/8/2015 6/1/2015 5/26/2015 5/18/2015 5/18/2015 5/18/2015 5/12/2015 5/11/2015$310,145,000 $244,005,000 $245,965,000 $200,030,000 $229,930,000 $481,175,000 $452,530,000 $886,535,000 $330,100,000

Goldman Sachs JP Morgan BAML Wells Fargo Siebert Branford Jefferies Barclays Goldman Sachs Goldman Sachs

Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax ExemptAGM

- - A2/AA/A+ - - - - - -Aa1/AA/AA+ Aa2/Aa2/AA- NR/A/A A1/A/NR NR/AA+/AA+ Aa3/A+/A+ Aa2/AA+/AA+ Aa1/AA/NR A1/AA-/AA-

Utility Utility Utility Utility Utility Utility Utility Utility UtilityFixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed

Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown Takedown2.50 0.752.50 2.50 0.75

1.25 2.50 2.50 2.00 3.751.25 3.75 2.50 2.00 3.752.25 3.75 2.50 2.00 3.75 0.752.25 3.75 2.50 2.00 3.75 0.75 3.752.25 3.75 2.50 2.00 5.00 0.75 3.752.25 3.75 2.50 2.00 5.00 3.752.25 3.75 2.50 2.00 5.00 3.752.25 4.00 2.50 2.00 5.00 5.00 3.753.25 4.00 3.75 2.00 5.00 5.00 0.75 3.753.25 4.00 3.75 2.00 2.00 5.00 0.75 3.753.25 4.00 3.75 2.00 2.00 5.00 0.75 3.753.25 4.00 3.75 2.00 2.00 5.00 3.754.00 4.00 3.75 2.00 2.00 5.00 3.754.00 4.00 3.75 2.00 2.00 5.00 4.004.00 4.00 3.75 2.00 2.00 5.00 0.75 4.00

4.00 3.75 2.00 2.00 0.75 4.004.00 3.75 2.00 2.00 0.75 4.004.00 3.75 2.00 2.00 0.75 4.004.00 2.00 0.75

5.005.00 4.005.00

3.75 2.00

2.753.75 2.75 0.75 4.00

Page 12

Date: May 20, 2016

To: Great Lakes Water Authority Audit Committee

From: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer

Re: Proposed GLWA Contract CS-1558 with The Foster Group for “Annual Financial Management Consulting” at a fixed cost of $625,000 for FY 2017 and $500,000 for FY 2018 and “System Consultant Services – Related to Specific Bond Transactions” Services on a per transaction fee basis.

Background: See attached board letter.

Proposed Action: Audit Committee recommends that the Great Lakes Water Authority Board approve the Contract CS-1558, “Annual Financial Management Consulting and System Consultant Services – Related to Specific Bond Transactions” services with The Foster Group

Page 13

Resolution Regarding Proposed GLWA Contract CS-1558, " with The Foster Group for “Annual Financial Management Consulting” at a fixed cost of $625,000 for FY 2017 and $500,000 for FY 2018 and “System Consultant Services – Related to Specific Bond Transactions” Services on a per transaction fee basis. Agenda of: May 25, 2016 Item No.: 2016-05-XX Amount: N/A

TO: The Honorable

Board of Directors Great Lakes Water Authority

FROM: Sue McCormick, Chief Executive Officer Great Lakes Water Authority DATE: May 25, 2016

RE: Proposed GLWA Contract CS-1558 with The Foster Group for “Annual Financial Management Consulting” at a fixed cost of $625,000 for FY 2017 and $500,000 for FY 2018 and “System Consultant Services – Related to Specific Bond Transactions” Services on a per transaction fee basis.

MOTION

Upon recommendation of Nicolette Bateson, Chief Financial Officer, the Great Lakes Water Authority Board authorizes the Chief Executive Officer (CEO) to enter into Contract No. CS-1558, with The Foster Group for “Annual Financial Management Consulting” at a fixed cost of $625,000 for FY 2017 and $500,000 for FY 2018 and “System Consultant Services – Related to Specific Bond Transactions” Services on a per transaction fee basis, and also authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.

BACKGROUND Consulting services provided by The Foster Group have provided critical financial and strategic support to the Detroit Water & Sewerage Department (DWSD) for many years. With the recent operational standup of the Great Lakes Water Authority on January 1, 2016, this contract was assigned to the Great Lakes Water Authority. The rationale is that The Foster Group’s extensive knowledge of the debt portfolio assigned to GLWA and the related financial plans, system of revenue charges that supports payment of the indebtedness, terms of the master bond ordinance and the knowledge of the wholesale charge and cost allocation methodology. Further, The Foster Group’s in-depth support of the parties leading up to the Memorandum of Understanding for the creation of the Authority has provided valuable during the drafting and, now, the implementation of the lease and shared services agreements.

Page 14

JUSTIFICATION The Foster Group’s knowledge of both DWSD and GLWA has supported the successful, and at times complex, stand-up of both entities – in particular the alignment of bifurcated financial plans and the new financial relationship between DWSD and GLWA. This is a process which will largely continue to be operationally refined over the course on the next two years. In addition, there are commitments in the services agreement between the City of Detroit and GLWA to review cost allocation and other revenue related data analysis methodologies with internal staff as well as through the Customer Outreach Program. The Foster Group’s working relationship with all parties, including customers, makes The Foster Group uniquely qualified to continue to provide this service. This procurement is considered a “specialized service” under 1.9(x) of the GLWA Procurement Policy defined as “a unique expertise provided by an individual or firm and unattainable in the market in a competitive environment”. The attached proposal from The Foster Group outlines the services and work plan. Of particular note, is The Foster Group’s reducing scope over the next two years for “Annual Financial Management Consulting” services as the GLWA develops internal financial management capacity. “System Consultant Services – Related to Specific Bond Transactions” is proposed to continue as a stand-alone service whereby certification of the financial plan is sought in conjunction with the issue of special revenue bonds.

BUDGET IMPACT The Foster Group Contract is divided equally between the Finance Department and the Public Finance Department in the Financial Services Group. There will be an allocation required from the Administrative Budget Reserve to allow for the discrepancy between early budget estimates and the proposed fee. Overall, the contract provides for a decrease over the next two years. It should be noted that The Foster Group has been a supportive contributor of the transformed Financial Services Group.

Line Item Budget Expiring Contract

FY 2016 Annualized

Proposed FY 2017 Services

Proposed FY 2018 Services

Finance Department Consulting Services 5910-884111.000-617900-WS7900

$375,000

$281,250

$210,938

Public Finance Consulting Services 5910-884141.000-617903-WS7900

375,000

281,250

210,937

Departmental Budget Subtotal 750,000 562,500 421,875 Administrative Budget Reserve Allocation - 62,500 78,125 Total Proposed Fee $750,000 $625,000 $500,000 Cost Containment

(17%)

(25%)

Page 15

Fees for bond transactions are charged to the bond issuance costs consistent with industry practice for all advisor fees that are transaction based.

COMMITTEE REVIEW The Audit Committee is scheduled to review this matter at its May 20, 2016 Audit Committee meeting.

SHARED SERVICES IMPACT The extent to which DWSD will utilize The Foster Group’s services is undetermined. The Foster Group has been a resource in FY 2016 for DWSD as a part of the stand-up of DWSD and its financial planning for FY 2017 and 2018. It is currently being evaluated whether the parties are better served by a shared services arrangement or cost allocation approach. The outcome of that decision is not deemed to have a material impact to the GLWA budget overall.

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T F G

THE FOSTER GROUP P.O. BOX 26282 The Foster Group, LLC Leawood, KS 66225 Bart Foster, President Tel: (913) 345-1410 Cell: (913) 530-6240 Fax: (913) 345-1640 [email protected]

April 18, 2016 Ms. Nicolette Bateson Chief Financial Officer Great Lakes Water Authority 735 Randolph Street Detroit, Michigan 48226 Dear Ms. Bateson: In accordance with your direction, we are pleased to present this proposal to provide continued business consulting services to the Great Lakes Water Authority (GLWA). This letter has been prepared to summarize the anticipated work plan and budget to provide annual financial management, cost of service, and charge design consulting services to the organization, including consulting services to support GLWA’s customer outreach program. At your request we have also included a proposed scope of services and estimated fee structure to provide System Consultant services in support of GLWA’s projected and/or planned issuance of revenue bonds to finance capital improvements and/or refinance outstanding revenue bonds that GLWA inherited from DWSD. These services are currently being provided under CS-1558, which supports strategic financial and customer outreach consulting services in conjunction with development of the FY 2017 water and sewer charges. As noted in our recent status report, CS-1558 is on schedule to provide sufficient funding for consulting assistance through June 30, 2016 in support of development and implementation of the FY 2017 budgets, financial plans, charges, and related support activities. The intent of this proposal is to establish a mechanism to provide funding for similar consulting services during FY 2017 and FY 2018. As we have discussed, as GLWA matures and continues to develop additional internal financial planning and management resources, the organization’s need for our services will naturally wane. The proposed scope of services set forth herein recognizes that strategic transition. The work plan outlined in this proposal is designed to provide consulting services in support of:

• Financial planning, monitoring, cost of service studies, and charge development activities in support of the FY 2018 / FY 2019 and FY 2019 / FY 2020 Budgets, Financial Plans, cost of service allocations, and development of supporting wholesale service charges;

• Related implementation assistance, including consultation on GLWA/DWSD coordination matters;

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Ms. Nicolette Bateson April 18, 2016

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• Support of GLWA’s customer outreach program, including provision of leadership positions on several work groups of the Technical Advisory Committee and the Sewer Partnering Group;

• System Consultant services in support of GLWA’s issuance of revenue bonds and related financing vehicles.

The basic scope of services summarized herein has been crafted with the understanding that they be similar in nature to those set forth in CS-1558 and prior agreements. Based on our experience with studies of a similar nature for GLWA and other major municipal clients, and several conversations with key representatives of the GLWA leadership team, we have developed a detailed work plan for the proposed consulting services. This work plan is designed to result in comprehensive, high quality consulting services and deliverables. We are uniquely qualified to provide the services desired by GLWA, having been directly involved with the organization’s annual financial planning process for the last 30 years.

Executive Summary Work Plan

Six general categories of analyses are necessary to carry out the objectives of the annual financial management and charge design consulting services, as summarized by the task descriptions below. In addition, we have included two customer outreach tasks – one for Water and one for Sewer. Finally, we have provided a task to support System Consultant services on an as needed basis. We are prepared to provide a more detailed work plan for these services as necessary.

1. Operating and Capital Budget Development - THE FOSTER GROUP will assist GLWA in the development of operating budgets and capital improvement programs, including analyses to incorporate DWSD retail budget and capital improvement programs, and to present budgetary information in a manner suitable for discussions with stakeholders.

2. Review of Accounting Records - THE FOSTER GROUP will perform detailed analytical reviews of GLWA's accounting records, to facilitate development of financial plans, cost of service allocations and charge designs, and to provide interpretive commentary on the overall adequacy and accuracy of the statements.

3. Design of Financing Plans - THE FOSTER GROUP will develop alternative 10-year operating and capital financing plans for the water and sewer utilities, strategize with Authority management on the most appropriate depiction, and formalize such analyses as the “plan of record” for the Authority.

4. Cost of Service Allocations - THE FOSTER GROUP will allocate the annual cost of providing utility service to individual customers and customer classes. This element will include detailed reviews of new technical data gathered to indicate relative use of the water and sewer systems, application of industry standards and agreed upon

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methodologies, and incorporation of new initiatives being discussed at various stakeholder work groups. This element will include updates of demands placed on the water system by individual customer communities and classes, and updates of relative customer wastewater contributions and other technical data to compute “SHAREs”.

5. Charge Design - THE FOSTER GROUP will design schedules of water and sewer service charges that recover the total annual revenue requirements from utility customers in an equitable, defensible manner and in accordance with applicable policies, statutes, regulations, and agreements.

6. Implementation Assistance - THE FOSTER GROUP will assist GLWA in its preparation of all material necessary to implement the proposed water and sewer charges, and to carry out and monitor GLWA’s financial plans. This assistance will include development of notification material, drafting of ordinances and other documents, and presentations to interested stakeholders at the Authority’s direction. This task will also include ongoing monitoring throughout the year to address charge related issues that arise, including briefing sessions with GLWA management and attendance of Board meetings, workshops, and subcommittee meetings, and support of interagency meetings with DWSD representatives and related stakeholders.

7. Sewer Customer Outreach Program Support - THE FOSTER GROUP will assist the Authority in the Sewer Customer Outreach activities by attending and presenting materials on behalf of the Authority at several committees and work groups, including the Steering Committee, the Sewer Rates Work Group, etc. THE FOSTER GROUP has been a vital resource to the success of this initiative and the individual work groups, and it is anticipated that the committees and work groups will continue to function in their current forms through at least June 2018. Key elements of this task are anticipated to include strategic consultation regarding development of possible updates to SHAREs, the Wastewater Master Plan update, assistance with development and implementation of the next version of the Long Term CSO Control Plan (including development of NPDES Permit modifications), technical assistance with implementation of new flow balancing efforts, and continued leadership role in discussions on sewer charge methodologies, including efforts to further implement “rate simplification”.

8. Water Customer Outreach Program Support - THE FOSTER GROUP will assist the Authority in the Water Customer Outreach activities by continuing to play a key membership role in the Technical Advisory Committee (TAC) and all of its work groups, including the Analytical Work Group, the Water Rates Work Group, etc. THE FOSTER GROUP was critical to the vision, development, and implementation of the model contract and the associated water charge platform. It is envisioned that subsequent efforts will focus on continued contract implementation, strategic planning with respect to consultation on studies being conducted to evaluate units of service, and ongoing development and presentation of material illustrating the Authority’s financial planning, cost allocation and service charge practices. It is also anticipated that these efforts will be required through June 2018, at a minimum.

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9. System Consultant Services - THE FOSTER GROUP will serve as the Authority’s System Consultant to support its issuance of revenue bonds and related financing instruments. These services have traditionally consisted of two separate levels of consulting based on the type of transaction. For “regular” revenue bonds issued to finance capital improvements and/or refinance outstanding revenue bonds, we have been engaged to provide a financial feasibility report, complete with updated five-year financial projections, certification of compliance with the Additional Bonds Test, and related implementation assistance. On other occasions, including support of issuance of Junior Lien Bonds through the State Revolving Fund, our services have been limited to certification of compliance with the Additional Bonds Test and related, less comprehensive analytical assistance. As noted in the Proposed Fee section below, it is difficult to project the amount and timing of such possible transactions, and we suggest that this task be treated on an “as needed” basis at the direction of the Authority.

Schedule The work plan outlined in this proposal is designed to provide for consulting services for GLWA Fiscal Years 2017 and 2018, to support development of the FY 2018 and the FY 2019 water and sewer charges. As such, we suggest a contract start date of July 1, 2016 and a contract termination date of June 30, 2018. Resources In addition to members, employees, and contract employees, THE FOSTER GROUP maintains cooperative arrangements with several other professional service firms, large and small, to facilitate effective delivery of a wide variety of specialized consultative services. These entities are available to provide additional technical assistance on a subcontract basis, as needed. Proposed Fees Our proposed fees for the consulting services set forth herein are summarized in the table below. Annual Financial Management Consulting Under CS-1558, fees during FY 2015 and FY 2016 for the Annual Financial Management Consulting tasks totaled $1,500,000. In keeping with the Authority’s plan to begin to strategically transition away from consulting services provided by THE FOSTER GROUP, we have gradually reduced the estimated level of consulting services to result in 25 percent

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reduction for the comparable two-year total fee. We have structured the annual estimates consistent with this transition, and the proposed fee for the first year is larger than that for the second year. We propose to continue to invoice for these services in fixed monthly amounts.

Item Fee Estimate Annual Financial Management Consulting – FY 2017 $625,000 Annual Financial Management Consulting – FY 2018 $500,000 Total – Financial Management Consulting $1,125,000

System Consultant Services – Related to Specific Bond Transactions As noted above, it is difficult to accurately forecast the frequency and magnitude of transactions that may require services under this task. For example, our fees for consulting services in FY 2016 to support of the Series 2015 Revenue Refunding Bonds (to achieve bondholder consent) totaled $200,000, which included transactions for both the Water and Sewer Funds. Our fee for consulting services related to SRF Junior Lien Bonds and related transactions has generally been $15,000 per transaction, and there were three such transactions during FY 2016. For that reason we suggest that the contract contain an annual allowance of $250,000 to be directed towards System Consultant services on an as needed basis. Any such services will only be initiated and invoices will only be produced at the direction of GLWA via separate task order for each transaction, as transactions are identified and specific services are requested, along with agreed upon fees for each task. We note that fees for these consulting services have usually been funded via issuance expenses of the specific transactions, and not through normal operating expense budgets.

