V STATE of MICHIGAN SUMMONS CASE NO. Instructions

Original - Court 2nd copy - Plaintiff Approved, SCAO 1st copy - Defendant 3rd copy - Return STATE OF MICHIGAN CASE NO. JUDICIAL DISTRICT JUDICIAL CIRCUIT SUMMONS 2018 MZ COUNTY PROBATE Court address Court telephone no. Court of Claims, Hall of Justice, 925 W. Ottawa Street, Lansing, MI 48909 (517) 373-0807

Plaintiff’s name(s), address(es), and telephone no(s). Defendant’s name(s), address(es), and telephone no(s). OAKLAND COUNTY WATER RESOURCES MICHIGAN DEPARTMENT OF ENVIRONMENTAL COMMISSIONER, as County Agent for the County of Oakland, QUALITY GREAT LAKES WATER AUTHORITY, v CITY OF DETROIT, by and through its Water and Sewerage Department, AND CITY OF LIVONIA

Plaintiff’s attorney, bar no., address, and telephone no. Peter H. Webster (P48783), Dickinson Wright PLLC, 2600 W. Big Beaver, Ste. 300, Troy, MI 48084, (248) 433-7200; Steven E. Chester (P32984), Miller, Canfield, Paddock and Stone, PLC, One Michigan Bldg., 120 N. Washington Sq., Ste. 900, Lansing, MI 48933, (517) 483-4933; Randal Brown (P70031), 735 Randolph, Ste. 1900, Detroit, MI 48226, (313) 964-9068; Michael Fisher (P37037), 33000 Civic Center Drive, Livonia, MI 48154, (734) 466-2520

Instructions: Check the items below that apply to you and provide any required information. Submit this form to the court clerk along with your complaint and, if necessary, a case inventory addendum (form MC 21). The summons section will be completed by the court clerk.

Domestic Relations Case There are no pending or resolved cases within the jurisdiction of the family division of the circuit court involving the family or family members of the person(s) who are the subject of the complaint. There is one or more pending or resolved cases within the jurisdiction of the family division of the circuit court involving the family or family members of the person(s) who are the subject of the complaint. Attached is a completed case inventory (form MC 21) listing those cases. It is unknown if there are pending or resolved cases within the jurisdiction of the family division of the circuit court involving the family or family members of the person(s) who are the subject of the complaint.

Civil Case This is a business case in which all or part of the action includes a business or commercial dispute under MCL 600.8035. ✔ There is no other pending or resolved civil action arising out of the same transaction or occurrence as alleged in the complaint. A civil action between these parties or other parties arising out of the transaction or occurrence alleged in the complaint has

been previously filed in this court, Court, where

it was given case number and assigned to Judge .

The action remains is no longer pending.

Summons section completed by court clerk. SUMMONS

NOTICE TO THE DEFENDANT: In the name of the people of the State of Michigan you are notified: 1. You are being sued. 2. YOU HAVE 21 DAYS after receiving this summons and a copy of the complaint to file a written answer with the court and serve a copy on the other party or take other lawful action with the court (28 days if you were served by mail or you were served outside this state). 3. If you do not answer or take other action within the time allowed, judgment may be entered against you for the relief demanded in the complaint. 4. If you require special accommodations to use the court because of a disability or if you require a foreign language interpreter to help you fully participate in court proceedings, please contact the court immediately to make arrangements.

Issue date Expiration date* Court clerk

*This summons is invalid unless served on or before its expiration date. This document must be sealed by the seal of the court.

MC 01 (8/18) SUMMONS MCR 1.109(D), MCR 2.102(B), MCR 2.104, MCR 2.105 SUMMONS 2018 MZ PROOF OF SERVICE Case No. TO PROCESS SERVER: You are to serve the summons and complaint not later than 91 days from the date of filing or the date of expiration on the order for second summons. You must make and file your return with the court clerk. If you are unable to complete service you must return this original and all copies to the court clerk.

