The ‘rainmaker’ and the Senate

Here, followed by my introduction, is the 1992 Detroit Free Press article that set off the “Sewergate” scandal in Canton, Northville and Plymouth townships. I reprinted it on May 29, 2010, and now that one of the key actors is running for public office, it seems like a good time to run the intro and story again.

By Joel Thurtell

Sub-Head:Byline:  JOEL THURTELL FREE PRESS STAFF WRITERPub-Date: 2/22/1992Memo:  DRAINING THE SUBURBS; SEE CHART IN MICROFILMCorrection:  CORRECTION RAN MARCH 3, 1992GETTING IT STRAIGHT* A FEB. 22 FRONT-PAGE ARTICLE INCORRECTLY REPORTED WHAT THEYPSILANTI COMMUNITY UTILITIES AUTHORITY AND WAYNE COUNTY CHARGEFOR TREATING SEWAGE. YCUA CHARGES $10.59 IN OPERATION ANDMAINTENANCE COSTS PER 1,000 CUBIC FEET. WAYNE COUNTY CHARGESCANTON TOWNSHIP $5.65 PER 1,000 CUBIC FEET, NORTHVILLE TOWNSHIP$4.77 AND PLYMOUTH TOWNSHIP $5.23millions of dollars in sewer fees.Wayne County wanted $25.5 million for the three to join its Super Sewerproject. But  the supervisors of Plymouth, Canton and Northville Townshipssaid they could do it for $17 million and went their own way.Their way is costing the 98,000 residents of the townships $94.5 million.At least $30 million of that is being spent on non- construction costs.And more than $11.5 million in contracts has been awarded to people withconnections with the township officials, a Free Press investigation shows.What will the townships get for the extra money? Sewer rates at least twiceas high as those of the 12 communities tied into Super Sewer. A system withonly half as much  additional capacity as Super Sewer would have given them –and only if the Ypsilanti plant, which will treat the sewage, is expanded.That cost hasn’t been calculated.”Holy Toledo! That’s incredible!”  exclaimed former Canton Township ClerkLinda Chuhran, who now regrets  casting one of the seven votes in 1986 thatestablished the Western Townships Utilities Authority, which oversees thesewer system.Canton Township supervisor and sewer authority chairman Thomas Yack defend the project, saying it’s  better for the environment and provides all thecapacity the western townships will need for growth.”The project is a lot different than the early project envisioned by WayneCounty,” Yack said.  “Why it’s four or five fold, I really couldn’t respond.”But a Free Press investigation  shows  that the three township supervisors,who double as commissioners for the sewer authority, have done little to holddown costs:* Some $30 million is going to nonconstruction contracts that were awardedwithout competitive bidding.* The sewer board so far has paid out at least $5.5 million to people andbusinesses with connections to the authority, according to records obtained bythe Free Press.  Their contracts call for them to receive another $6 million.Among work awarded without bids:* Legal services and consulting contracts to firms connected to former WTUAsecretary Robert Law. His  legal firm also represents the three townships. Hisbrother, Gerald Law, is now Plymouth Township supervisor and  WTUA treasurer.* Land acquisition, assigned to John Breen, brother of Maurice Breen,authority cofounder and former Plymouth Township supervisor.* Engineering, awarded to a firm headed by Abe Munfakh, a Plymouth Townshiptrustee who voted to establish WTUA.Meanwhile, Super Sewer  costs haven’t exceeded the original projection of $60million and the federal government is paying 55 percent.  The westerntownships have received no federal money.Because of the federal money,  all contracts have been awarded on acompetitive basis, according to Tom Kampinnen of the state Department ofNatural Resources. Super Sewer will replace sewer lines between 12 communitiesand the Detroit Wastewater Treatment Plant.‘There will be no unknowns’When officials of the townships decided to break away from Super Sewer in1986, they were optimistic.”You’re looking at a better project  we’re buying into,” Maurice Breensaid at the time. “We’ll know what the dollars are. There will be no unknownsin the project other than acts of nature.”James Poole, then the Canton Township  supervisor, warned that Super Sewermight never receive federal funds.The supervisors didn’t believe they would  pay only $25.5 million for astake in the county system. They worried they would  be taxed down the road ifDetroit were ordered to upgrade its sewage treatment plant.Besides, the township officials said, instead of trusting Wayne County andDetroit, they would have control  over their sewer facilities.Officials of the townships were able to form WTUA and issue bonds withoutvoter approval under a 1955 state law that allows them to sell bonds tofinance public utilities.  