Item Fee Estimate System Consultant Services – FY 2017 $250,000 System Consultant Services – FY 2018 $250,000 Total – System Consultant Services $500,000

We sincerely appreciate this opportunity to be of continued service to the Authority. If you have any questions regarding this matter, please do not hesitate to contact me.

Very truly yours,

THE FOSTER GROUP

Bart Foster President

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ADDENDUM #1 TO MEETING BINDER for Friday, May 20, 2016 at 8:00 a.m.

Agenda Item # 6A ‐ FY 2017 and 2018 Financial Planning Update

– Resolutions for consideration by Audit Committee

.

1

Great Lakes Water Authority Resolution 2016 - XXXX

Resolution Adopting the FY 2017 & FY 2018 Budget By Board member: ___________________________________________________________: Whereas The Great Lakes Water Authority (“GLWA” or the “Authority”) assumed the operation of the regional water system on January 1, 2016 (the “Effective Date”) pursuant to lease agreements between the GLWA and the City of Detroit dated June 12, 2015; and Whereas Commencing with the Fiscal Year beginning July 1, 2016, the Authority shall adopt a two-year budget for the Regional Sewer System for the following two Fiscal Years that sets forth budgeted Revenues and Expenses for each such Fiscal Year; and Whereas The budgeted expenses for each such Fiscal Year shall equal the sum of the projected expenses and revenue requirements for the Regional Water System and the Regional Sewer System for each such Fiscal Year; and Whereas The budgeted revenue requirements for the Regional Water System for FY 2017 is $331,213,200 and for FY 2018 is $344,461,700 as shown on “Schedule 1 – Wholesale Revenue Requirements from Charges” of the budget document; and Whereas The budgeted revenue requirements for the Regional Sewer System for FY 2017 is $464,078,500 and for FY 2018 is $482,641,600 as shown on “Schedule 1 – Wholesale Revenue Requirements from Charges” of the budget document; and Whereas The operations and maintenance budget for the Regional Water System for FY 2017 is $111,879,200 and for FY 2018 is $116,354,400 as shown on Schedule 1 – Wholesale Revenue Requirements from Charges of the budget document; and Whereas The operations and maintenance budget for the Regional Sewer System for FY 2017 is $175,858,900 and for FY 2018 is $182,893,300 as shown on Schedule 1 – Wholesale Revenue Requirements from Charges of the budget document; and Whereas The amounts necessary to pay the principal of and interest on all water system bonds and to restore any reserves therefore established in the Master Bond Ordinance is $190,497,300 for FY 2017 and $189,129,000 for FY 2018 as shown on the Debt Management budget document; and

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Whereas The amounts necessary to pay the principal of and interest on all sewer system bonds and to restore any reserves therefore established in the Master Bond Ordinance is $244,985,900 for FY 2017 and $244,940,100 for FY 2018 as shown on the Debt Management budget document; and Whereas The amounts necessary to fund the annual water system capital expenditures of $129,582,000 in FY 2017 and $168,230,000 in FY 2018 for the capital improvement plan in accordance with the “Recap of Capital Improvement Program (CIP) Expenditures” in the budget; and Whereas The amounts necessary to fund the annual sewer system water capital expenditures of $128,973,000 in FY 2017 and $147,894,000 in FY 2018 for the capital improvement plan in accordance with the “Recap of Capital Improvement Program (CIP) Expenditures” in the budget; Whereas The GLWA Audit Committee reviewed the inaugural budget at its meetings on May 6, 2016; and Whereas The GLWA Audit Committee recommended presentation of the proposed budget to the Board for consideration of adoption of the proposed budget; and Whereas The GLWA Board conducted public hearing on the proposed budget in accordance with the provisions of Public Act No. 43 of the Acts of the State Legislature of 1963 (“Budget Hearings of Local Governments”); and Whereas A notice for the public hearing on the proposed budget scheduled for March 2, 2015 at 1 pm at the Water Board Building, 735 Randolph, Detroit, Michigan was published in The Detroit Legal News announcing a public hearing on the budget in addition to posting the notice and proposed budget on glwater.org; and NOW THEREFORE BE IT: RESOLVED That the GLWA Board conducted a public hearing on March 2, 2016 to receive public comment regarding the proposed budget for the Fiscal Years 2017 and 2018. RESOLVED That the GLWA Board approves the budget for Fiscal Years 2017 and 2018 RESOLVED That the Chairperson, the Chief Executive Officer, and the Treasurer/Chief Financial Officer are authorized to take such other action as may be necessary to accomplish the intent of this action.

Five Year Water Supply System Capital Improvement Program (CIP) For Fiscal Years 2017 Through 2021 Agenda of: Item No.: Time: Fiscal Years 2017 through 2021 TO: The Honorable


FROM: Sue F. McCormick, CEO

Great Lakes Water Authority DATE: May 25, 2016 RE: Approve FY 2017-2021 Water Supply System Capital Improvement Program

MOTION

Upon recommendation of Nicolette Bateson, Chief Financial Officer, the Board of Directors for the Great Lakes Water Authority authorizes the Chief Executive Officer to approve the five year water supply system Capital Improvement Program (CIP) for Fiscal Years 2017 through 2021, and also authorizes the Chief Executive Officer to take such other action as may be necessary to accomplish the intent of this vote.

JUSTIFICATION

A capital improvement plan identifies an organization’s priorities within available resources over a multiple year time period. The related plan document communicates the scope, funding, and timing to customers, coordinating agencies, investors, and the general public. The water system capital improvement plan (CIP) submitted for approval by the Great Lakes Water Authority reflects changes based on the current information and the plan’s progress since the approval of the FY 2016 CIP by the Board of Water Commissioners (BOWC) for the Detroit Water and Sewerage Department (DWSD). The FY 2016 CIP reflected a capital program that pre-dates the establishment of the Regional System, Great Lakes Water Authority, and the new locally focused DWSD. The FY 2017 – 2021 CIP is the first year that the Regional System, Great Lakes Water Authority, alone is presented. The CIP is in alignment with the proposed FY 2017 budget, rate, master plan study team interim reports and recommendations, the overall organization strategy, and continues to focus on providing a reliable and efficient service.

COMMITTEE REVIEW

The FY 2017 five-year CIP for the Water Supply System has been presented to the GLWA’s customers, GLWA Capital Improvement Planning Committee, GLWA Board, and the GLWA Audit Committee for review and feedback; their review comments have been incorporated, if applicable, in the final document.

APPROVAL REQUIRED

The Articles of Incorporation of the Great Lakes Water Authority requires an affirmative vote of at least five (5) members to approve the 5-year capital improvement program.

Five Year Sewer System Capital Improvement Program (CIP) For Fiscal Years 2017 Through 2021 Agenda of: Item No.: Amount: Time: Fiscal Years 2017 through 2021 TO: The Honorable


FROM: Sue F. McCormick, CEO

Great Lakes Water Authority DATE: RE: Authorization to Approve FY 2017 Sewage Disposal System Capital

Improvement Program

MOTION

Upon recommendation of Nicolette Bateson, Chief Financial Officer, the Board of Directors for the Great Lakes Water Authority authorizes the Chief Executive Officer to approve the five year sewer system Capital Improvement Program (CIP) for Fiscal Years 2017 through 2021, and also authorizes the Chief Executive Officer to take such other action as may be necessary to accomplish the intent of this vote.

JUSTIFICATION

A capital improvement plan identifies an organization’s priorities within available resources over a multiple year time period. The related plan document communicates the scope, funding, and timing to customers, coordinating agencies, investors, and the general public. The sewer system capital improvement plan (CIP) is being submitted for approval by the Great Lakes Water Authority Board. The CIP reflects changes based on the current information and the plan’s progress since the approval of the FY 2016 CIP by the Board of Water Commissioners (BOWC) for the Detroit Water and Sewerage Department (DWSD). The FY 2016 CIP reflected a capital program that pre-dates the establishment of the Regional System, Great Lakes Water Authority, and the new locally focused DWSD. The FY 2017 – 2021 CIP is the first year that the Regional System, Great Lakes Water Authority, alone is presented. The CIP is in alignment with the proposed FY 2017 budget, rate, and the overall organization strategy. The CIP is largely focused to ensure short, mid, and long-term compliance with

National Pollutant Discharge Elimination System (NPDES) permit and to achieve sustainable environmental compliance and financial sustainability.

COMMITTEE REVIEW

The FY 2017 CIP for Sewage Disposal System (SDS) was presented to the GLWA’s customers, GLWA Capital Improvement Planning Committee, GLWA Board for review and feedback; their review comments have been incorporated, if applicable, in the final document.

APPROVAL REQUIRED The Articles of Incorporation of the Great Lakes Water Authority requires an affirmative vote of at least five (5) members to approve the 5-year capital improvement program.

Resolution Regarding Approval of FY 2017 Schedule of Water Service Charges Agenda of: May 25, 2016 Item No.: 2016-05-XX Amount: N/A

TO: The Honorable


FROM: Sue McCormick, Chief Executive Officer Great Lakes Water Authority DATE: May 25, 2016

RE: Approval of FY 2017 Schedule of Water Service Charges

MOTION

Upon recommendation of Nicolette Bateson, Treasurer/ Chief Financial Officer (CFO), the Board of Directors (Board) of the Great Lakes Water Authority (GLWA),

a) approves the proposed wholesale Water Service Charges as well as the proposed FY 2017 City of Detroit allocated water revenue requirement of $15,490,300, as proposed by the Chief Executive Officer of the Great Lakes Water Authority, all with an effective date of July 1, 2016; and,

b) authorizes the Chief Executive Officer (CEO) to take such other action as may be necessary to accomplish the intent of this vote.

BACKGROUND

Pursuant to the Effective Date of the Leases signed between the Great Lakes Water Authority (GLWA) and the City of Detroit, the GLWA began operations of the regional water supply and sewage disposal system. During its February 24, 2016 meeting, the Board of Directors (Board) staff presented a proposed FY 2017 and 2018 Biennial Budget Request and a proposed FY 2017 Schedule of Revenues and Charges based upon that Budget Request. This was the first full fiscal year Budget Request and the first Schedule of Charges to be prepared for, and considered by, the GLWA. On March 2, 2016, the Board held a Public Hearing on the Budget and the Schedule of

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JUSTIFICATION

Great Lakes Water Authority (“GLWA”) management and its consultant, The Foster Group, have developed a Schedule of Water Service Charges for FY 2017 in order to support the budgeted FY 2017 water system revenue requirements. The FY 2017 water revenue requirements reflect GLWA’s commitment to work within the four percent limitation outlined in the Memorandum of Understanding.

BUDGET IMPACT

The recommended FY 2017 Schedule of Water Service Charges as presented produces the necessary revenues to fund the FY 2017 Water Budget, based on the projections made in the FY 2017 Water Cost of Service Study prepared by The Foster Group.

COMMITTEE REVIEW

This matter is being presented to the Audit Committee at its meeting on May 20, 2016.

SHARED SERVICES IMPACT

This item does not impact the Shared Services Agreement between the GLWA and the City of Detroit.

Great Lakes Water Authority Resolution 2016 – 5 -XX

RE: Approval of FY 2017 Schedule of Water Service Charges By Board member: ___________________________________________________________: Whereas Great Lakes Water Authority (“GLWA”) management and its consultant, The Foster Group, have developed a Schedule of Water Service Charges for FY 2017 in order to support the budgeted FY 2017 water system revenue requirements; and

Whereas The FY 2017 water revenue requirements reflect GLWA’s commitment to work within the four percent limitation outlined in the Memorandum of Understanding; and

Whereas A Public Hearing was held for the Water Service Charges proposed by the GLWA for FY 2017 on March 2, 2016 at 12:00 p.m.; and

Whereas The GLWA Audit Committee recommended that the Board adopt the FY 2017 Schedule of Charges as presented at its May 20, 2016 meeting. NOW THEREFORE BE IT: RESOLVED The Great Lakes Water Authority Board approves the proposed wholesale Water Service Charges as well as the proposed FY 2017 City of Detroit allocated water revenue requirements of $15,490,300, as proposed by the Chief Executive Officer of the Great Lakes Water Authority, all with an effective date of July 1, 2016; and be it further

RESOLVED That the Chairperson, the Chief Executive Officer, and the Chief Financial Officer/Treasurer are authorized to take such other action as may be necessary to accomplish the intent of this action.

Great Lakes Water Authority

Proposed FY 2017 Water Supply System

Schedule of Wholesale Service Charges and

Total Revenue Requirement for the Detroit Customer Class

Effective July 1, 2016

Proposed Service Charges Proposed Service Charges

Fixed Mo Commodity Fixed Mo Commodity

Community $/mo $/Mcf Community $/mo $/Mcf

Allen Park 113,700 6.59 Mayfield Twp 1,400 23.86

Almont Village 10,700 9.51 Melvindale 32,700 5.57

Ash Township 36,400 7.28 New Haven, Village of 17,100 9.79

Belleville 15,300 8.19 N O C W A 1,137,400 9.78

Berlin Township 35,300 9.74 Northville 36,400 9.11

Brownstown Township 165,800 9.75 Northville Township 321,900 20.12

Bruce Twp 2,400 19.40 Novi 426,900 12.98

Canton Township 638,600 15.77 Oak Park 64,400 5.00

Center Line 23,300 5.49 Oakland Co. Drain Comm. 3,200 2.84

Chesterfield Township 186,000 9.18 Plymouth 50,100 9.54

Clinton Township 377,500 7.59 Plymouth Township 205,200 9.95

Commerce Township 245,600 21.13 Redford Township 166,500 7.70

Dearborn 463,100 5.90 River Rouge 34,400 4.75

Dearborn Heights 186,400 6.84 Riverview 44,800 7.79

Eastpointe 79,400 5.43 Rockwood 14,700 10.66

Ecorse 70,300 3.60 Romeo 12,800 17.05

Farmington 47,500 8.09 Romulus 179,600 7.33

Farmington Hills 430,900 9.50 Roseville 130,500 5.02

Ferndale 47,000 5.70 Royal Oak Township 11,200 7.47

Flat Rock 58,100 7.50 S O C W A 1,099,900 6.84

Fraser 63,600 7.83 Shelby Township 667,900 13.49

Garden City 81,200 7.06 South Rockwood 5,000 8.08

Genesee County DC 964,800 12.71 Southgate 105,900 6.83

Gibraltar 22,900 10.79 St. Clair County‐Burtchville 14,600 12.98

Grosse Ile Township 62,600 11.64 St. Clair County‐Greenwoo 19,000 15.17

Grosse Pt. Park 69,300 9.09 St. Clair Shores 150,400 5.45

Grosse Pt. Shores 30,100 12.68 Sterling Heights 774,900 10.05

Grosse Pt. Woods 69,600 7.42 Sumpter Township 31,800 8.49

Hamtramck 34,300 4.49 Sylvan Lake 11,700 13.37

Harper Woods 42,400 5.84 Taylor 235,800 6.60

Harrison Township 68,800 5.92 Trenton 103,800 9.12

Hazel Park 34,600 5.13 Troy 653,000 12.01

Highland Park 62,600 4.56 Utica 28,900 10.05

Huron Township 68,800 9.18 Van Buren Township 140,900 8.54

Imlay City 56,800 11.22 Walled Lake 45,200 11.66

Inkster 89,800 6.90 Warren 490,200 5.42

Keego Harbor 15,300 11.13 Washington Township 150,800 18.28

Lapeer 69,700 9.36 Wayne 132,500 10.70

Lenox Township 14,800 6.23 West Bloomfield Township 487,000 15.16

Lincoln Park 108,400 5.94 Westland 295,300 7.45

Livonia 663,700 10.88 Wixom 115,900 14.48

Macomb Township 516,000 13.90 Woodhaven 100,100 12.52

Madison Heights 99,700 5.39 Ypsilanti Comm Util Auth 524,500 8.56

Imlay Township 134 10.84

Allocated Detroit Annual Revenue Requirement

Wholesale Revenue Requirements (a) 15,490,300

Indirect Retail Revenue Requirements (b) 40,536,000

Direct Retail Revenue Requirements (c) 36,574,900‐‐‐‐‐‐‐‐‐‐‐‐

Total 92,601,200

(a) Reflects Great Lakes Water Authority (GLWA) wholesale amounts only.