CERTIFICATE / AFFIDAVIT OF SERVICE / NONSERVICE OFFICER CERTIFICATE OR AFFIDAVIT OF PROCESS SERVER I certify that I am a sheriff, deputy sheriff, bailiff, appointed Being first duly sworn, I state that I am a legally competent court officer, or attorney for a party (MCR 2.104[A][2]), adult who is not a party or an officer of a corporate party, and that: (notarization not required) and that: (notarization required)

I served personally a copy of the summons and complaint. I served by registered or certified mail (copy of return receipt attached) a copy of the summons and complaint, together with List all documents served with the summons and complaint

on the defendant(s):

Defendant’s name Complete address(es) of service Day, date, time

I have personally attempted to serve the summons and complaint, together with any attachments, on the following defendant(s) and have been unable to complete service. Defendant’s name Complete address(es) of service Day, date, time

I declare under the penalties of perjury that this proof of service has been examined by me and that its contents are true to the best of my information, knowledge, and belief.

Service fee Miles traveled Fee Signature $ $ Incorrect address fee Miles traveled Fee TOTAL FEE Name (type or print) $ $ $ Title Subscribed and sworn to before me on , County, Michigan. Date My commission expires: Signature: Date Deputy court clerk/Notary public Notary public, State of Michigan, County of

ACKNOWLEDGMENT OF SERVICE I acknowledge that I have received service of the summons and complaint, together with Attachments on Day, date, time on behalf of . Signature

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

OAKLAND COUNTY WATER RESOURCES COMMISSIONER, as County Agent for the County of Oakland, GREAT LAKES WATER AUTHORITY, CITY OF DETROIT, by and through its Water and Sewerage Department, AND CITY OF LIVONIA,

Plaintiffs, Honorable v. Case 2018- - MZ MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY,

Defendant.

Peter H. Webster (P48783) Randal Brown (P70031) Scott A. Petz (P70757) Lavonda Jackson (P54982) Farayha Arrine (P73535) Counsel for Plaintiff Great Lakes Water Authority DICKINSON WRIGHT PLLC 735 Randolph Suite 1900 Counsel for Plaintiff WRC Detroit, MI 48226 2600 W. Big Beaver Road Ste. 300 (313) 964-9068 Troy, MI 48084 [email protected] (248) 433-7200 [email protected] Michael Fisher (P37037) Counsel for Plaintiff City of Livonia Steven E. Chester (P32984) 33000 Civic Center Dr. Amanda Van Dusen (P31195) Livonia, MI 48154 Sonal H. Mithani (P51984) (734) 466-2520 Miller, Canfield, Paddock and Stone, PLC [email protected] Counsel for Plaintiff DWSD One Michigan Building 120 N. Washington Square, Suite 900 Lansing, MI 48933 (517) 483-4933 [email protected]

VERIFIED COMPLAINT FOR DECLARATORY JUDGMENT INVALIDATING MDEQ’S REVISED LEAD AND COPPER RULES, PROMULGATED PURSUANT TO MICHIGAN’S SAFE DRINKING WATER ACT

There is no other pending or resolved civil action arising out of the transaction or occurrences alleged in the complaint.

Plaintiffs Oakland County Water Resources Commissioner, as County Agent for the

County of Oakland, Michigan, Great Lakes Water Authority, the City of Detroit (by and through

its Water and Sewerage Department), and the City of Livonia, state as follows for their Verified

Complaint for Declaratory Judgment Invalidating MDEQ’s Revised Lead and Copper Rules

Promulgated Pursuant to Michigan’s Safe Drinking Water Act against Defendant Michigan

Department of Environmental Quality:

PARTIES

1. As defined under the Michigan Safe Drinking Water Act, (“MSDWA” or the

“Act”), a “supplier of water” is: “a person who owns or operates a public water supply, and

includes a water hauler.” MCL 325.1002(t). In turn, a “public water supply” (“supply” or “water

supply”) is defined, in pertinent part, as: “a waterworks system that provides water for drinking or household purposes to persons other than the supplier of the water . . . .” MCL 325.1002(p).