The supervisors — Canton’s Poole, Plymouth’sBreen and Northville’s Suzie Heintz — gathered the day after Christmas 1986and formally organized the authority.”We told them when they started that  it was going to be very expensive,”said  Wayne County Department of Public Works Director Jim Murray, who wasWashtenaw County drain commissioner and chairman of the Michigan WaterResources Commission  in 1988 when  the sewer authority sought a new waterdischarge permit for the Ypsilanti plant.Had the townships stayed with Super Sewer, they were promised about 52million gallons a day of additional capacity, or six times the 8.7 milliongallons they will lease from the Ypsilanti Community Utilities Authoritybeginning in fall 1993. If they want more, the townships will have to pay toexpand the Ypsilanti plant, said YCUA Director Bruce Jones. An expanded plantwould give them about half what Super Sewer promised, according to  theYpsilanti sewer authority’s figures.WTUA project engineer  Phil Loud said he believes Super Sewer’s promisedcapacity in 1986 was exaggerated. He said his firm is using sophisticatedmethods of estimating capacity which may not have been used by engineersplanning  Wayne County’s system.In the early years of the authority, officials also were optimistic aboutrates.In 1988, Poole boasted, “eventually, our rates will be better than Detroit”because the  Ypsilanti plant “is a much more efficient operation.”Today, Ypsilanti’s rate is $12.64 per 1,000 cubic feet a second, comparedto Wayne County’s $4.77, according to YCUA and the Wayne County Department  of Public Works.Some bills already higherSome residents already are getting higher bills to pay for the new system;they will get them for a generation or more as WTUA pays off its constructionbonds, plus $150 million in interest.Plymouth Township residents are paying quarterly $15.69 installmentsintended to collect more than $1,882 per household over the next 30 years.Northville  Township plans to cover its debt through hookup fees paid bydevelopers of new housing, according to  the township finance director, DuaneHarrigan.Canton Township plans to pay part of its share  by gradually increasingwater and sewer rates,  said finance director John Spencer.”We don’t see it impacting rates significantly,” he said. Over the past 20years, Canton has saved about $17 million  from hookup fees, and part of thatcould be used for the debt, he said.Some of the debt comes from administrative costs the authority incurred ingetting the bond money.A computer analysis  of  municipal bond transactions, done for the FreePress by Securities Data Co. of Newark, N.J., shows that the fees WTUA paid toissue its 1989 and 1991 bonds were more than 20 percent above average.In all, the authority’s bonding fees cost $494,385 above average.Among those costs was a $75,000 finder’s fee to Plymouth stockbroker CraigFleming, who said he learned of the deal from Ernie Essad,  a partner inWTUA’s law firm. Fleming said he acted as a liaison between the law firm andhis employers, Prescott, Ball and Turben Inc. of Chicago, the lead bondunderwriters.No bidding policySewer officials say much of the extra cost comes from unanticipatedconstruction needs, such as a larger interceptor and catch basin and a pumpstation and pipes to move treated wastewater to the Rouge  River.But they could have tried to lower costs by requiring bidding forprofessional services.  The authority has no bidding policy, according toExecutive Director Deloris Newell.Said  Robert VanRavenswaay Jr.,  an authority attorney: “There’s reallynothing in the statutes that says or even suggests we get requests forproposals for everything that is procured.”But former Canton  Township Clerk Chuhran, now an accountant for GeneralMotors, calls not seeking bids “against all the ethics and guidelines set upfor governments to run by.”The Michigan Townships Association, to  which the three townships belong,recently drafted a policy recommending that its members solicit competitivebids for goods and services.Peter Letzmann, past president of the Michigan Association of MunicipalAttorneys who frequently speaks on ethics in government, said the sewer boardshould have sought bids.”It seems to me that any public officials would take great steps to besqueaky clean  or scrupulous within the letter of the law so there would be noconflict of interest or no appearance of conflict of interest,” said Letzmann.”Those people who do not take that step are doing a disservice  to theirmunicipality or governmental agency because today we have a crying need forethics, honesty and integrity in government.”No-bid contracts for engineering, lobbying and legal services went  topeople with connections to township officials.The engineering contract went to the Ann Arbor firm of Ayres, Lewis,Norris & May, whose president  is Plymouth Township Trustee Munfakh.Munfakh voted in November 1986 to establish the authority. In 1991, he votedto increase sewer rates so  the township could pay its share of the bonds. Hiscompany had billed the authority $3,225,901  by mid-December and is budgetedto earn $9.8 million on the sewer job.According to Newell, the townships were worried about a conflict ofinterest when they chose an engineering firm. They ruled  out a Taylorengineering firm because it already was working for Wayne County on SuperSewer.The authority “wanted an engineering firm in Washtenaw County becausethere was quite a bit of negotiating  to do with YCUA,” she said. Another AnnArbor firm was ineligible because it was working for Ypsilanti, Newell said.Munfakh’s firm “was highly recommended and did not represent YCUA or WayneCounty,”  said Newell.”They beat us to get our fee down,” Munfakh said.Munfakh said Breen convinced him to accept a 4.5-percent profit, half itsusual margin.  