(b) Reflects amounts allocable to the Detroit Local System subject to the GLWA Master Bond Ordinance flow of funds.

(c) Reflects amounts allocable to the Local System, for which GLWA transfers monies to DWSD.

DRAFT 5.20.2016

DISCUSSION DRAFT


FY 2017 and 2018

Biennial Budget

DRAFT 5.20.2016

2

Contents Budget‐at‐a‐Glance ....................................................................................................................................... 1 Notice of Public Hearing ............................................................................................................................... 2 Overview & Commentary ............................................................................................................................. 3 Budget Calendar ............................................................................................................................................ 8 Core Financial Plan Schedules ..................................................................................................................... 11

Schedule 1 – Wholesale Revenue Requirements from Charges ............................................................. 13

Schedule 2 ‐ Sources of Revenues and Use of Revenue Requirements – Flow of Funds Basis per Master

Bond Ordinance ...................................................................................................................................... 14

Schedule 3A – Operations & Maintenance Expense by Budgetary Division .......................................... 15

Schedule 3B – Operations & Maintenance Expense by Expense Category ............................................ 16

Schedule 3C – Personnel Costs ............................................................................................................... 17

Schedule 4 ‐ Debt Service Coverage Calculations per Master Bond Ordinance ..................................... 20

Schedule 5 – Improvement & Extension Fund and Construction Bond Fund ......................................... 21

Operating Area Financial Plan ..................................................................................................................... 23 Water Operating Services ....................................................................................................................... 24

Water Operations ............................................................................................................................... 25

Systems Control .................................................................................................................................. 27

Fleet, Facilities, and Field Services ...................................................................................................... 29

Wastewater Operating Services ............................................................................................................. 31

Planning Services .................................................................................................................................... 33

Chief Executive Officer ............................................................................................................................ 36

Security & Integrity ............................................................................................................................. 38

Administrative & Compliance Services ............................................................................................... 40

Financial Services .................................................................................................................................... 46

Debt Management ...................................................................................................................................... 48 Water System Revenue Charges ................................................................................................................. 52

The Foster Group, LLC Report – Water System ....................................................................................... 52

Water System Schedule of Charges ........................................................................................................ 53

Sewer System Revenue Charges ................................................................................................................. 56 The Foster Group, LLC Report – Sewer System ........................................................................................ 56

Sewer System Schedule of Charges ........................................................................................................ 57

Abbreviations .............................................................................................................................................. 58

DRAFT 5.20.2016

1

Budget‐at‐a‐Glance

DRAFT 5.20.2016

2

Notice of Public Hearing

GREAT LAKES WATER AUTHORITY NOTICE OF PUBLIC HEARING

BIENNIAL BUDGET For the Two Year Period ended June 30, 2018

(FY 2017 and 2018) Notice is hereby given that the Great Lakes Water Authority will hold a Public Hearing on the FY 2017 and 2018 Biennial budget.

DATE: Wednesday, March 2, 2016 TIME: 12:00 p.m. PLACE: 5th Floor Board Room

735 Randolph Detroit, Michigan 48226

The budget is available for public inspection at the office of the Authority, Water Board Building, 735 Randolph, Detroit, Michigan 48226. A copy of the budget may also be found online at http://glwater.org/finance/.

Note: Published in the Detroit Legal News beginning on February 1, 2016.

DRAFT 5.20.2016

3

Overview & Commentary

Creation of the Great Lakes Water Authority

On September 9, 2014, the Mayor of the City of Detroit, the Chief Executives of Wayne,

Oakland and Macomb Counties, and the Governor of the State of Michigan entered into a

Memorandum of Understanding (MOU) to form the regional Great Lakes Water Authority

(GLWA or “regional system”). That action also established the foundation for a restructured

City of Detroit Water & Sewerage Department (DWSD or “local system”) focused on serving the

customers and needs of the local City of Detroit water and sewer system. That terms of that

MOU were the foundation for a lease agreement executed on June 12, 2015 between the City

of Detroit and the GLWA. That lease agreement established an operational effective date of

January 1, 2016 to provide time for drafting and execution of a number of related agreements

and to plan for “Day One”.

Budget Scope

The operational effective date of January 1, 2016 occurred mid‐way through FY 2016 for both

organizations. The essence of the transaction is that the “existing DWSD” was bifurcated into

two new operating entities: the new DWSD local system and the GLWA regional authority

system. For that reason, a “bifurcated budget” beginning January 1, 2016 and ending June 30,

2016 was approved by the GLWA Board on December 9, 2015 for the regional system.1 Given

the short timeline since the operational effective date, and significant back office efforts to

stand up the new entities, it is too early to present meaningful, regional authority actual results

for FY 2016. This document therefore focuses on the plans for FY 2017 and FY 2018.

It should also be noted that the foundational documents for the Authority establish a biennial

budget process, a five year capital plan, and a robust quarterly budget amendment process

document with fiscal notes to ensure the highest level of accountability. This budget presented

is the first biennial budget for the GLWA.

This overview and commentary include a discussion of the following key topics to understand the context of GLWA’s core financial plan. 4% Revenue Requirement Commitment & Revenue Stability Managing Charge Stability for Our Customers Water Residential Assistance Program Closed Loop Lease Payment Closed Legacy Payment Obligations

1 Each “system” encompasses a water system and a sewer system.

DRAFT 5.20.2016

4

The 4% Revenue Requirement Commitment & Revenue Stability The former DWSD began an optimization process in 2012 to reduce expenses. In addition, the

DWSD also began the process to stabilize revenues. The objectives of both efforts was to vastly

improve the long‐term sustainability of the system.

That optimization effort revealed opportunities to significantly control costs. This resulted in a

commitment to preserve the “revenue requirement” to increase, on an annual basis, by no

more than 4%. The revenue requirement reflects those items which can be controlled by board

policy and good management: controlled expenses, managing debt burden, and increasing cash

reserves. This commitment to increase the revenue requirement was memorialized in the

MOU that established the regional authority.

Board policy and management cannot, however, control changing water use demand patterns.

Weather patterns, in particular over the past few years, have been a contributor to decreased

water volume demand. While the “revenue requirement” addresses the cash outflows of the

system, revenues, based on customer volume demands, are not controllable. To stabilize the

revenues, the GLWA carried forward relatively new policies from DWSD. The wholesale

customer charge model is based upon a 60% fixed cost recovery and 40% of volume charges.

To the extent that an individual customer, or the system as a whole, experience declining

volumes, the annual service charges may increase beyond 4%.

The wholesale sewer rate simplification methodology became effective July 1, 2014. Under this

revenue‐setting methodology, costs are allocated based on each customer’s historical use of

the system. Each customer’s share of system costs is set for three years. Billings are based on

one‐twelfth of the annual revenue requirement as shown on the “Sewer System Schedule of

Charges” provided in this document. The sewer system’s wholesale revenue plan has a high

degree of stability.

Managing Charge Stability for Our Customers

Given that the wholesale water system charges are exposed to some level of fluctuation based

on demand volumes, the GLWA has considered methods to smooth out known or material

factors which could cause charges to rise higher than 4%. The need for a smoothing approach

is urgent given that the GLWA will lose Genesee County Drain Commission (GCDC) as a

customer in the next fiscal year. The likely outcome is a water revenue loss of approximately

$18 million dollars, which could drive a double digit charge adjustment for FY 2018.

To offset this revenue risk, it is proposed that realized savings in FY 2018 that result in increased

net revenues be designated in the surplus fund to mitigate future increases in customer

charges. An example is estimated bond refunding savings of $5.5 million in FY 2017. The

vehicle for this revenue charge stability approach is consistent with Section 503 of each of the

master bond ordinances which defines the flow of funds and use of revenues deposited in the

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Receiving Fund with the Trustee. That section provides that “(A)ny amounts remaining in the

Receiving Fund as of the last day of each Fiscal Year shall be applied against future years’

Revenue deposit obligations under Section 503, unless directed by the Authority within thirty

(30) days of completion of the Fiscal Year’s audited financial statements to be deposited in the

Surplus Fund.” Further, Section 510 of each of the master bond ordinances provides that

amounts on deposit from time to time in the Surplus Fund may, at the option of the Authority,

be withdrawn on written request to the Trustee and used for any purpose related to the

System. The approach would then be to utilize surplus funds to either (i) be applied as a credit

against future years’ revenue deposit obligations (and mitigate to the extent of such credit any

need to charge customers for such amounts) or (ii) deposited in the Surplus Fund and used at

the direction of the Authority for the same purpose.

The process by which savings realized would be earmarked to stabilize charges would be

through the quarterly budget amendment process.

Water Residential Assistance Program

The MOU and Water and Sewer Leases included a provision to establish a Water Residential

Assistance Program (“WRAP”). This program is funded at 0.5% of base budgeted operating

revenues of the water and sewer systems to provide assistance to indigent residential

customers throughout the 126 communities served by GLWA. The WRAP was designed to

provide monthly bill assistance, arrearage assistance and minor plumbing repairs to qualified

applicants that have income at or below 150% of the federal poverty threshold. The initial

allocation of funds to the City of Detroit and communities in Wayne, Macomb and Oakland

Counties is in the same proportion of revenue that customers within those geographic

boundaries pay into the program. Based on the FY 2017 Water and Sewer Budgets, the WRAP

funding is estimated to be $4.7 million and at $4.92 million in FY 2018. WRAP is administered by

Wayne Metro and other community action agency alliance partners.

Closed Loop Lease Payment

The Lease agreement between the City of Detroit and the Great Lakes Water Authority,

provides that the Authority shall pay an annual amount of $22.5 million for the regional water

system and $27.5 million for the regional sewer system. The allocation of these amounts,

totaling $50 million, shall be subject to review and adjustment by the Authority every three to

five years consistent with the method of allocation of other common‐to‐all charges between

the regional water system and the regional sewer system.

The lease payment is referred to as a closed loop system because the lease payment by the

Authority stays within the local water and sewer system for the benefit of the water and sewer

system. The City of Detroit can achieve this in one of three ways (or some combination). The

lease payment may be used to:

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1. pay the principal of and interest on bonds issued to finance the cost of water and

sewer system improvements to the Detroit local system; and/or

2. pay the City's share of the principal of and interest on bonds issued to finance the cost

of common‐to‐all improvements to the leased water and sewer facilities; and/or

3. pay the cost of improvements to the Detroit local water and sewer system facilities.

Closed Legacy Benefit Plan Costs

A significant outcome of the City of Detroit’s Chapter 9 bankruptcy plan of adjustment was the

restructuring of its pension and retiree healthcare plan (otherwise referenced as other post‐

employment benefits or OPEB). The plan of adjustment required annual payments by the

DWSD for these closed plans. The first payment was in FY 2015. With the stand‐up of the

Authority on January 1, 2016, this annual commitment is allocated between the local and

regional systems as shown in the table below.

Pension: In accordance with the Plan of Adjustment, the water and sewer systems are required

to annually contribute a total of $42.9 million per year, plus $2.5 million per year in

administrative expenses, for a total of $45,400,000 for the nine Fiscal Years beginning on July 1,

2014 and ending on June 30, 2023 to the City of Detroit General Retirement System (GRS). The

required funding under the Plan of Adjustment represents a substantial reduction in the

Systems’ overall funding obligation from the pre‐bankruptcy liability. After the initial nine‐year

period through June 30, 2023, the Systems’ will remain responsible for any of the remaining

allocable share of the unfunded accrued actuarial liability (UAAL) of GRS. Under the Plan of

Adjustment, an assumed investment rate of 6.75% and then‐available mortality tables were

utilized in calculating the potential size of the Systems’ remaining liability. An updated GRS

actuarial report has been received by the City, calculated as of June 30, 2014, which utilizes an

assumed rate of return of 6.75% and updated mortality tables, and sets forth a UAAL for the

Systems’ of approximately $352.4 million, which is approximately $60 million more than

contemplated in the Plan of Adjustment. The more recent reports indicate a total UAAL for the

Department as of June 30, 2023 of between $100 million to $125 million. For Fiscal Year 2024,

the Systems’ annual contribution is projected to be approximately $12.7 million in that actuarial

report. The Systems will not pay any more than its actual, full, allocable share of the UAAL of

the closed GRS plan or for its fair share of administrative expenses pursuant to a subsequent

agreement between the City of Detroit, General Retirement System, and the Authority. The

remaining allocable share of unfunded pension liability will be monitored on an annual basis to

proactively plan for the increased liability over the remaining period.

OPEB and Pension Obligation Certificates: The Systems are responsible for an allocable share of

the portion of the City of Detroit 30 year B Notes relating to settlement of OPEB claims and 10

year C Notes related to the Systems’ prior allocable share of the City’s pension obligation

certificates. The Systems’ allocable potions of those settlement payments, in the form of New

B/C Notes, is equal to approximately $105 million. Annual debt service for the next two years is

$2,923,000.

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The pension and B/C note payments are allocated between the Operations & Maintenance

Expense (O&M) for an estimated amount of what would have been the normal annual pension

expense. The remainder is considered an advance payment of a liability and therefore, a non‐

O&M expense. (For simplicity on Schedule 2, the amounts are labeled as “GRS Pension”; the

substance includes both the payment to GRS and payment of the allocable share of the B/C

note to the City of Detroit.)

Reviewing this Budget

The Core Financial Plan Schedules address the macro view of the GLWA and unique points of

intersection between the GLWA and DWSD as outlined in the master bond ordinance, lease

agreements, services agreements, pension agreement, shared services agreement. Those

documents may be found online at www.glwater.org .

The Operating Financial Plan Schedules provide a better understanding of GLWA’s operations,

staffing, and departmental budget plans.

The last section of the budget document provides additional information related to Debt

Management and the Schedule of Charges.

