Detroit Stops Water Shutoffs for 15 Days as Residents Sue

Jul 21, 2014 11:08 am ET

July 21 (Bloomberg) -- Detroit said it would suspend water service cutoffs of delinquent customers as residents sued, claiming the shutdowns to about 30,000 low-income households violated their constitutional rights.

The bankrupt city is halting shutoffs for 15 days to give customers a chance to contact water department officials and arrange payment schedules for past-due balances, and to get financial help, Curtrise Garner, a department spokeswoman, said in a phone interview today.

The lawsuit comes as the city prepares to release the results of a vote by creditors on a plan that would cut about $7.4 billion in unsecured debt. The city filed a record municipal bankruptcy a year ago this month, saying it couldn’t meet financial obligations and still provide essential services.

The water cutoffs are unfair in part because commercial customers who owe money haven’t been shut down, according to a complaint in U.S. Bankruptcy Court in Detroit.

“Water service to private residences is the most basic and essential utility service, and is necessary for the health and safety of the residents,” the residents said in the filing.

About 80,000 of 176,000 Detroit, residential accounts are past due, Garner said. She denied claims that the city isn’t shutting off past-due commercial accounts.

‘Affordability Plan’

The residents who sued are seeking an injunction to keep the water flowing and orders for a “water affordability plan with income-based payments.”

U.S. Bankruptcy Judge Steven Rhodes heard complaints in court last week about the shutoff policy. He asked water department officials to do a better job of helping poor residents get financial aid for their bills.

Today the judge commended the department’s latest plan, saying “a lot of effort went into it.”

The vote tally on the city’s debt-adjustment plan could be made public as early as today. Rhodes will take the vote by city workers, retirees and bondholders into consideration when he decides whether to approve the proposal. Next month, he will start a trial on the plan that could last several weeks.

The case is In re City of Detroit, Michigan, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan, Southern Division (Detroit).

--With assistance from Steven Raphael in in Detroit federal court.