Lastly, a “waterworks system” is: “a system of pipes and structures through which water is

obtained and distributed, including but not limited to wells and well structures, intakes and cribs,

pumping stations, treatment plants, storage tanks, pipelines and appurtenances, or a combination

thereof, actually used or intended for use for the purpose of furnishing water for drinking or

household purposes.” MCL 325.1002(x).

2. Plaintiff Jim Nash, in his capacity as Oakland County Water Resources

Commissioner (“WRC”), and as County agent for Oakland County, Michigan, is the elected

official in Oakland County responsible for planning, developing, and maintaining designated

surface water drainage systems in Oakland County and providing operations and maintenance to

both water and sewer customers in more than fifteen Oakland County communities.

3. Oakland County is the owner, and WRC the operator, of the City of Pontiac’s public water supply, making it a “supplier of water” under the MSDWA and subject to the revised lead and copper rules that are the subject of this declaratory action. MCL 325.1001 et seq.

4. Plaintiff Great Lakes Water Authority (“GLWA”) is an authority established pursuant to Act 233, Michigan Public Acts of 1955, as amended, and a wholesale water supply provider to over 127 governmental entities in Southeast Michigan. GLWA’s main office is located at 735 Randolph St. Suite 1900, Detroit, Michigan 48226.

5. GLWA is a supplier of water as defined by the MSDWA.

6. Plaintiff Detroit Water and Sewerage Department (“DWSD”) is a department of the

City of Detroit that provides drinking water and sewage disposal services for retail customers in the City of Detroit and some customers adjacent to the City of Detroit. DWSD’s service area has an estimated 2,700 miles of water mains serving a population of approximately 680,000, of which over 35 percent have incomes below the U.S. federal poverty line. Detroit has an estimated

125,000 lead service lines, aged water and sewer pipe networks, and high incidences of water and sewer line breaks. DWSD’s main office is located at 735 Randolph St. Suite 506, Detroit,

Michigan 48226.

7. Detroit’s waterworks system, like most such systems in the State of Michigan, was and is financed through revenue bonds issued and sold pursuant to the Revenue Bond Act, Act 94 of 1933, MCL 141.101, et seq. The terms of the Revenue Bond Act are therefore binding on

Detroit as a supplier of water, as they are on most if not all public water supplies affected by the

Rules.

8. DWSD is a supplier of water as defined by the MSDWA.

9. Plaintiff City of Livonia (“Livonia”) is a home rule city, which services approximately 39,000 retail customer accounts throughout the City.

10. Livonia’s waterworks system, like most such systems in the State of Michigan, was and is financed through revenue bonds issued and sold pursuant to the Revenue Bond Act, Act 94 of 1933, MCL 141.101, et seq. (See, Livonia Ordinance 2990, adopted July 8, 2015)(authorizing the issuance of Water Supply and Wastewater System Revenue Refunding Bonds pursuant to the

Revenue Bond Act). The terms of the Revenue Bond Act are therefore binding on Livonia as a supplier of water, as they are on most if not all public water supplies affected by the Rules.

11. Livonia is a supplier of water as defined by the MSDWA.

12. Defendant Michigan Department of Environmental Quality (“MDEQ”) is a principal department of the Executive Branch of the State of Michigan, as defined by Const 1963, art 5, § 2, which is assigned responsibilities pertaining to water quality standards in Michigan.

JURISDICTION

13. On the basis of the Michigan Constitution and applicable statutory provisions,

Plaintiffs seek declaratory relief against MDEQ. The Court of Claims has the power and jurisdiction to “hear and determine any claim or demand, statutory or constitutional, liquidated or unliquidated, ex contractu or ex delicto or any demand for monetary, equitable or declaratory relief or any demand for an extraordinary writ against the state or any of its departments or officers notwithstanding another law that confers jurisdiction of the case in the circuit court.” MCL

600.6419(1)(a) (emphasis added). Pursuant to the Court of Claims Act, the jurisdiction of the Court of Claims is exclusive. The Court of Claims has jurisdiction in this case.