Legacy Benefit Payment Allocable to: Water Sewer Total % Water Sewer Total %

Regional System O&M Expense 6,037,100$ 10,838,400$ 16,875,500$ 6,037,100$ 10,838,400$ 16,875,500$

Accelerated Pension from Regional System 6,035,200 11,096,500 17,131,700 6,035,200 11,096,500 17,131,700

Subtotal ‐ Allocable to Regional System 12,072,300 21,934,900 34,007,200 70% 12,072,300 21,934,900 34,007,200 70%

Local System O&M Expense 4,262,900 2,861,600 7,124,500 4,262,900 2,861,600 7,124,500

Accelerated Pension from Local System 4,261,800 2,929,700 7,191,500 4,261,800 2,929,700 7,191,500

Subtotal ‐ Allocable to Local System 8,524,700 5,791,300 14,316,000 30% 8,524,700 5,791,300 14,316,000 30%

Total Annual Legacy Benefit Payment 20,597,000$ 27,726,200$ 48,323,200$ 100% 20,597,000$ 27,726,200$ 48,323,200$ 100%

Water & Sewer System Commitment Per Bankruptcy Plan of Adjustment

Annual Payment for Closed GRS Plan through 2023 45,400,000$ 45,400,000$

Annual Contribution to the B/C Note Obligations Related to OPEB 2,923,200 2,923,200

Total 48,323,200$ 48,323,200$

Closed Legacy Benefit Plan Costs

FY 2017 FY 2018

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Budget Calendar FY 2017/18 Financial Planning Cycle

The Great Lakes Water Authority (GLWA) FY 2017 and 2018 Financial Planning Cycle includes:

1. FY 2017 ‐2018 biennial budget

2. FY 2017 – 2021 Five Year Capital Improvement Plan

3. FY 2017 Schedule of Revenues and Charges

The operational effective date for the regional system assets by GLWA began on January 1,

2016. The schedule below reflects planning for the first full operating fiscal year for the GLWA.

Date Activity

Tuesday, November 17, 2015 Customer Rollout Meeting #1 – Capital Improvement Plan

Tuesday, November 17, 2015 Customer Rollout Meeting #2 – Units of Service

Tuesday, December 1, 2015 GLWA and DWSD (City) exchange shared services to be provided and

costs (Shared Services Agreement 5.4)

Friday, January 1, 2016 DWSD ‐ Preliminary two year budget forecast Including key assumptions

and impact statement due to GLWA (Services Agreement 5.3)

Wednesday, January 13, 2016 GLWA Workshop ‐ Customer Outreach Program and Schedule

Thursday, January 14, 2016 Customer Rollout Meeting #3 ‐ Status Report: FY 2017/18 Biennial

Budget

Friday, January 15, 2016 GLWA Audit Committee Meeting ‐ Status Report re: FY 2017/18 Biennial

Budget Request

Wednesday, January 20, 2016 Internal ‐ Deadline for Budget Request for Cost of Service Analysis

Tuesday, January 26, 2016 GLWA Capital Planning Committee – Present Proposed FY 2017‐21

Capital Improvement Plan for Review

Wednesday, January 27, 2016 GLWA Board Meeting ‐ Present Proposed FY 2017 Schedule of Revenues

and Charges and Request for FY 2017/18 Biennial Budget Public Hearing

Thursday, January 28, 2016 Customer Rollout Meeting #4 ‐ Proposed Service Charges

Monday, February 1, 2016 DWSD – Current capital improvement plant due to GLWA (Services

Agreement 5.3d(i))

Monday, February 1, 2016 Publish notice of the hearing by publication in a newspaper of general

circulation (B)

Friday, January 29, 2016 Mail Notice to Customers of Public Hearing to be held on March 2, 2016

(minimum 30 days prior to Act 279 Public Hearing) (D)

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Date Activity

Friday, February 5, 2016 GLWA Audit Committee Meeting – Review of FY 2017 Proposed

Schedule of Revenues and Charges and FY 2017/18 Biennial Budget

Request

Wednesday, February 17,

2016

DWSD FY 2017 – FY 2021 Capital Improvement Plan approved

Wednesday, February 24,

2016

GLWA Board Workshop – Review of Proposed FY 2017 Schedule of

Revenues and Charges, FY 2017/18 Biennial Budget, and FY 2017‐21

Capital Improvement Plan

Wednesday, March 2, 2016 GLWA Board Meeting – Public Hearing on FY 2017/18 Biennial Budget

(A)

Wednesday, March 2, 2016 GLWA Board Meeting – Public Hearing on FY 2017 Schedule of Revenues

and Charges (Act 279, minimum 120 days before effective date) (C)

Thursday, March 16, 2016 DWSD FY 2017 & 2018 Budget Public Hearing and Approval

Wednesday, March 23, 2016 DWSD adopted biennial budget due to GLWA (Services Agreement 5.3B)

Sunday, May 1, 2016 DWSD provides direction to GLWA on how to apply lease payment

(Services Agreement 4.3)

Wednesday, May 11, 2017 GLWA Board Meeting – FY 2017 Schedule of Sewer System Charges

Wednesday, May 25, 2017 GLWA Board Meeting – Pending ‐ Proposed Approval of FY 2017/18

Biennial Budget, FY 2017 Schedule of Water Charges, and FY 2017‐21

Capital Improvement Plan

(A) thru (D) ‐ The above schedule is designed to meet applicable statutory and contractual

requirements with excerpts shown below.

A. Uniform Budgeting and Accounting Act, Act 2 of 1968, Section 141.434, “Before final

passage of a general appropriations act by the legislative body, a public hearing shall be

held as required by 1963 (2nd Ex Sess) PA 43, MCL 141.411 to 141.415, and the open

meetings act, 1976 PA 267, MCL 15.261 to 15.275.” (For purposes of Public Act 2, the

GLWA Board is the legislative body.)

B. Budget Hearings of Local Governments, Act 43 of 1963 (2nd Ex. Sess.), Section

141.412, “The local unit shall give notice of the hearing by publication in a newspaper of

general circulation within the local unit at least 6 days before the hearing.” (For

purposes of Public Act 2, the GLWA Board is a local unit.)

C. Home Rule City Act, Act 279 of 1909, Section 117.5e, “Municipal water or sewage

system; annual audit; public hearing before proposed rate increase. A municipal water

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or sewage system established by a city incorporated under this act which serves more

than 40% of the population of the state shall: ….(b) Hold at least 1 public hearing at least

120 days before a proposed rate increase is scheduled to take effect. Each hearing shall

be conducted in compliance with Act No. 267 of the Public Acts of 1976, being sections

15.261 to 15.275 of the Michigan Compiled Laws. Notice of the time, date, and place of

each hearing shall be given in the manner required by Act No. 267 of the Public Acts of

1976, shall be prominently printed in a daily newspaper of general circulation within the

area, and shall be mailed to each city, village, or township served by the system not less

than 30 days before each hearing. A final vote by the governing body of the city to

implement a proposed rate increase shall not be taken until the hearings provided for in

this subdivision are concluded and the results of those hearings are considered by the

city's governing body.” (Emphasis added)

It should be noted that the Home Rule City Act does not apply to GLWA. It is relevant to

GLWA’s planning cycle, however, as it is referenced in the Wholesale Customer Model

Water Contract as noted below.

D. GLWA Wholesale Customer Model Water Contract Section 7.02 provides: “Notification

of Rates. As soon as possible in the ratemaking process, the Board shall provide

information on proposed rates and the draft data and information used in the

calculation of proposed rates in a format that will enable Customer to assist in the

ratemaking process. Not less than thirty calendar days prior to the hearing required by

Act 279, the Board shall provide Customer with written notice of a proposed rate and

the underlying data used to calculate the rate. The Board shall meet with Customer to

review the rate and the data.” (Emphasis added; Act 279 is the Home Rule City Act

noted above.)

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Core Financial Plan Schedules

The Great Lakes Water Authority budget is presented on an enterprise level utilizing five key

schedules to depict the Core Financial Plan. Those schedules are listed below

Schedule 1 ‐ Wholesale Revenue Requirements from Charges

This schedule presents the Authority’s direct costs of operations plus its “allocable” share of

debt and other long‐term liabilities. This schedule is helpful when analyzing regional revenue

requirements as a basis for establishing charges to customers, managing cashflow, and as an

internal measure of financial performance.

Schedule 2 ‐Sources of Revenues and Use of Revenue Requirements – Flow of Funds Basis per

Master Bond Ordinance

This schedule is most important for parties that want to understand the Authority’s financial

plan as it relates to payment of outstanding debt. In particular, this schedule demonstrates

alignment of the financial plan with the flow of funds in the Master Bond Ordinance. Of

particular note is that both regional wholesale and local system revenues are deposited into a

trust for the ultimate benefit of the GLWA bondholders that provides for systematic

distribution of funds in a legal, prioritized manner by the trustee (i.e. the flow of funds).

Schedule 3A ‐ Operations & Maintenance Expense by Budgetary Division

Schedule 3B ‐ Operations & Maintenance Expense by Expense Category

Schedule 3C – Personnel Costs

These three schedules provide a snapshot of what operations & maintenance (O&M) expenses

are budgeted and provide a solid plan to measure performance throughout the year.

Additional information may be found in the departmental budgets presented in the Operating

Area Financial Plan section.

Schedule 4 ‐ Debt Service Coverage Calculations Pursuant to Master Bond Ordinance

Debt service coverage is a key measure of financial strength of a system. This schedule

demonstrates the debt service coverage as well as the pledge of revenues from the local and

regional system for payment of outstanding bond obligations.

Schedule 5 – Improvement & Extension Fund and Construction Bond Fund

In addition to an operations and maintenance fund for each system, the GLWA has, for each

system, an Improvement & Extension Fund (I&E) and a Bond Construction Fund.

Inflows to the I&E Fund represent revenues in excess of expenses carried forward on a monthly

and annual basis. Building the I&E Fund over time is a key financial objective of GLWA to strike

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an improved balance between revenue financed capital improvements versus issuing long‐term

debt. Outflows from the I&E Fund presently include non‐construction capital outlay such as

building improvements, machinery, equipment, vehicles, furniture, office equipment,

hardware, and software.

Inflows to the Bond Construction Funds include proceeds from the sale of bonds and

investment income on those funds. Outflows are for the costs of constructing capital assets.

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Great Lakes Water Authority Schedule 1 – Wholesale Revenue Requirements from Charges

FY 2017 and FY 2018

Revenues FY 2017

Water Fund FY 2017

Sewer Fund

FY 17 Combined(Informational

Only) FY 2018

Water Fund FY 2018

Sewer Fund


Only)

1 O&M Expenses Allocable to Regional System $ 111,879,200 $ 175,858,900 $ 287,738,100 $ 116,354,400 $ 182,893,300 $ 299,247,700 2

General Retirement System (GRS) Pension Allocable to Regional System O&M Expense 6,037,100 10,838,400 16,875,500 6,037,100 10,838,400 16,875,500

3 Debt Service Allocable to Regional System 159,277,500 222,418,500 381,696,000 157,909,200 222,372,700 380,281,900

4 GRS Accelerated Pension from Regional System 6,035,200 11,096,500 17,131,700 6,035,200 11,096,500 17,131,700 5

Water Residential Assistance Program (WRAP) Contribution from Regional System 1,645,700 2,299,800 3,945,500 1,711,500 2,391,800 4,103,300

6 Lease Payment to Local System I&E Account 22,500,000 27,500,000 50,000,000 22,500,000 27,500,000 50,000,000

7 Net Revenues Allocable to Regional System Improvement & Extension Account (A) 23,838,500 14,066,400 37,904,900 33,914,300 25,548,900 59,463,200

8 Total Budgeted Revenue Requirements 331,213,200 464,078,500 795,291,700 344,461,700 482,641,600 827,103,300

9 Less: Non‐Operating Revenue (Regional System) (2,077,600) (4,115,800) (6,193,400) (2,316,000) (4,569,100) (6,885,100)

10

Plus: Bad Debt True‐Up Recovery Allocable to Regional System I&E Account ‐ 7,631,700 7,631,700 ‐ 7,631,700 7,631,700

11 Total Revenue Requirements from Charges $ 329,135,600 $ 467,594,400 $ 796,730,000 $ 342,145,700 $ 485,704,200 $ 827,849,900

(A) Reconciliation of Regional System Net Revenues Above with “Schedule 2”

Line 7 plus Line 10 $ 23,838,500 $ 21,698,100 $ 45,536,600 $ 33,914,300 $ 33,180,600 $ 67,094,900

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Great Lakes Water Authority Schedule 2 ‐ Sources of Revenues and Use of Revenue Requirements – Flow of Funds Basis per Master Bond Ordinance

FY 2017 and FY 2018

Revenues FY 2017

Water Fund FY 2017

Sewer Fund

FY 17 Combined (Informational

Only) FY 2018

Water Fund FY 2018

Sewer Fund


Only)

1 Regional System Wholesale Revenues $ 313,645,300 $ 280,290,300 $ 593,935,600 $ 326,035,700 $ 291,074,600 $ 617,110,300

2 DWSD Local System Revenues 87,851,200 255,207,300 343,058,500 89,935,000 263,866,000 353,801,000

3 Miscellaneous Revenue (Local System) 4,750,000 5,000,000 9,750,000 4,750,000 5,000,000 9,750,000

4 Non‐Operating Revenue (Regional System) 2,077,600 4,115,800 6,193,400 2,316,000 4,569,100 6,885,100

5 Total Revenues $ 408,324,100 $ 544,613,400 $ 952,937,500 $ 423,036,700 $ 564,509,700 $ 987,546,400

Revenue Requirements

Operations & Maintenance Expense

6 Regional System Wholesale Expenses $ 111,879,200 $ 175,858,900 $ 287,738,100 $ 116,354,400 $ 182,893,300 $ 299,247,700 7 Local System Expenses 33,596,300 41,535,500 75,131,800 34,013,600 42,854,500 76,868,100

8 GRS Pension allocable to Regional System 6,037,100 10,838,400 16,875,500 6,037,100 10,838,400 16,875,500

9 GRS Pension allocable to Local System 4,262,900 2,861,600 7,124,500 4,262,900 2,861,600 7,124,500

10 Total Operations & Maintenance Expense 155,775,500 231,094,400 386,869,900 160,668,000 239,447,800 400,115,800

11 Net Revenues after Operations & Maintenance Expense 252,548,600 313,519,000 566,067,600 262,368,700 325,061,900 587,430,600

Non‐operating Activities

12 Debt Service Allocable to Regional System 159,277,500 222,418,500 381,696,000 157,909,200 222,372,700 380,281,900

13 Debt Service Allocable to Local System 31,219,800 22,567,400 53,787,200 31,219,800 22,567,400 53,787,200

14 GRS Accelerated Pension from Regional System 6,035,200 11,096,500 17,131,700 6,035,200 11,096,500 17,131,700

15 GRS Accelerated Pension from Local System 4,261,800 2,929,700 7,191,500 4,261,800 2,929,700 7,191,500

16 WRAP Contribution from Regional System 1,645,700 2,299,800 3,945,500 1,711,500 2,391,800 4,103,300

17 WRAP Contribution from Local System 431,100 354,800 785,900 448,000 369,000 817,000

18 DWSD Budget Stabilization Fund Contribution 360,400 2,654,200 3,014,600 360,400 2,654,200 3,014,600

19 Total Non‐operating Activities 203,231,500 264,320,900 467,552,400 201,945,900 264,381,300 466,327,200

20 Net Revenues Available for Revenue Financed Capital 49,317,100 49,198,100 98,515,200 60,422,800 60,680,600 121,103,400

Reserve for Revenue Financed Capital from Net Revenues 21 Lease Payment to Local System I&E Account 22,500,000 27,500,000 50,000,000 22,500,000 27,500,000 50,000,000 22 Net Revenues Allocable to Local System 2,978,600 ‐ 2,978,600 4,008,500 ‐ 4,008,500 23 Net Revenues Allocable to Regional System 23,838,500 21,698,100 45,536,600 33,914,300 33,180,600 67,094,900

24 Reserve for Revenue Financed Capital Both Systems 49,317,100 49,198,100 98,515,200 60,422,800 60,680,600 121,103,400

25 Total Revenue Requirements $ 408,324,100 $ 544,613,400 $ 952,937,500 $ 423,036,700 $ 564,509,700 $ 987,546,400

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Great Lakes Water Authority Schedule 3A – Operations & Maintenance Expense by Budgetary Division

FY 2017 and FY 2018

Budgetary Divisions FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

A Water System Operations $ 64,904,252 23% $ 66,062,055 22%

B Wastewater System Operations 121,912,047 42% 121,349,057 41%

C Centralized Services 62,989,396 22% 71,113,432 24%

D Administrative & Other Services 37,932,405 13% 40,723,156 14%

Total Operations & Maintenance $ 287,738,100 100% $ 299,247,700 100%

A) Water System Operations include water quality services, operation of five water treatment plants, 20 pumping stations, engineering, laboratory services, and management of those activities.

B) Wastewater System Operations include wastewater operations (process control, primary, secondary, dewatering, and incineration), biosolids dryer facility and hauling, combined sewer overflow management, nine combined sewer overflow facilities, six pumping stations, engineering, industrial waste control, laboratory services, and management of those facilities. C) Centralized Services include operational functions that serve both water and wastewater

operations. This includes the chief planning office (system planning, system analytics, asset

management and capital planning, and energy management), field services (operations,

engineering, and fleet), and systems control.

D) Administrative & Other Services include the Board of Directors, Chief Executive Officer, Chief

Administrative Officer, General Counsel, public affairs, organizational development, risk

management & safety, financial services group (Chief Financial Officer, finance, treasury, public

finance, procurement, internal audit & lease administration, and transformation), information

technology (Chief Information Officer, business applications, enterprise applications,

infrastructure, service desk), Security & Integrity, and transition services.