The sewer project will account for  15 percent of  his firm’sincome this year, said Munfakh.Munfakh meets regularly with the sewer board and in the absence of chiefengineer Loud gives reports to the board.He said he voted  for the Plymouth Township sewer rate increase because hefelt a responsibility to make sure the township pays its debt.Also without seeking bids, the authority  awarded its contract for landacquisition  legal work to  Breen’s brother, John Breen. They share an officein Plymouth Township.Although now a Wayne County commissioner, Maurice Breen still takes anactive part in authority affairs.He defended the choice of his brother, saying that John Breen  hadexperience in acquiring  land when he was legal director for Wayne County’sDepartment of Public Works.”John had retired from  Wayne County and was just kind of looking forsomething to  do. We wanted somebody doing acquisition who would treat ourpeople in a kind manner . . . and did not charge us $250 an hour for legalservices.”By mid-December, John Breen had billed the authority $51,005.Former state Rep. Gerald Law took Maurice Breen’s place as PlymouthTownship supervisor and sewer commissioner last year after Breen  became acounty commissioner.Law’s brother, Robert Law,  was  secretary to the sewer board during itsfirst meeting in 1986. His legal firm represents all three townships.Without seeking  bids, the sewer board  during that first meeting in 1986named Robert Law’s firm to represent it and named him its lead attorney. Sincethen, without bids, the board has awarded lobbying and public relationscontracts to firms connected to Law or his firm, Law, Hemming, Essad &Polaczyk.By mid-December, the legal firm had made more than $1.5 million from theproject, including a one-half-percent fee on both bond transactions, totalingmore than $900,000. The other firms took in more than $150,000.  “We werehired because of our background in this project and because of our workingrelationship with  the communities,” said Robert Law.The board pays a $3,000 monthly retainer to Government Affairs ConsultingGroup. Robert Law is the president of the firm, which also has offices in thesame building  as Law, Hemming. By mid-December, Government Affairs had billed the authority $50,587 for lobbying services.In 1988, when the sewer board needed to have proposals and news releaseswritten, the  board, without seeking bids, awarded the contract to PowerAssociates of Plymouth Township. Law said Power Associates was an affiliate ofthe legal firm and has offices in the same building as Law, Hemming.According to state records, Power Associates’ president is Michael Brice andits director is Robert Law. By mid-December, Power Associates had billed  thesewer authority $20,000.Another firm affiliated  with Law, Hemming is Communications ManagementCo., which had billed $61,624 for public relations work by mid-December,Robert Law said. Communications Management  is the new name for  PowerAssociates,  whose name was not popular with clients, said the attorney. Yetanother public relations firm which he acknowledged was, until recently, aLaw, Hemming affiliate, is Strategies Plus, which had billed  $27,371 bymid-December. He said Strategies Plus is no longer an affiliate of the lawfirm.Michael Brice is president of Strategies Plus.Law, Hemming partner Ernie Essad said he sees no problem with Robert Lawserving as general counsel of WTUA while his brother, Gerald Law, is itstreasurer.”It’s nothing hidden, and everybody knows who everybody is,” said Essad.”There are bar opinions  which indicate that you are not automaticallydisqualified as a result of that relationship.”$611,876 lobbying billThe biggest single consulting bill — $611,876 — has come from theWashington,  D.C., lobbying firm of Cassidy & Associates. The authority didnot advertise for bids for the work.Cassidy bills WTUA $20,000 a month to lobby Michigan’s congressionaldelegation to help get a $19  million federal grant. The money would  pay forpipes and  a pumping system to carry treated wastewater to the Rouge.The authority  says that part of the project, recommended by the DNR, is aunique national environmental demonstration.Officials are hoping for a grant from the Army Corps of Engineers.Maurice Breen said he’s “absolutely convinced” the project eventually willreceive federal money.The authority has stressed environmental benefits of the sewer system. Itsplan to eventually pump 58 million gallons a day of treated wastewater fromYpsilanti back to Canton  for discharge into the lower Rouge has been termed a”win-win situation” by Paul Zugger, director of the surface water qualitydivision of the DNR.The authority proposes by November 1994 to send  all of the Ypsilantiplant’s treated wastewater to the Rouge. According to Newell, the water wouldbe cleaner than water now in the Rouge, and would stabilize  streamflows.But in October, U.S.  Rep. John Dingell asked the corps to study theeffect of the project on residents of his 16th Congressional District,  whichcovers Monroe County and parts of Lenawee and Wayne counties, downriver fromthe discharge.Maurice Breen remains confident the townships did the right thing in goingit alone.”We were willing to go into a system not so much for sanitary sewer needs,but as an environmental  project, even though it may cost more.”To Edward Hustoles, director of planning at the Southeastern MichiganCouncil of Governments, it’s no surprise the system is costing more.”The idea of  independence is a seductive  one. That always sounds good, tobe our own bosses. They’re paying a price for independence.”Haggerty  roads in Canton Township. The sewer project,conceived as a money-saver for Plymouth, Canton and Northvilletownships, will cost $94.5 million. Wayne County had asked for$25.5 million for its Super  Sewer.Illustration:  PHOTO DAYMON J. HARTLEY; MAP HANK SZERLAGCHARTEdition: METRO FINALSection:  NWSPage: 1AKeywords: ; SEWER;  MAJOR STORY;  SUBURB;  WAYNE COUNTYDisclaimer: