FLINT, MI -- If the Flint City Council doesn’t approve a $20-million settlement proposal for water crisis lawsuits, residents could end up paying to defend the city in court through a special tax on property owners, Mayor Sheldon Neeley is warning.
Neeley told MLive-The Flint Journal Monday, Nov. 30, that the proposed settlement, which would be completely paid by a city insurance carrier, is the best opportunity for shedding millions of dollars of potential liability and attorney fees with the least amount of pain.
“We’re in a critical stage of our financing as it relates to paying all our obligations currently,” Neeley said. “Any (additional) drain (has the potential) to take us and push us over the edge.”
Flint most recently emerged from state financial control and emergency management after four years when former Gov. Rick Snyder declared an end to the city’s financial emergency in April 2015.
Former Gov. John Engler also declared a financial emergency in Flint from 2002 until 2004.
Neeley said if the City Council rejects the water crisis settlement, Flint loses the $20 million from its insurance carrier and may not be able to pay the cost of continued litigation and potential judgements against it in court.
Asked if property owners could face a special assessment to pay those potential costs -- similar to a special tax to pay for an $8-million judgement against the city in a 2007 lawsuit involving the old Genesee Towers building downtown -- the mayor called that scenario a “strong possibility.”
“If they vote no on this, we don’t have the resources to pay out a sum of $20 million...even $10 million,” Neeley said.
The city’s proposed $20-million settlement is part of a larger deal that also involves the state of Michigan, Rowe Professional Services and McLaren Regional Medical Center -- each of which have been sued by thousands of Flint residents who claim they were harmed by the water crisis.
The city’s portion of the settlement is in the hands of the City Council, and several members have refused to discuss it privately with city attorneys in recent weeks.
Some council members have said they oppose the overall settlement, which still must be approved in federal court, partly because the deal doesn’t provide enough money for adults who suffered damages, but Neeley said the division of the settlement fund is beyond the control of the council, which is expected to take up the settlement Dec. 14, council President Kate Fields said Monday.
Settlements proposed by the state ($600 million), McLaren ($20 million) and Rowe ($1.25 million) won’t be affected by whatever the city does, but if the council doesn’t join in the deal, Flint will join the federal government, two Flint water consultants and bond underwriters involved in borrowing for the Karegnondi Water Authority in defending the actions of its former employees and former emergency managers as lawsuits in state and federal courts continue against them.
Contract attorneys hired to represent the city in those cases warned last week that Flint could be left with “astronomical liability” in the future, if it fails to join in the settlement now.
The settlement itself would set up a claims process for those harmed by Flint water, with awards based on an individual’s age and damages suffered.
After attorney fees have been awarded, the bulk of the settlement -- nearly 80 percent -- would be divided among children who were 17 or younger when they were first exposed to water from the Flint River, with the youngest children -- 6 years old and younger at first exposure -- receiving the most.
Adults with evidence of harm from city water would split 15 percent of the settlement -- roughly $96 million -- before attorney fees.
The use of the Flint River for drinking water in parts of 2014 and 2015 was the triggering event in the water crisis, leading to elevated levels of lead, bacteria and chlorination byproducts in city water.
Thousands of city residents filed lawsuits against the state, the city, Flint water consultants and others after the water crisis was recognized as a federal emergency in 2016.
“The City Council has a very important vote before them,” Neeley said of the proposed city settlement. “Beyond all the rhetoric or the political posturing or the misinformation, they have a duty and responsibility as trustees of this community...”
The Genesee Towers case in 2007 resulted in an average assessment of about $150 on all Flint property owners to pay off an $8-million judgement tied to a lawsuit brought by the building’s owner.
The lawsuit came after the city shut down the building because of alleged code violations.
The city agreed in 2006 to enter into binding arbitration over the property and its worth, and an arbitrator awarded the building owner more than $6 million plus interest.
Read more:
Attorney warns Flint residents: Settlement train could ‘leave the station without us’
Flint water crisis lawsuit settlement grows to $641M after city, McLaren, Rowe agree to terms
Genesee Towers: A storied history in downtown Flint
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Without settlement, Flint residents could pay new tax for water crisis lawsuits, mayor warns - MLive.com
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