Michigan will pay $600 million to settle lawsuits filed by Flint residents whose water was contaminated because state emergency managers sought to save money as part of the city’s shift to a new, bond-financed water pipeline in 2014.
The preliminary settlement that comes after 18 months of negotiations, with the help of court-appointed mediators, will be finalized in the next 45 days. It was announced Thursday by Gov. Gretchen Whitmer and Attorney General Dana Nessel.
Bloomberg News
The crisis occurred after the city’s contract with Detroit to receive Lake Huron water ended and the city shifted to Flint River water in April 2014 while awaiting the completion of a $285 million pipeline carrying Lake Huron water to Flint and other Genesee County communities.
The city failed to properly treat the Flint River water, triggering lead contamination because of pipe corrosion, which was not abated when the city in the fall of 2015 shifted back to Detroit-supplied water.
The settlement requires that the state deposit $600 million into a qualified settlement fund for the benefit of those individuals, property owners, and businesses who claimed they were injured by the water distributed by the city of Flint.
Nearly 80% will go to children who were under 18 at the time of the contamination. The remainder is divided among adults and businesses and other expenses such as property damage and those impacted by a Legionnaires outbreak.
“What happened in Flint should have never happened, and financial compensation with this settlement is just one of the many ways we can continue to show our support for the city of Flint and its families,” Whitmer said in a video address.
The governor, who took office last year, inherited the Flint debacle from predecessor Rick Snyder, whose administration came under attack for failing to prevent or move quickly to correct the contamination.
Several members of the administration and the city’s emergency managers at the time faced criminal charges although Nessel scrapped the charges in June 2019, saying she would start anew with the case.
Whitmer said the city the settlement would bring the state’s funding for relief and recovery efforts to $1 billion. The state previously agreed to provide $97 million toward replacing all of the city’s lead service lines, which is 85% complete.
To date, the state has spent more than $409 million in response to the Flint water emergency, according to state budget documents. The appropriations have been included in recent budgets. Settlement related information is available at flintsettlementfacts.org.
Officials did not immediately say how the state would cover the costs of the preliminary settlement, which comes as Michigan faces billions in tax losses due to the COVID-19 pandemic economic shutdown and recession.
“We are still finalizing the plans for the funding source, but are confident that the options available to the State are fiscally prudent, and it is our intent to minimize any impact to taxpayers. Due to the complexity of the settlement, the funding details are still being worked out and will be described specifically in the settlement documents that are being finalized in the next 45-60 days,” said the attorney general’s press secretary, Ryan Jarvi.
U.S. District Court Judge Judith Levy, Michigan First District Court of Appeals Judge Christopher Murray and Genesee County Circuit Court Judge Joseph Farah must sign off and the legislature must appropriate the funds.
Other defendants, including engineering consultants, have not agreed to participate in the settlement so the plaintiffs’ lawsuit against them will continue unless they join the pact.
“Ultimately, by reaching this agreement, I hope we can begin the process of closing one of the most difficult chapters in our state’s history and writing a new one that starts with a government that works on behalf of all of its people,” Nessel said. If finalized and approved, it would resolve more than 100 pending cases filed the state, federal and appellate courts against the state for its role in the crisis.
The crisis began on April 25, 2014 when the city switched to water supplied from the Flint River from Detroit-supplied and treated Lake Huron water as it waited for the new pipeline. State agencies failed to ensure such treatment was done and when confronted with concerns over the water quality denied any contamination.
The seeds of the crisis had begun two years earlier when the city — then under state emergency management — agreed to participate with Genesee County in financing the construction of a new water pipeline to trim water costs.
Flint pledged to repay about 34% of the $220 million 2014 bond issue that provided initial financing for the Karegnondi Water Authority’s 63-mile pipeline led by Genesee County. The deal was recognized by The Bond Buyer as Midwest Deal of the Year.
In addition to the toxic lead poisoning of household water that is especially damaging to children’s developing brains, a 2014-15 Legionnaires’ disease outbreak in the Flint region led to the deaths of at least 12 and sickened another 79 individuals.
Flint reverted back to Detroit water in October 2015 and it signed a long-term contract to continue receiving water through the Great Lakes Water Authority, a regional agency that is the successor agency to Detroit’s system.
The long-term water supply arrangement between GLWA and Flint does not alter the terms of the KWA financing contract or the obligation of Flint to make contractual payments to the issuer at the times and in the amounts required. Under its GLWA contract, Flint receives credit for the portion of the debt service on the KWA system bonds that Flint pays to the issuer. Ultimately, the county is on the hook for debt service.
Fifteen government officials were criminally charged. Seven struck plea agreements. Nessel, who took office last year, dismissed all pending criminal cases related to the crisis, two of which were against former state-appointed city emergency managers. The office launched a new case citing the development of new evidence and criticisms of the original investigation under then-Attorney General Bill Schuette.
The pending criminal charges had named former emergency managers Gerald Ambrose and Darnell Earley. Ambrose served as Flint’s EM from Jan. 13, 2015 through April 28, 2015. Earley was named EM in September 2013 and served until January 2015. Both were appointed by Snyder.
Earley oversaw the decision to change the city’s water source to the Flint River. A March 13, 2014, order signed by Ambrose for a water main cut-in at the water plant cleared the way for the switch to the river.
Early faced misconduct and willful neglect of duty charges for allegedly making misleading statements that the Flint plant could adequately treat the water and that the water was safe to drink. Ambrose faced similar charges in part for allegedly obstructing a county probe of ties to the Legionnaire’s disease outbreak. Misleading information was also allegedly provided over the city’s ability to participate in the bond sale and Early was later charged with involuntary manslaughter.
Flint exited from state financial receivership on April 10, 2018, after seven years under state oversight. The Flint debacle cast a poor spotlight on the state’s emergency law and the state largely put further actions related to the program on hold.
Update: The story was updated with a comment from the attorney general’s office.