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Great Lakes Water Authority Schedule 3B – Operations & Maintenance Expense by Expense Category

FY 2017 and FY 2018

Operations & Maintenance Expense Category FY 2017

FY 2017 % of Total FY 2018

FY 2018 % of Total

1.1 Salaries & Wages $ 54,575,824 19% $ 55,981,614 19%

1.2 Overtime 8,532,400 3% 8,658,400 3%

1.3 Employee Benefits 20,494,988 7% 20,938,897 7%

1.4 Personnel Transition Adjustment (6,202,000) ‐2% (6,102,000) ‐2%

2 Transition Services 14,772,140 5% 15,518,053 5%

Total Personnel Services 92,173,352 32% 94,994,964 32%

3.1 Electric 51,164,929 18% 50,233,441 17%

3.2 Gas 9,314,882 3% 9,316,322 3%

3.3 Other Utilities 6,084,398 2% 6,084,398 2%

Total Utilities 66,564,209 23% 65,634,161 22%

4 Chemicals 20,538,121 7% 20,576,957 7%

5 Supplies & Other 27,045,695 9% 25,233,993 8%

6 Contractual Services 107,534,211 37% 108,659,944 36%

7 Capital Program Allocation (26,376,921) ‐9% (25,233,021) ‐8%

8 Shared Services (10,306,908) ‐4% (10,721,248) ‐4%

9 Unallocated Reserve 10,566,341 4% 20,101,950 7%

Total Operations & Maintenance Expense $ 287,738,100 100% $ 299,247,700 100%

Personnel Services Costs include traditional categories (salaries & wages, overtime, benefits) in

addition to two categories that reflect the transitional nature of the Great Lakes Water Authority

(GLWA) as a new entity. Transition services represent the use of contractual and/or temp to hire

personnel that are placed in positions that would otherwise be filled by employees. The

personnel transition adjustment reflects savings that will be realized as the reliance on

contractual services declines in addition to serving as an efficiency target for budgetary control.

Capital Program Allocation denotes a portion of operations and maintenance expenses that are

properly allocable to capital program management overhead.

Shared Services accounts for recoverable operations and maintenance costs pursuant to a

shared services agreement executed in December 2015 with the City of Detroit. Shared services

largely fall in the information technology and security budgets.

Unallocated Reserve & Repair Contingency is a new budget cataegory that reflects a reserve for

unforeseen operational needs. In particular, the FY 2017 and 2018 budget placed downward

pressure on individual budgetary lines to remove contingencies which were previously within

individual departments. Use of the unallocated reserve & repair contingency will be aligned with

a new fiscal note process to increase accountability.

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Great Lakes Water Authority Schedule 3C – Personnel Costs

FY 2017 and FY 2018 As a new entity, GLWA is in a transitional phase – especially in skilled trades and professional positions. The latter is largely due to back office functions, such as finance and procurement, that were most impacted by the bifurcation effort. At the time of preparing this budget, there is a 25% positive variance between filled positions and the staffing plan. The result is a reliance on contractual arrangements to backfill vacancies and to bridge the timeline while recruitments efforts are in progress. The overall strategy is careful management of evaluating short‐term and long‐term operational needs. Overall Personnel Budget The overall personnell budget includes salaries, wages, overtime, employee benefits, trasition

services, as well as a “personnel transition adjustment”. As noted on the preveious page,

“transition services” represent the use of contractual and/or temp to hire personnel that are

placed in positions that would otherwise be filled by employees. The “personnel transition

adjustment” reflects savings that will be realized as the reliance on contractual services declines

in addition to serving as an efficiency target for budgetary control.

Budget with Staffing Plan at 100% with "Transition Adjustment"

Personnel Expense Categories FY 2017 FY 2018

1.1 Salaries & Wages $ 54,575,824 $ 55,981,614

1.2 Overtime 8,532,400 8,658,400

1.3 Employee Benefits 20,494,988 20,938,897

1.4 Personnel Transition Adjustment (6,202,000) (6,102,000)

2 Transition Services 14,772,140 15,518,053

Total Personnel Expenses $ 92,173,352 $ 94,994,964

As it relates to wastewater treatment plant staffing, the proposed level of staffing plan is consistent with ongoing compliance and regulatory evaluation (FTE = full‐time equivalent employee).

Staffing Plan at 100%

Group FY 2017 FTE

Count FY 2018 FTE

Count

A Water System Operations 187 187

B Wastewater System Operations 461 442

C Centralized Services 184 197

D Administrative & Other Services 273 275

Grand Total 1,105 1,101

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The table below quantifies the “transition contracts” at 110 FTE (i.e. where staff vacancies are

backfilled with contractual services) as well as the level of effort currently underway to advertise

and evaluate potential employee candidates. These amounts are measures of the level of

significant organizational change being managed to achieve an optimized and refocused regional

authority.

Measures of Organizational Change

Group Transition Contracts

Vacant at 1.31.2016

A Water System Operations 9 39

B Wastewater System Operations 22 139

C Centralized Services 38 71

D Administrative & Other Services 41 64

Total FTE Positions 110 313

Given that a number of the staff vacancies are at the skilled trade and professional level, the

average budget per transition services FTE is higher than the personnel services overall. As these

positions become filled or re‐evaluated, the average budget per FTE will decrease. The personnel

transition adjustment accounts for a portion of this budget variance that will be realized as

positions are filled.

Average Budget per FTE

Personnel Categories FY 2017 FY 2018

Employee Services Average Budget per FTE $ 77,825 $ 79,912

Transition Services Average Budget per FTE 134,292 141,073

Total Personnel Average Budget per FTE 83,449 86,316

Modernized Employee Benefit Design It should be noted that, as a new employer, GLWA implement a modern employee benefit design. The employee benefits program is competitive to attract and retain employees balanced with no risk of unfunded long‐term liabilities. The pension and retiree healthcare benefit utilize a defined contribution formula. Each budgeted position is assigned a fixed and variable cost element. Fixed costs include medical and dental insurance based on per employee per month fee. Variable costs include federal taxes, Medicare, and pension. The medical plan is partially self‐funded. Since GLWA is a new employer, it does not have extensive claims history for its employee population. This means that the GLWA will need to carefully monitor its claims experience in its first year. As a hedge against this claims experience risk, an attachment point of $300,000 has been established for the medical plan. This is the dollar threshold at which a stop‐loss insurance contract will pay for an individual or claim.

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The table below is a summary of the employee benefits in all departments and the fixed and variable portion of the benefits costs.

FY 2017 FY 2018

Employee Benefits Budget ‐ All Departments $ 20,684,488 $ 21,134,097

Employee Benefits ‐ Fixed & Variable Elements FY 2017 % FY 2018 %

Fixed Cost (1,105 FTE less 110 TSC)* $ 10,415,873 50% $ 10,415,873 49%

Variable (Salaries/Wages @ 19%) 10,369,407 50% 10,636,507 50%

Variable (Overtime @ 19%) 1,621,156 8% 1,645,096 8%

Reserve for Claims and Market Adjustments 628,639 3% 777,992 4%

Personnel Transition Budget ‐ Benefit Portion (2,350,586) ‐11% (2,341,370) ‐11%

Total Employee Benefits $ 20,684,488 100% $ 21,134,097 100%

*FTE = Full‐time Equivalent; TSC = Transition Services Contracts

The reserve for claims and adjustments is set at a modest amount to address mid‐year benefit

plan cost adjustments (the medical, dental, and vision plan are based on a calendar year – rate

adjustments would be effective January 1st). The personnel transition budget adjust represents

the employee benefit portion of that contra‐expense across all budgets.

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Great Lakes Water Authority Schedule 4 ‐ Debt Service Coverage Calculations per Master Bond Ordinance

FY 2017 and FY 2018

Revenues FY 2017

Water Fund FY 2017

Sewer Fund


Only) (a) FY 2018

Water Fund FY 2018

Sewer Fund


Only) (a)

1 Regional System Wholesale Revenues $ 313,645,300 $ 280,290,300 $ 593,935,600 $ 326,035,700 $ 291,074,600 $ 617,110,300

2 Local System Revenues 87,851,200 255,207,300 343,058,500 89,935,000 263,866,000 353,801,000

3 Miscellaneous Revenue (Local System) 4,750,000 5,000,000 9,750,000 4,750,000 5,000,000 9,750,000

4 Non‐Operating Revenue (Regional System) 2,077,600 4,115,800 6,193,400 2,316,000 4,569,100 6,885,100

5 Total Revenues $ 408,324,100 $ 544,613,400 $ 952,937,500 $ 423,036,700 $ 564,509,700 $ 987,546,400

Revenue Requirements

Operations & Maintenance Expense

6 Regional System Wholesale Expenses $ 111,879,200 $ 175,858,900 $ 287,738,100 $ 116,354,400 $ 182,893,300 $ 299,247,700 7 Local System Expenses 33,596,300 41,535,500 75,131,800 34,013,600 42,854,500 76,868,100

8 GRS Pension allocable to Regional System 6,037,100 10,838,400 16,875,500 6,037,100 10,838,400 16,875,500

9 GRS Pension allocable to Local System 4,262,900 2,861,600 7,124,500 4,262,900 2,861,600 7,124,500

Total Operations & Maintenance Expense 155,775,500 231,094,400 386,869,900 160,668,000 239,447,800 400,115,800

10 Net Revenues after Operations & Maintenance Expense $ 252,548,600 $ 313,519,000 $ 566,067,600 $ 262,368,700 $ 325,061,900 $ 587,430,600

Debt Service by Lien

11 Senior Lien Bonds $ 145,902,300 $ 147,918,800 $ 293,821,100 $ 143,983,100 $ 147,878,600 $ 291,861,700

12 Second Lien Bonds 42,042,100 49,117,000 91,159,100 42,596,100 49,083,000 91,679,100

13 SRF Junior Lien Bonds 2,552,900 47,950,100 50,503,000 2,549,800 47,978,500 50,528,300

14 Total Debt Service $ 190,497,300 $ 244,985,900 $ 435,483,200 $ 189,129,000 $ 244,940,100 $ 434,069,100

Debt Service Coverage (a) and [GLWA policy (b) for minimum ratio in brackets]

15 Senior Lien Bonds Line (10) / (11) [1.20] 1.73 2.12 1.93 1.82 2.20 2.01 16

Senior and Second Lien Bonds Line (10) / [(11) + (12)] [1.10] 1.34 1.59 1.47 1.41 1.65 1.53

17

All Bonds, including SRF Junior Lien Bonds Line (10) / (14) [1.00] 1.33 1.28 1.30 1.39 1.33 1.35

(a) Debt Service Coverage is not applicable to the "Combined" GLWA Water and Sewer presentation. (b) GLWA Debt Management Policy online at

http://www.glwater.org/wp‐content/uploads/2016/01/012716‐FINAL_Debt_Management_Policy_GLWA_December‐4pw.pdf

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Great Lakes Water Authority Schedule 5 – Improvement & Extension Fund and Construction Bond Fund

FY 2017 and FY 2018

Improvement & Extension Fund

Construction Bond Fund (a)

Activity Water Fund

Sewer Fund

Combined (Informational

Only) Water Fund

Sewer Fund

Combined (Informational

Only)

Beginning Balance, July 1, 2016 (b) $ 60,000,000 $ 100,000,000 $ 160,000,000 $ 40,000,000 $ 100,000,000 $ 140,000,000

Uses of Funds FY 2017 Capital Improvement Plan (f) 34,432,000 28,289,000 62,721,000 95,150,000 100,684,000 195,834,000

Increases in Funds FY 2017 Forecasted Net Revenues Allocable to Regional System I&E Account (c)

23,838,500

21,698,100

45,536,600

n/a

n/a

n/a

Investment Earnings (d) (d) (d) 300,000 750,000 1,050,000

Bond Proceeds (e) n/a n/a n/a 203,587,500 41,148,000 244,735,500

Ending Balance, June 30, 2017 49,406,500 93,409,100 142,815,600 148,737,500 41,214,000 189,951,500

Uses of Funds FY 2018 Capital Improvement Plan (f) 34,963,000 75,701,000 110,664,000 133,267,000 72,193,000 205,460,000

Increases in Funds FY 2018 Forecasted Net Revenues Allocable to Regional System I&E Account (a)

33,914,300

33,485,900

67,400,200

n/a

n/a

n/a

Investment Earnings (d) (d) (d) 1,115,500 309,100 1,424,600

Bond Proceeds n/a n/a n/a 60,965,000 43,300,000 104,265,000

Ending Balance, June 30, 2018 $ 48,357,800 $ 51,194,000 $ 99,551,800 $ 77,551,000 $ 12,630,100 $ 90,181,100

(a) Includes State Revolving Fund (SRF) amounts (b Estimated based on FY 2016 activity (c) Source: "Schedule 1" (d) Investment earnings on the Improvement and Extension Funds are transferred to the Receiving Fund and treated as non‐operating revenue. (e) Bond proceeds reflect net proceeds after financing issuance expenses. Also ‐ SRF figures in this table reflect the reimbursement based on the estimated expenditure schedule of SRF financed projects in the GLWA CIP. (f) See recap of CIP expenditures on next page.

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Recap of Capital Improvement Program (CIP) Expenditures The budgeted expenditure amounts for the Improvement & Extension Fund and the Construction Fund agree with the capital improvement program for FY 2017 and FY 2018 as demonstrated below. As shown in the table below, I&E Funds (an accumulation of revenues collected in excess of expenses) in a combined total of $69,395,000 will be used for water capital improvements over the next two years and $103,990,000 for sewer system capital improvements during that same time period. Similarly, net proceeds from bonds will be used to fund a combined total of $228,417,000 of water capital improvements over the next two years and $171,877,000 of sewer system capital improvements during that same time period. Water CIP Summary* FY 2017 FY 2018 Total Funded from I&E Fund $ 34,432,000 $ 34,963,000 $ 69,395,000 Funded from Construction Bond Fund 95,150,000 133,267,000 228,417,000 Total (Page 4 of FY 2017‐21 CIP) $ 129,582,000 $ 168,230,000 $ 297,812,000 Sewer CIP Summary* Funded from I&E Fund $ 28,289,000 $ 75,701,000 $ 103,990,000 Funded from Construction Bond Fund 100,684,000 72,193,000 172,877,000 Total (Page 4 of FY 2017‐21 CIP) $ 128,973,000 $ 147,894,000 $ 276,867,000

* Detailed project expenditures for these totals shown in the respective GLWA Water or Sewer CIP document available online at http://www.glwater.org/about‐us/capital‐improvement‐planning‐committee/

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Operating Area Financial Plan

How We Work: The GLWA is organized into six distinct operating

areas as identified in the bubble chart to the right. Within each area,

there are functional groups. Together, these groups work in a cross‐

functional manner to achieve the organization’s mission.

Our Promise: Through regional collaboration, GLWA strives to be a

provider of choice dedicated to efficiently delivering the nation’s

best water and sewer services in partnership with our customers.

How we deliver on that Promise:

Demonstrating a commitment to:

‐ Regional collaboration,

‐ High quality through innovation, and

‐ Trustworthiness & Integrity.

In the following pages, each operating area sets forth their initiatives

and the operating and financial plan that supports those goals.

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Water Operating Services

The Water Operating Services Area includes the following three groups.

Water Operations – the direct cost of water treatment and distribution

Systems Control – a centralized services that supports both water and wastewater operations

Fleet, Facilities, and Field Services – a centralized service that supports both water and wastewater operations

The Water Operations Group produces and delivers water of unquestionable quality to nearly 40% of the State of Michigan’s

population while meeting or exceeding all state, federal, local, and department standards for quality and safety.

This is accomplished by employing qualified staff certified by the Michigan Department of Environmental Quality (MDEQ), maintaining

the Safe Drinking Water Act (PA399) mandated requirements and ensuring that all contractual obligations are maintained for pressure

and flow requirements for all communities served.

The contractual requirements (pressure and flow) for the communities served is accomplished by having a robust system of five (5)

water treatment facilities, nineteen (19) water booster and sewer lift stations, and thirty‐one (31) reservoirs.

Our treatment and distribution system is controlled by an award winning state of the arts Supervisory Control and Data Acquisition (SCADA)

system. The Water Operations Group is further supported by its' Engineering and Water Quality Team.

FY 2017 & 2018 Initiatives

Through the leadership of the Chief Executive Officer, the GLWA has identified four entity‐wide initiatives.

1. Maintain 100% water quality compliance (Trustworthiness & Integrity)

2. Complete the design for water production metering for the Northeast, Southwest and Springwells plants (High Quality through Innovation)

3. Automation of High‐lift controls at the southwest plant for control by System Control (High Quality through Innovation)

4. Complete the design of the new Springwells Reservoir fill line (High Quality through Innovation)

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Water Operations

FY 2017 & 2018 Budget Summary

The largest category of expense in water operations budget is utilities at 50% for FY 2017 and 48% for FY 2018. The second largest

category of expense is personnel services at 22% for FY 2017 and 23% for FY 2018. Chemicals for water treatment and contractual

services for repairs and maintenance are the third and fourth largest categories of expense, respectively.

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Water System Operations $ 64,904,252 100% $ 66,062,055 100%

1.1 Salaries & Wages 9,896,790 15% 10,243,175 16%

1.2 Overtime 1,620,000 2% 1,620,000 2%




Subtotal Personnel Services 14,428,074 22% 14,960,423 23%

3.1 Electric 30,732,836 47% 29,815,651 45%

3.2 Gas 1,122,660 2% 1,122,660 2%

3.3 Other Utilities 777,796 1% 777,796 1%

Subtotal Utilities 32,633,292 50% 31,716,107 48%

4 Chemicals 6,192,455 10% 6,192,455 9%

5 Supplies & Other 4,937,806 8% 5,033,989 8%



8 Shared Services (332,200) ‐1% (342,000) ‐1%


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Water system operations personnel is largely comprised of water treatment plant staffing at 144 FTE or 77%. Water engineering is

the second largest category at 23 FTE or 12% and water quality of 15 FTE or 8%.

FY 2017 FTE Staffing Plan

2018 FTE Staffing Plan

Water System Operations 187 187

Chief Operating Officer Water Operations 2 2

Water Director 3 3

Water Quality 15 15

Water Engineering 23 23

Water Treatment Plants

Lake Huron 29 29

Northeast 26 26

Southwest 27 27

Springwells 32 32

Water Works Park 30 30

Subtotal Water Treatment Plant Staffing 144 144

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Systems Control


The systems control budget is primarily contractual services (74% for FY 2017 and 75% for FY 2018) which support the high level of

technology and complex nature of the water and wastewater operations. Contracted services include the following.

Support and maintenance of the Supervisory Control and Data Acquisition (SCADA) System to effectively manage water

treatment, water distribution, wastewater collection and wastewater treatment ($3,500,000 for FY 2017 and $4,000,000 for

FY 2018).

Specialized process and facilities equipment, installation and maintenance services to ensure effective operation of pumps,

motors, valves and associated systems ($3,200,000 for FY 2017 and $4,800,000 for FY 2018).

Repair and maintenance of high voltage electrical transformers, switch gears and breakers at various facilities to verify the

functionality and extend the useful life of the equipment ($2,080,000 for FY 2017 and $2,080,000 for FY 2018).

Periodic inspection of the water station reservoirs to assess structural integrity and to ensure compliance with water quality

standards including those mandated by the Department of Environmental Quality ($1,158,000 for FY 2017 and $44,000 for FY

2018).

Seasonal support of skilled operators at the Imlay Pumping Station and Systems Control Center ($1,281,000 for FY 2017 and

$1,281,000 for FY 2018).

The second largest category is personnel costs (44% for FY 2017 and 43% for FY 2018).

The data tables are shown on the next page.

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FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Systems Control $ 19,243,777 100% $ 20,257,152 100%

1.1 Salaries & Wages 2,744,398 14% 2,840,452 14%

1.2 Overtime 700,000 4% 700,000 3%




3.1 Electric 11,574 0% 11,227 0%

3.2 Gas 71,500 0% 71,500 0%

3.3 Other Utilities 7,947 0% 7,947 0%

5 Supplies & Other 751,774 4% 751,774 4%



8 Shared Services (1,339,100) ‐7% (1,481,400) ‐7%

The staffing plan is comprised of technicians that operate and maintain electrical and instrumentation equipment in the water and

wastewater treatment plants, field services, pumping stations, electrical systems, computerized process controls, and equipment.

FY 2017 FTEStaffing Plan


Systems Control

79

79

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Fleet, Facilities, and Field Services


The fleet, facilities, and field services budget is primarily contractual services (64% for FY 2017 and 65% for FY 2018). The level of

contractual services reflects the decision to contract for certain non‐core services as well as the efficient management of peak

workload activities.

Fleet includes the shared service agreement with DWSD to manage and maintain all fleet vehicles ($2,151,000).

Facilities contracts include elevator maintenance ($1,200,000), janitorial services ($1,082,000), landscaping and exterior

maintenance ($2,640,000), and shared services with the DWSD for tenancy in the Water Board Building and Central Services

Facility ($1,106,000).

Field services includes sewer cleaning and investigation to assess the condition and reduce the risk for sewer failures

($2,000,000), gate valve inspection and exercising to ensure readiness for emergency use and extend the useful life of the valve

($1,800,000), pavement repairs ($2,200,000), water main leak and repair contract ($1,920,000), and sewer main repair

($1,450,000).

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Fleet, Facilities, & Field Services $ 34,694,148 100% $ 36,211,836 100%

1.1 Salaries & Wages 3,218,544 9% 3,331,192 9%

1.2 Overtime 1,650,000 5% 1,650,000 5%



3.1 Electric 1,225,219 4% 1,188,463 3%

3.2 Gas 465,722 1% 465,722 1%

3.3 Other Utilities 293,855 1% 293,855 1%

5 Supplies & Other 6,105,004 18% 5,902,720 16%



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Personnel costs account for 18% for FY 2017 and 17% for FY 2018 of the total budget for this group. The staffing level is in the table

below.



Fleet, Facilities, & Field Services 60 60

Facility Operations 22 22

Field Engineering 13 13

Field Service Operations 25 25

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Wastewater Operating Services

The Wastewater Operating Services Area includes the direct cost of wastewater treatment.

Wastewater treatment collects and treats regional sanitary and combined sewage to protect receiving waters and public health.

Discharges are treated to comply with National Pollutant Discharge Elimination System (NPDES) Permit limits established by federal,

state laws and regulations. The department reclaims a portion of its Biosolids for beneficial reuse.


Through the leadership of the Chief Executive Officer, the GLWA has identified six entity‐wide initiatives.

1. Maintain compliance with the National Pollutant Discharge Elimination System Permit (and other regulatory requirements)

2. Complete NPDES Permit Renewal Strategy (High Quality through Innovation)

3. Complete application and submit not later than April 1, 2017 (Trustworthiness & Integrity)

4. Develop GLWA industrial pretreatment program (High Quality through Innovation)

5. Negotiate NPDES Permit Renewal (High Quality through Innovation)

6. Submit industrial pretreatment program to MDEQ for approval not later than October 1, 2017 (Trustworthiness & Integrity)


The largest category of expense in the wastewater operations budget is personnel services at 28% for both FY 2017 and FY 2018. The

second largest category of expense is utilities at 26% for both years. The third largest category is contractual services at 24%. Over

half of that budget line includes $16,500,000 for contract # PC‐792 with New England Fertilizer Company (NEFCO) for operating and

maintaining the Biosolids Dryer Facility which came online in March 2016. The proposed first, full year budget is based on a minimum

charge of $13 million for the first 73,000 tons plus an estimate of additional tons to be processed. The fourth largest category is

chemicals at 12% for wastewater treatment operations.

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FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Wastewater System Operations $ 121,912,047 100% $ 121,349,057 100%

1.1 Salaries & Wages 21,056,112 17% 20,898,222 17%

1.2 Overtime 4,200,000 3% 4,326,000 4%





3.1 Electric 19,000,300 16% 19,015,300 16%

3.2 Gas 7,655,000 6% 7,656,440 6%

3.3 Other Utilities 5,004,800 4% 5,004,800 4%

Subtotal Utilities 31,660,100 26% 31,676,540 26%

4 Chemicals 14,345,666 12% 14,384,502 12%

5 Supplies & Other 9,694,791 8% 8,760,953 7%




Wastewater system operations personnel expense is largely comprised of wastewater treatment plant staffing at 333 FTE or 72%.

Industrial waste control is second at 67 FTE or 15% for FY 2017 with a similar percentage for FY 2018. The decrease in staffing plan

levels from FY 2017 to 2018 is attributable to ongoing optimization efforts partially due to the new biosolids dryer facility.



Wastewater System Operations 461 442

Wastewater Director 4 4

Wastewater Engineering 34 34

Wastewater Operations 333 315

Industrial Waste Control 67 66

Combined Sewer Overflow Facilities 23 23

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Planning Services

The Planning Services Area includes centralized services that encompasses the following groups.

Asset Management & Capital Improvement Planning

System Planning

System Analytics


Through the leadership of the Chief Executive Officer, the GLWA has identified seven entity‐wide initiatives.

1. Water Units of Service, Metering Plan and Water Audits (Regional Collaboration)

2. Update to the Wastewater Shares (Regional Collaboration)Complete application and submit not later than April 1, 2017 (Trustworthiness & Integrity)

3. Regional Wastewater Master Plan (Regional Collaboration)

4. New Asset Management and Capital Improvement Plan (CIP) Work Group (Regional Collaboration)

5. Advance the Energy Management Program (Innovation)

6. Advance the Asset Management Program (Innovation)

7. Improve CIP Program Process and Project Delivery (Trustworthiness & Integrity)


The scope of the planning services group budget aligns with the strategic decision by GLWA to create and staff a Panning Services

group. The first Chief Planning Officer was hired during the stand‐up of the regional authority in 2015. The mission in the first years

of this new operating area is to assess current procedures, staffing, and systems to advance a robust planning function for the new,

DRAFT 5.20.2016

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regional authority. This will be achieved with a series of projects. For this reason, contractual services is the largest category of

expenses at $15,310,000 for FY 2017 and $13,950,000 for FY 2018 which includes the following.

System Asset Management & Capital Improvement Program Group Projects

Water system CIP: A three to four year project currently under procurement to study the current operations and implement

new software, processes & procedures based on findings ($4,000,000 for FY 2017 and $3,200,000 for FY 2018).

Sewer system CIP: A three to four year project currently under procurement to study the current operations and implement

new software, processes & procedures based on findings ($3,400,000 for FY 2017 and $2,700,000 for FY 2018).

Wastewater Master Plan (WWMP): A three year project to update the WWMP which is a projection of the sewer system’s

needs and long term CSO Control Program for the next 40‐50 years ($2,500,000 for FY 2017 and $2,500,000 for FY 2018).

Systems Analytics Group Projects

Sewage flow analysis and quality control to support sewer meter flow trend analysis and customer outreach support for the

Wastewater Analytical Task Force ($1,300,000 for FY 2017 and $1,300,000 for FY 2018).

Given that the nature of these expenses supports the capital program, a significant portion of theses expense are allocable to capital

program management allocation overhead as shown below.

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Planning Services $ 8,376,750 100% $ 9,905,369 100%

1.1 Salaries & Wages 2,886,220 34% 3,738,124 38%

1.2 Overtime 80,000 1% 80,000 1%

1.3 Employee Benefits 952,130 11% 1,231,988 12%

1.4 Personnel Transition Adjustment (587,000) ‐7% (587,000) ‐6%


2 Transition Services 384,050 5% 643,200 6%

3.1 Electric 195,000 2% 202,800 2%

5 Supplies & Other 415,050 5% 470,657 5%



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The staffing plan provides for expansion of the system analytics, asset management, and capital planning group capacity over the

course of the next two years.



Planning Services 45 58

Chief Planning Officer 2 2

System Analytics 29 33

Energy Management 2 2

System Planning 2 4

Asset Management and Capital Planning 10 18

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Chief Executive Officer

The Chief Executive Officer Area includes encompasses the following areas.

Board of Directors

Legislative and Regulatory Compliance

Community and Customer Relations

Security and Integrity

The Chief Executive Officer Area ensures that the GLWA's Service Areas function in a communicative and collaborative fashion to

implement the Board's policies, GLWA facilities and personnel are protected to the maximum extent possible, organizational

efficiencies are pursued and optimized, customer needs are met in an open and transparent manner, that the integrity of the utility is

maintained, that the organization maintains the highest standards of integrity and compliance, and that the customers of the GLWA

receive efficiently delivered, quality compliant water services.

The Customer and Community Relations Group provides information, communication, education and outreach services within and

between the GLWA and its customer communities so that they may experience organizational transparency and collaborate to

optimize the delivery of quality compliant water services to the residents of southeastern Michigan.


Through the leadership of the Chief Executive Officer, the GLWA has identified seven entity‐wide initiatives.

1. Maintain 100% Compliance (Trustworthiness & Integrity)

2. Become a Utility of Choice for Southeastern Michigan (Trustworthiness & Integrity)

3. Further Development of the Asset Management Program (High Quality through Innovation)

4. Expand Community Outreach Effort and Engage in Local Community Activities (Regional Collaboration)

5. GLWA/DWSD Standup (Regional Collaboration)

6. Align Performance with Recognized Utility Standards (Trustworthiness & Integrity)

7. Continued Cost Containment Efforts (Trustworthiness & Integrity)

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The Chief Executive Officer’s budget encompasses staff and services that supports the executive office, the GLWA board activities and

expenses, and public affairs. The largest category of expense is salaries based upon the nature of this service area. The second largest

category is contractual services which provides for public relations and board member activities. Supplies and other provides for

training and organizational memberships.

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Chief Executive Officer $ 1,683,890 100% $ 1,849,158 100%

1.1 Salaries & Wages 619,480 37% 768,074 42%

1.2 Overtime 4,400 0% 4,400 0%

1.3 Employee Benefits 187,210 11% 243,883 13%

Subtotal Personnel Services 811,090 48% 1,016,357 55%

5 Supplies & Other 411,800 24% 411,800 22%

6 Contractual Services 461,000 27% 421,001 23%

The staffing plan provides for the CEO and administrative support. The public affairs staff is under the direction of a Public Affairs

Officer (PAO) which is presently an open position.

FY 2017 FTEStaffing Plan


Chief Executive Officer 7 10

Chief Executive Officer 2 2

Public Affairs 5 8

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Security & Integrity

The Security and Integrity Group provides security protection, investigative and coordinated law enforcement services to the GLWA,

its employees, and customers so that they may experience confidence in their safety and the integrity of the people and processes

utilized by the GLWA.


Through the leadership of the Chief Executive Officer, the GLWA has identified eight entity‐wide initiatives.

1. The Security group will continue enhanced training for its officers, by designated offerings in this calendar year (High Quality through Innovation)

2. Update and expand the Homeland Security Response Plan by June 30, 2016. (Regional Collaboration)

3. Develop strategy and execute a tabletop exercise relating to the Homeland Security Response Plan within the calendar year and thereafter (Regional Collaboration)

4. Enhancing the security IT network systems (High Quality through Innovation)

5. Update and expand the Homeland Security Response Plan by June 30, 2016 (High Quality through Innovation)

6. Develop strategy and execute a tabletop exercise relating to the Homeland Security Response Plan within the calendar year and thereafter (Regional Collaboration)

7. Recommended CIP innovations for consideration (High Quality through Innovation)

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The largest category of expense is personnel. Net of the shared service agreement, personnel costs are 150% for FY 2017 and 155%

for FY 2018. This occurs because the GLWA has hired and supervises 30 security officers in alignment with the shared services

agreement.

FY 2017

FY 2017

% of Total FY 2018

FY 2018

% of Total

Security $ 3,423,090 100% $ 3,314,735 100%

1.1 Salaries & Wages 3,433,440 100% 3,437,665 104%

1.2 Overtime 197,000 6% 197,000 6%



5 Supplies & Other 223,060 7% 175,560 5%

6 Contractual Services 300,000 9% 300,000 9%

7 Capital Program Allocation (204,800) ‐6% (211,000) ‐6%

8 Shared Services (2,029,200) ‐59% (2,090,100) ‐63%

The staffing plan is designed to provide staff at 24/7 facilities as well as provide specialized investigate work.

FY 2017 FTE

Staffing Plan

2018 FTE

Staffing Plan

Security 78 78

DRAFT 5.20.2016

40

Administrative & Compliance Services

The Chief Executive Officer Area includes encompasses the following areas.

Enterprise Risk Management

Organizational Development

General Counsel

Information Technology

The Administrative Services Area provides the GLWA and its customers with outstanding people, processes and technology so that it

may efficiently provide water supply and wastewater disposal services in compliance with applicable laws, standards and regulations.

Enterprise Risk Management

The Risk Management and Safety Group coordinates and provides risk analysis, risk avoidance, loss mitigation, and quality assurance

services to the GLWA so that its employees may experience a safe and healthy work environment and its customers may experience

communities served with and surrounded by clean environmentally compliant water.


Through the leadership of the Chief Executive Officer, the GLWA has identified several entity‐wide initiatives.

1. Initiate reasonable and appropriate loss control techniques (High Quality through Innovation)

2. Minimize harm to physical, human, fiscal and environmental resources (Trustworthy & Integrity); and

3. Minimize the total cost of risk to the organization (Trustworthiness & Integrity)

Organizational Development

The Organizational Development Group provides recruitment, retention, training, workplace policies, assistance, guidance, benefit

coordination, and quality assurance services to the GLWA and its employees, so that can develop and optimize their talent and the

deployment of their talent within the organization to support a motivated integrated workforce team that efficiently delivers quality,

compliant water services to GLWA customers.

DRAFT 5.20.2016

41


1. Negotiate model contract with collective bargaining units as their current agreements expire (Trustworthiness & Integrity)

2. Resolve outstanding labor issues with all collective bargaining groups (Trustworthiness & Integrity)

3. Develop training and apprenticeship programs with input from union in accordance with 2015 mediation orders (Trustworthiness & Integrity)

4. Continue development and dissemination of Information Bites for Great Lakes staff which include optimization updates (Trustworthiness & Integrity)

5. Continue development and implementation of comprehensive training program for all levels of leadership as well as other staff to ensure Great Lakes employees are fully aware of and competent in performing their assigned responsibilities and involved in additional learning opportunities (Trustworthiness & Integrity)

6. Create a public industry presence through active participation in state, regional, national and international professional organizations (Regional Collaboration)

General Counsel

The General Counsel Group provides legal representation, strategic guidance, counseling, advice, and support to the Great Lakes Water

Authority so that it may make sound decisions and use appropriate legal processes to better provide its customers with quality

compliant water services.


1. Provide transitional support to DWSD pursuant to the Shared Services Agreement (Regional Collaboration)

2. Develop GLWA templates (for professional, legal, Information Technology (IT), and personal services contracts and amendments) that modernize the contractual relationship with our vendors (High Quality through Innovation)

3. Support Risk Management Group Stand‐up to improve internal customer service delivery and assist in expediting external customer service to our customers (Trustworthiness & Integrity)

4. Work collaboratively with GLWA customers to establish GLWA model wholesale customer contracts for water and sewer customers (Regional Collaboration)

5. Implement matter management solution to support GLWA legal activities (High Quality through Innovation)

DRAFT 5.20.2016

42

6. Negotiate NPDES permit revisions that balance GLWA customers’ needs for affordable service and need to maintain environmental quality within the communities we serve (Trustworthiness & Integrity)

7. Work collaboratively with GLWA CEO, Board, and customers to address legislation, litigation and other areas of common interest (Regional Collaboration)

8. Utilize technology and other available resources to improve administration of Family and Medical Leave Act (FMLA) leave (High Quality through Innovation)

9. Support activities of GLWA Board of Directors by providing timely advice on legal issues, and matters of concern (Trustworthiness & Integrity)


The largest category of expense in the Administrative & Compliance services area is contractual services at 82% in FY 2017 and 84% in FY 2018. This includes the following.

Risk Management: Cost of property insurance and brokerage services ($1,640,000 in FY 2017 and $1,700,000 in FY 2018). General Counsel: Outside counsel for a wide range of matters including environmental, labor, contract review, land matters,

bond counsel (non‐transactional), and other matters ($3,400,000 in FY 2017 and $3,600,000 in FY 2018). General Counsel Shared Services: Contingent contract to assist DWSD with bankruptcy collections (budgeted at $1,000,000

per year).

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Administrative & Compliance Services $ 10,921,296 100% $ 10,690,781 100%

1.1 Salaries & Wages 2,724,040 25% 2,725,540 25%

1.2 Overtime 21,000 0% 21,000 0%

1.3 Employee Benefits 879,510 8% 879,937 8%



5 Supplies & Other 185,506 2% 153,136 1%


8 Shared Services (1,695,600) ‐16% (1,959,100) ‐18%

DRAFT 5.20.2016

43

The staffing plan covers four distinct groups as shown in the table below.



Administrative & Compliance Services 36 36

Chief Administrative Officer 2 2

Risk Management and Safety 8 8

Organizational Development 21 21

General Counsel 5 5

DRAFT 5.20.2016

44

Information Technology

The Information Technology Group utilizes hardware, software, and network services to provide business and system planning,

business process development, organizational change management and information flow optimization services to the GLWA and its

customers so that they may utilize technology to experience a transparent organization and efficiencies in the use of resources within

the organization.


Through the leadership of the Chief Executive Officer, the GLWA has identified four entity‐wide initiatives.

1. Transform GLWA Web properties (High Quality through Innovation)

2. Automate and expand information security and general controls environment (Regional Collaboration, Trustworthiness & Integrity)

3. Continue implementation, enhancement and stabilization of core enterprise systems (High Quality through Innovation)

4. Develop an IT implementation plan to coordinate with ongoing City of Detroit technology initiatives and address continued GLWA requirements. (Regional Collaboration, High Quality through Innovation)


The Information Technology Group budget manages all IT related costs throughout the GLWA. This includes IT staffing, business unit

support, software licensing services, fees for cloud based solutions, hardware maintenance, and project management for the

deployment of upgraded and new technology. The largest expense category is contractual services at 101% for FY 2017 and 102% for

FY 2018 based on the net budget expense. This largely due to an annual contract with AT&T who owns, operates, updates, and

maintain the wide area network and local area network. Of the annual contract commitment of $6,000,000, $1.8 million, or 30% is

reimbursed by DWSD.

DRAFT 5.20.2016

45

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Information Technology $ 7,288,979 100% $ 8,156,380 100%

1.1 Salaries & Wages 3,178,500 44% 3,180,870 39%





5 Supplies & Other 2,845,954 39% 2,826,954 35%



8 Shared Services (4,772,308) ‐65% (4,789,248) ‐59%

The IT staffing plan is organized among five groups: administration, business applications, enterprise applications, infrastructure, and

service desk.



Information Technology 55 56

DRAFT 5.20.2016

46

Financial Services The Financial Services Group supports external and internal customers through a team of professionals dedicated to excellence, continuous improvement, and transparency.

Finance: Accounting, financial reporting, capital management, and planning & analysis Treasury: Cash management, investing, and cash flow forecasting Public Finance: Debt management, rate‐setting, and billing Procurement: Supply Chain Operations, Logistics and Materials and Construction and Contracted Services Internal Audit & Lease Administration Internal audit and administration of operational agreements with DWSD) Transformation Lean, process improvement coaching, performance management, restructuring support, and

technology roll‐out FY 2017 & 2018 Initiatives

1. Strategic Debt Management (Trustworthiness & Integrity)

2. Recognizing that desired financial outcomes are the result of effective entity‐wide operations, facilitate a new level of support to operational partners (Trustworthiness & Integrity and High Quality through Innovation)

3. Pilot Document Management Technology (Trustworthiness & Integrity)

4. Maximize New Financial Systems Launched in FY 2016 (Trustworthiness & Integrity and High Quality through Innovation)

5. Provide Ongoing Project Management Support for Stand‐up of GLWA and DWSD (Regional Collaboration)

6. Improved Procurement Practices (Trustworthiness & Integrity)


The Financial Services Area is largely a service organization whose “customers” are both external and internal. Accordingly, the largest category of expenses is personnel at 42% in FY 2017 and 47% in FY 2018. The second largest category is contractual services which includes the annual audit, external strategic financial consulting and rate setting, non‐transactional financial advisor fees, contracting compliance, debt disclosure services.

DRAFT 5.20.2016

47

FY 2017 FY 2017 % of Total FY 2018

FY 2018 % of Total

Financial Services $ 12,692,430 33% $ 11,973,027 29%

1.1 Salaries & Wages 4,818,300 38% 4,818,300 40%

1.2 Overtime 60,000 0% 60,000 1%





5 Supplies & Other 846,950 7% 746,450 6%

6 Contractual Services 1,985,500 16% 989,878 8%

7 Capital Program Allocation (195,000) ‐2% (200,800) ‐2%

8 Shared Services (58,500) 0% (59,400) 0%

Staffing in the Financial Services area is allocated among seven groups with each unique technical knowledge to advance and support

transformation across the organization.



Financial Services 98 95

Chief Financial Officer 3 3

Finance 28 28

Procurement 49 48

Public Finance 5 5

Treasury 3 3

Transformation 5 3

Internal Audit & Lease Administration 5 5

DRAFT 5.20.2016

48

Debt Management

A clear long‐term objective of the Great Lakes Water Authority is to reduce the level of annual debt service as a percent of the

revenue requirement. For FY 2017, debt service equates to 46% of the water system revenue requirement and 44% of the sewer

system revenue requirement. Similar percentages apply to FY 2018.

Foundational to the creation of the GLWA was a sound long‐term financial plan. Key elements are continued optimization of the

organization, continuing recently implemented water and sewer revenue policies that minimize risk, closing the door on unfunded

legacy liabilities, implementing sound asset management and improved control of capital spending, and moving from maximum use

of bonded debt. The ten year “Lease Feasibility Forecast” is available online at http://www.glwater.org/board/organizational‐

documents/ .

GLWA has refunding opportunities in both FY 2017 and FY 2018 to further control the cost of debt service. Based on the five year

capital plan needs, however, the GLWA has authorized the issuance of up to $300 million of new water system bonds in FY 2017.

Where possible, the GLWA is seeking to maximize the use of lower interest cost loan programs such as the Drinking Water Revolving

Fund (DWRF), State Revolving Fund (SRF), and the Stormwater, Asset Management, and Wastewater (SAW) program.

Pursuant to the terms of the lease agreements dated June 12, 2015 and subsequent bondholder consent achieved in November

2015, the GLWA is the successor obligor for the former City of Detroit Water & Sewerage Department (DWSD) revenue bonds.

Revenues from both the DWSD and GLWA systems, however, represent pledged assets for the payment of the bonds. Revenues

collections from both systems are therefore received directly by the Trustee pursuant to the terms of the GLWA Master Bond

Ordinance (MBO). The Trustee then distributes and maintains trust accounts for specified purposes including the payment of debt

obligations. The MBO and lease agreements are available online at http://www.glwater.org/board/organizational‐documents/ .

The tables on the following pages provide an analysis of the annual debt service and total remaining principal for both the water and

sewer systems. Also provided is a table of outstanding debt at year end.

DRAFT 5.20.2016

49

Current Proposed (1) Total Current Proposed (1) Total

Principal

Senior Lien $50,585,000 ‐$ $50,585,000 $51,465,000 ‐$ $51,465,000

Second Lien 9,495,000 ‐ 9,495,000 10,530,000 ‐ 10,530,000

Junior Lien‐ DWRF 1,426,250 ‐ 1,426,250 1,453,700 ‐ 1,453,700

Total Principal $61,506,250 ‐$ $61,506,250 $63,448,700 ‐$ $63,448,700

Interest

Senior Lien $82,736,000 $12,581,300 $95,317,300 $79,936,800 $12,581,300 $92,518,100

Second Lien 32,547,100 ‐ 32,547,100 32,066,100 ‐ 32,066,100

Junior Lien‐ DWRF 351,650 775,000 1,126,650 321,100 775,000 1,096,100

Total Interest $115,634,750 $13,356,300 $128,991,050 $112,324,000 $13,356,300 $125,680,300

Total Debt Service

Senior Lien $133,321,000 $12,581,300 $145,902,300 $131,401,800 $12,581,300 $143,983,100

Second Lien 42,042,100 ‐ 42,042,100 42,596,100 ‐ 42,596,100

Junior Lien‐ DWRF 1,777,900 775,000 2,552,900 1,774,800 775,000 2,549,800

Total Debt Service $177,141,000 $13,356,300 $190,497,300 $175,772,700 $13,356,300 $189,129,000

159,277,500$ 157,909,200$

Debt Service Allocable to Local System 31,219,800 31,219,800

190,497,300$ 189,129,000$

(1) Includes debt service payments from Issuance of $228,750,000 in New Money Water Bonds & $31,000,000 DWRF Bonds in FY 2017.

DWRF: Drinking Water Revolving Fund Loan Program

FY 2017 and FY 2018


Annual Debt Service Payments ‐ Water Fund

FY 2017 FY 2018

Allocation of Debt Service Per "Schedule 2"

Debt Service Allocable to Regional System

Total Debt Service

DRAFT 5.20.2016

50

Current Proposed (2) Total Current Proposed (2) Total

Principal

Senior Lien Fixed $42,099,900 ‐$ $42,099,900 $47,360,000 ‐$ $47,360,000

Senior Lien Capital Appreciation 1,957,400 ‐ 1,957,400 811,200 ‐ 811,200

Senior Lien Variable Rate 0 ‐ 0 0 ‐ 0

Senior Lien‐SRF 8,251,300 ‐ 8,251,300 8,457,500 ‐ 8,457,500

Second Lien 6,480,000 ‐ 6,480,000 6,760,000 ‐ 6,760,000

Junior Lien‐SRF/SAW 35,720,000 ‐ 35,720,000 36,566,300 ‐ 36,566,300

Total Principal $94,508,600 ‐$ $94,508,600 $99,955,000 ‐$ $99,955,000

Interest

Senior Lien $86,552,900 ‐$ $86,552,900 $84,346,900 ‐$ $84,346,900

Senior Lien Capital Appreciation 3,607,600 ‐ 3,607,600 1,658,800 ‐ 1,658,800

Senior Lien Variable Rate 4,430,300 ‐ 4,430,300 4,430,300 ‐ 4,430,300

Senior Lien‐SRF 1,019,400 ‐ 1,019,400 813,900 ‐ 813,900

Second Lien 42,637,000 ‐ 42,637,000 42,323,000 ‐ 42,323,000

Junior Lien‐SRF/SAW 9,105,100 3,125,000 12,230,100 8,287,200 3,125,000 11,412,200

Total Interest $147,352,300 $3,125,000 $150,477,300 $141,860,100 $3,125,000 $144,985,100

Total Debt Service

Senior Lien $128,652,800 ‐$ $128,652,800 $131,706,900 ‐$ $131,706,900

Senior Lien Capital Appreciation 5,565,000 ‐ 5,565,000 2,470,000 ‐ 2,470,000

Senior Lien Variable Rate 4,430,300 ‐ 4,430,300 4,430,300 ‐ 4,430,300

Senior Lien‐SRF 9,270,700 ‐ 9,270,700 9,271,400 ‐ 9,271,400

Second Lien 49,117,000 ‐ 49,117,000 49,083,000 ‐ 49,083,000

Junior Lien‐SRF/SAW 44,825,100 3,125,000 47,950,100 44,853,500 3,125,000 47,978,500

Total Debt Service $241,860,900 $3,125,000 $244,985,900 $241,815,100 $3,125,000 $244,940,100

Allocation of Debt Service Per "Schedule 2"

Debt Service Allocable to Regional System 222,418,500$ 222,372,700$

Debt Service Allocable to Local System 22,567,400 22,567,400

Total Debt Service 244,985,900$ 244,940,100$

(2) Includes debt service payments from issuance of $10,000,000 in SAW Bonds in FY 2016 & $115,000,000 in SRF Bonds in FY 2017.

SRF: State Revolving Fund Loan Program

SAW: Stormwater, Asset Management, and Wastewater Loan Program

Sewer Fund

FY 2017 FY 2018


Annual Debt Service Payments ‐ Sewer Fund

FY 2017 and FY 2018

DRAFT 5.20.2016

51

Water Fund Additions: On February 10, 2016, the GLWA Board of Directors approved a Notice of Intent to issue water supply

system revenue bonds in a principal amount not to exceed $300 million. This amount included estimated amounts from Drinking

Water Revolving Fund and traditional bond financed proceeds. The amount in the table above of $259,750,000 represents the

combined estimated par amount to be sold in FY 2017 to fund the CIP.

Sewer Fund Additions: On February 10, 2016, the GLWA Board of Directors also approved a Notice of Intent to issue sewage

disposal system revenue bonds in a principal amount not to exceed $125,000,000. This amount is based on the approved State

Revolving Fund sewer projects from the CIP which are all scheduled to close in FY 2017, with the exception of the $10 million in SAW

Bonds which are closing in May, 2016.

Fiscal Year

Beginning

Balance Payments Additions

Ending

Balance

FY 2017 2,259,288,800$ (61,506,000)$ 259,750,000$ 2,457,532,800$

FY 2018 2,457,532,800 (63,448,700) ‐ 2,394,084,100

Fiscal Year

Beginning

Balance Payments Additions

Ending

Balance

FY 2017 3,263,959,400$ (94,508,627)$ 125,000,000$ 3,294,450,773$

FY 2018 3,294,450,773 (99,954,923) ‐ 3,194,495,850

Water Fund

Sewer Fund


Outstanding Debt Obligations

FY 2017 and FY 2018

DRAFT 5.20.2016

52

Water System Revenue Charges

The Water System Revenue Charges are developed by The Foster Group, LLC. The schedule of charges are the product of customer

engagement, industry practices, meter data, budgetary decisions, capital needs, debt obligations, cost allocation methodologies,

legal documents, and other contracts. The following report from The Foster Group outlines the charge development process and

key factors for FY 2017.

The Foster Group, LLC Report – Water System

The proposed water system service charges for FY 2017 reflect the first cost of service and service charge study prepared for GLWA,

as prepared by THE FOSTER GROUP and as set forth in a memorandum dated January 26, 2016. That study does not reflect any

material modifications from the cost of service methodologies practiced by the Detroit Water and Sewerage Department in prior

years, but reflects specific requirements of the Memorandum of Understanding and the Lease(s) that established GLWA. The cost of

service study in THE FOSTER GROUP memorandum report only addresses the wholesale service costs of service (revenue

requirements) that are GLWA’s responsibility, as retail revenue requirement elements solely allocable to the City of Detroit were still

under development as of the date of that study. The results of the cost of service study were presented to wholesale customer

representatives via the customer outreach program at key milestone dates throughout the study period, and customers were

formally notified of their proposed service charges on January 27, 2016. The entire memorandum report is available at

http://www.glwater.org/finances/budget/ on the GLWA web site, and except as otherwise noted, the FY 2017 service charges in this

schedule reflect the same charges presented at that meeting.

DRAFT 5.20.2016

53

Water System Schedule of Charges Great Lakes Water Authority

Proposed FY 2017 Water Supply System Allocated Revenue Requirements and Service Charges

Annual Revenue Requirement $

(a)

Fixed Monthly Charge $/month 60%

Commodity Charge $/Mcf 40%

Projected Sales

Volume Mcf

Projected Revenue $

Suburban Wholesale

1 Allen Park $ 2,273,400 $ 113,700 $ 6.59 138,000 $ 2,273,800

2 Almont Village 214,000 10,700 9.51 9,000 214,000

3 Ash Township 727,700 36,400 7.28 40,000 728,000

4 Belleville 306,900 15,300 8.19 15,000 306,500

5 Berlin Township 706,600 35,300 9.74 29,000 706,100

6 Brownstown Township 3,315,000 165,800 9.75 136,000 3,315,600

7 Bruce Township 48,600 2,400 19.40 1,000 48,200

8 Canton Township 12,771,900 638,600 15.77 324,000 12,772,700

9 Center Line 466,500 23,300 5.49 34,000 466,300

10 Chesterfield Township 3,719,700 186,000 9.18 162,000 3,719,200

11 Clinton Township 7,549,600 377,500 7.59 398,000 7,550,800

12 Commerce Township 4,912,800 245,600 21.13 93,000 4,912,300

13 Dearborn 9,261,100 463,100 5.90 628,000 9,262,400

14 Dearborn Heights 3,727,600 186,400 6.84 218,000 3,727,900

15 Eastpointe 1,588,500 79,400 5.43 117,000 1,588,100

16 Ecorse 1,438,600 70,300 3.60 (b) 156,000 1,405,200

17 Farmington 950,500 47,500 8.09 47,000 950,200

18 Farmington Hills 8,618,000 430,900 9.50 363,000 8,619,300

19 Ferndale 940,000 47,000 5.70 66,000 940,200

20 Flat Rock 1,162,500 58,100 7.50 62,000 1,162,200

21 Fraser 1,272,600 63,600 7.83 65,000 1,272,200

22 Garden City 1,624,000 81,200 7.06 92,000 1,623,900

23 Genesee County DC 16,359,100 964,800 12.71 (b) 523,000 18,224,900

24 Gibraltar 458,700 22,900 10.79 17,000 458,200

25 Grosse Ile Township 1,251,600 62,600 11.64 43,000 1,251,700

26 Grosse Pt. Park 1,385,500 69,300 9.09 61,000 1,386,100

27 Grosse Pt. Shores 602,500 30,100 12.68 19,000 602,100

28 Grosse Pt. Woods 1,391,000 69,600 7.42 75,000 1,391,700

29 Hamtramck 685,000 34,300 4.49 61,000 685,500

30 Harper Woods 847,400 42,400 5.84 58,000 847,500

31 Harrison Township 1,375,300 68,800 5.92 93,000 1,376,200

32 Hazel Park 692,500 34,600 5.13 54,000 692,200

33 Highland Park 1,202,900 62,600 4.56 (b) 110,000 1,252,800

34 Huron Township 1,376,500 68,800 9.18 60,000 1,376,400

35 Imlay City 1,136,200 56,800 11.22 40,500 1,136,000

36 Inkster 1,795,200 89,800 6.90 104,000 1,795,200

DRAFT 5.20.2016

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(a)



Projected Sales

Volume Mcf

Projected Revenue $

Suburban Wholesale

37 Keego Harbor 305,900 15,300 11.13 11,000 306,000

38 Lapeer 1,394,500 69,700 9.36 59,600 1,394,300

39 Lenox Township 295,900 14,800 6.23 19,000 296,000

40 Lincoln Park 2,168,300 108,400 5.94 146,000 2,168,000

41 Livonia 13,273,500 663,700 10.88 488,000 13,273,800

42 Macomb Township 10,319,300 516,000 13.90 297,000 10,320,300

43 Madison Heights 1,993,400 99,700 5.39 148,000 1,994,100

44 Mayfield Township 28,800 1,400 23.86 482 28,300

45 Melvindale 654,100 32,700 5.57 47,000 654,200

46 New Haven, Village of 365,200 17,100 9.79 14,000 342,300

47 N O C W A 22,747,400 1,137,400 9.78 930,000 22,744,200

48 Northville 728,600 36,400 9.11 32,000 728,300

49 Northville Township 6,438,600 321,900 20.12 128,000 6,438,200

50 Novi 8,537,000 426,900 12.98 263,000 8,536,500

51 Oak Park 1,287,400 64,400 5.00 103,000 1,287,800

52 Oakland Co. Drain Comm. 64,000 3,200 2.84 9,000 64,000

53 Plymouth 1,002,100 50,100 9.54 42,000 1,001,900

54 Plymouth Township 4,104,600 205,200 9.95 165,000 4,104,200

55 Redford Township 3,330,800 166,500 7.70 173,000 3,330,100

56 River Rouge 688,800 34,400 4.75 58,000 688,300

57 Riverview 1,066,700 44,800 7.79 (b) 46,000 895,900

58 Rockwood 293,300 14,700 10.66 11,000 293,700

59 Romeo 255,800 12,800 17.05 6,000 255,900

60 Romulus 3,592,600 179,600 7.33 196,000 3,591,900

61 Roseville 2,609,100 130,500 5.02 208,000 2,610,200

62 Royal Oak Township 247,400 11,200 7.47 (b) 12,000 224,000

63 S O C W A 21,997,500 1,099,900 6.84 1,286,000 21,995,000

64 Shelby Township 13,357,300 667,900 13.49 396,000 13,356,800

65 South Rockwood 100,900 5,000 8.08 5,000 100,400

66 Southgate 2,118,000 105,900 6.83 124,000 2,117,700

67 St. Clair County‐Burtchville Township 291,900 14,600 12.98 9,000 292,000

68 St. Clair County‐Greenwood 379,200 19,000 15.17 10,000 379,700

69 St. Clair Shores 3,008,600 150,400 5.45 221,000 3,009,300

70 Sterling Heights 15,497,900 774,900 10.05 617,000 15,499,700

71 Sumpter Township 636,500 31,800 8.49 30,000 636,300

72 Sylvan Lake 233,900 11,700 13.37 7,000 234,000

73 Taylor 4,716,700 235,800 6.60 286,000 4,717,200

DRAFT 5.20.2016

55




(a)



Projected Sales

Volume Mcf

Projected Revenue $

Suburban Wholesale

74 Trenton 2,075,500 103,800 9.12 91,000 2,075,500

75 Troy 13,060,500 653,000 12.01 435,000 13,060,400

76 Utica 578,100 28,900 10.05 23,000 578,000

77 Van Buren Township 2,817,400 140,900 8.54 132,000 2,818,100

78 Walled Lake 903,400 45,200 11.66 31,000 903,900

79 Warren 9,803,200 490,200 5.42 723,000 9,801,100

80 Washington Township 3,016,700 150,800 18.28 66,000 3,016,100

81 Wayne 2,649,000 132,500 10.70 99,000 2,649,300

82 West Bloomfield Township 9,739,300 487,000 15.16 257,000 9,740,100

83 Westland 5,906,500 295,300 7.45 317,000 5,905,300

84 Wixom 2,317,100 115,900 14.48 64,000 2,317,500

85 Woodhaven 2,002,600 100,100 12.52 64,000 2,002,500

86 Ypsilanti Community Utility Authority 10,489,000 524,500 8.56 490,000 10,488,400

87 Imlay Township NA 134 10.84 (b) 135 3,100 88

Net Requirement from Wholesale Charges (agrees with GLWA Budget “Schedule 2”) $ 313,645,300 $ 15,819,434 8.90 13,906,717 $ 315,311,400

Detroit Customer Class

89 Wholesale Revenue Requirements (c) $ 15,490,300 NA NA $ 15,490,300

90 Indirect Retail Revenue Requirements (d) 40,536,000 NA NA 40,536,000

91 Direct Retail Revenue Requirements (e) 36,574,900 NA NA 36,574,900

92 Gross Total 92,601,200 NA NA 92,601,200 93

less: Estimated Miscellaneous Operating Revenue (4,750,000) (4,750,000)

94

Net Requirement from Detroit Customer Class(agrees with GLWA Budget “Schedule 2”) $ 87,851,200 NA NA $ 87,851,200

(a) As determined in FY 2017 Cost of Service Study, set forth in January 26, 2016 memorandum from THE FOSTER GROUP.

(b) Reflects adjustments made after the FY 2017 Cost of Service Study. (c) Reflects Great Lakes Water Authority (GLWA) wholesale amounts only, net of ownership credit of $20,700,000 per the water lease agreement.

(d) Reflects amounts allocable to the Detroit Local System which are subject to the GLWA Master Bond Ordinance flow of funds.

(e) Reflects amounts allocable to the Local System, for which GLWA transfers monies to DWSD.

Mcf – per 1,000 cubic feet

DRAFT 5.20.2016

56

Sewer System Revenue Charges

The Sewer System Revenue Charges are developed by The Foster Group, LLC. The schedule of charges are the product of customer

engagement, industry practices, meter data, budgetary decisions, capital needs, debt obligations, cost allocation methodologies,

legal documents, and other contracts. The following report from The Foster Group outlines the charge development process and

key factors for FY 2017.

The Foster Group, LLC Report – Sewer System

The proposed sewer system service charges for FY 2017 reflect the first cost of service and service charge study prepared for GLWA,

as prepared by THE FOSTER GROUP and as set forth in a memorandum dated January 26, 2016. That study does not reflect any

material modifications from the cost of service methodologies practiced by the Detroit Water and Sewerage Department in prior

years, but reflects specific requirements of the Memorandum of Understanding and the Lease(s) that established GLWA. The cost of

service study in THE FOSTER GROUP memorandum report only addresses the wholesale service costs of service (revenue

requirements) that are GLWA’s responsibility, as retail revenue requirement elements solely allocable to the City of Detroit were still

under development as of the date of that study. The results of the cost of service study were presented to wholesale customer

representatives via the customer outreach program at key milestone dates throughout the study period, and customers were

formally notified of their proposed service charges on January 27, 2016. The entire memorandum report is available at

http://www.glwater.org/finances/budget/ on the GLWA web site. The only modification to the wholesale charges presented at that

meeting reflect a modified approach to recovering the “bad debt true‐up” associated with Highland Park bad debt expense from FY

2013 through FY 2015. The original cost of service study report assumed a four‐year implementation plan for revering this variance.

The final proposed charges reflect a five‐year implementation plan.

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57

Sewer System Schedule of Charges Great Lakes Water Authority

Proposed FY 2017 Sewage Disposal System Allocated Revenue Requirements and Service Charges

Annual Revenue Requirement Fixed Monthly Charge

Suburban Wholesale FY 2017 BUDGET

Bad Debt True‐Up Total

FY 2017 BUDGET

Bad Debt True‐Up Total

1 OMID $ 68,837,200 $ 789,300 $ 69,626,500 $ 5,736,400 $ 65,900 $ 5,802,300

2 Rouge Valley 54,746,400 738,800 55,485,200 4,562,200 61,700 4,623,900

3 Oakland GWK 45,050,800 631,400 45,682,200 3,754,200 52,700 3,806,900

4 Evergreen Farmington 31,751,700 425,900 32,177,600 2,646,000 35,600 2,681,600

5 NE Wayne Co 23,782,200 337,100 24,119,300 1,981,900 28,100 2,010,000

6 Dearborn 19,332,500 270,200 19,602,700 1,611,000 22,600 1,633,600

7 Grosse Pointe Farms 2,630,500 36,600 2,667,100 219,200 3,100 222,300

8 Grosse Pointe Park 1,604,900 22,100 1,627,000 133,700 1,800 135,500

9 Melvindale 1,363,000 18,200 1,381,200 113,600 1,500 115,100

10 Farmington 1,094,100 14,800 1,108,900 91,200 1,300 92,500

11 Center Line 914,000 11,700 925,700 76,200 1,000 77,200

12 Allen Park 661,000 8,700 669,700 55,100 900 56,000

13 Highland Park 5,745,600 73,500 5,819,100 478,800 6,100 484,900

14 Hamtramck 4,024,700 59,900 4,084,600 335,400 5,100 340,500

15 Grosse Pointe 927,500 14,200 941,700 77,300 1,200 78,500

16 Harper Woods 237,000 3,800 240,800 19,800 200 20,000

17 Redford Township 258,900 2,500 261,400 21,600 100 21,700

18 Wayne County #3 46,000 400 46,400 3,800 100 3,900

19 Gross Total 263,008,000 3,459,100 266,467,100 21,917,400 289,000 22,206,400

20 less: Estimated Bad Debt Expense (5,600,000) NA (5,600,000) NA NA NA

21 Subtotal Suburban Wholesale Contract Customers 257,408,000 3,459,100 260,867,100 NA NA NA

22 Industrial Waste Control Charges 14,259,700 NA 14,259,700 NA NA NA

23 Industrial Surcharges 5,163,500 NA 5,163,500 NA NA NA 24

Subtotal "Regional Wholesale Revenues" (agrees with GLWA Budget “Schedule 2”) $ 276,831,200 $ 3,459,100 $ 280,290,300 NA NA NA

Detroit Customer Class

25 Wholesale Revenue Requirements (a) 183,131,500 4,172,600 187,304,100 NA NA NA

26 Indirect Retail Revenue Requirements (b) 31,367,700 NA 31,367,700 NA NA NA

27 Direct Retail Revenue Requirements (c) 41,535,500 NA 41,535,500 NA NA NA

28 Gross Total 256,034,700 4,172,600 260,207,300 NA NA NA

29 less: Estimated Miscellaneous Operating Revenue (5,000,000) NA (5,000,000) NA NA NA 30

Net Requirement from Detroit Customer Rates(agrees with GLWA Budget “Schedule 2”) $ 251,034,700 $ 4,172,600 $ 255,207,300 NA NA NA

(a) Reflects Great Lakes Water Authority (GLWA) wholesale amounts only, net of ownership benefit of $5,516,000.

(b) Reflects amounts allocable to the Detroit Local System which are subject to the GLWA Master Bond Ordinance flow of funds.

(c) Reflects amounts allocable to the Local System, for which GLWA transfers monies to DWSD.

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Abbreviations

CIP – Capital Improvement Plan

DWRF – Drinking Water Revolving Fund

GRS – City of Detroit General Retirement System

I&E Fund – Improvement & Extension Fund

MOU – Memorandum of Understanding

O&M – Operations & Maintenance

OPEB – Other Postemployment Benefits

SAW – Stormwater, Asset Management, and Wastewater Loan Program

SRF – State Revolving Fund

UAAL ‐ Unfunded Accrued Actuarial Liability

WRAP ‐ Water Residential Assistance Program

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