14. The exception to the Court of Claims’ jurisdiction, MCL 600.6419(5), does not

apply here because there is no appeal from an administrative agency at issue.1

VENUE

15. “The court of claims shall sit in the court of appeals district where a court of appeals

judge serving as a judge of the court of claims sits . . . .” MCL 600.6413.

GENERAL ALLEGATIONS

16. Plaintiffs fully support aggressive and serious action against lead exposure from

water and other sources, and also support the removal of lead service lines. However, the revised

lead and copper rules enacted by MDEQ on June 14, 2018 (“the Rules”) impermissibly

compromise Plaintiffs’ ability to remove lead lines in a manner that protects the public from

exposure to a wide range of other contaminants in drinking water. MDEQ launched the stakeholder

engagement process in July 2017 accompanied by an announcement that the Rules would have to

be finalized by the end of the year. This abbreviated timeline limited Plaintiffs’ ability to work

through the numerous practical and legal complexities involved in implementing the Rules which

require the digging up of infrastructure on an estimated 500,000 residential properties.

17. Michigan’s Safe Drinking Water Act authorizes MDEQ to promulgate rules to

carry out and enforce the Act including setting “[s]tate drinking water standards and associated

monitoring requirements, the attainment and maintenance of which are necessary to protect the

public health.” MCL 325.1005(1)(b).

1 In accordance with Section 64 of the Administrative Procedures Act, MCL 24.264, the WRC, along with the Great Lakes Water Authority, the Detroit Water and Sewerage Department, and more than 50 other municipalities and water supplies, who signed on in support, filed a petition with MDEQ challenging the validity of the revised lead and copper rules. MDEQ refused to rule on the petition asserting it was not authorized to opine on the validity of its own rules. (See, MDEQ denial letter, Exhibit A, citing, Michigan Farm Bureau, 292 Mich App 106, 118, n 7; 807 NW2d 866 (2011)). Thus, there is no appeal of an agency decision here. 4

18. Pursuant to this authority, MDEQ has promulgated the “Supplying Water to the

Public” administrative rules. Mich Admin Code, R 325.10101 et seq.

19. The Supplying Water to the Public rules include a number of provisions related to

the regulation of lead and copper in drinking water, which, up until now, substantially tracked and

incorporated the requirements of the federal Lead and Copper Rule, 40 CFR 141.80-.91 (2007),

promulgated by the U.S. Environmental Protection Agency (“EPA”) pursuant to the federal Safe

Drinking Water Act, 42 USC 300f et seq.

20. However, on June 14, 2018, MDEQ enacted the Rules to make Michigan’s lead regulation the “toughest” in the nation.2

21. Among other things, the Rules now require a water supply to replace every single

lead service line in its system, including any portion of the service line on private property, after

first obtaining permission and access from every single private property owner to dig up and

replace the owner’s service lines.3 Rule 325.10604f(6). The replacement of both public and private portions of the service line (which will cost an estimated $2.5 billion across the State of

Michigan) must be paid for by the water supply, without any known funding from the State.

22. The Rules also lower the lead action level from 15 parts per billion (the action level used by the EPA) to 12 ppb. Rule 325.10401a. “Action level” means the level of lead in water that has to be found in order for a water supply to become subject to various (and costly) remedial water and pipe treatment requirements, and public awareness campaigns. The EPA is currently engaged in a detailed study of whether lowering the action level will have any corresponding benefit on public health, noting that the action levels were never chosen because they corresponded

2 For purposes of this Complaint, the term “Rules” refers to MAC R 325.10604f(6), Rule 325.10401a, Rule 325.11604(c) and Rule 325.10410(7). 3 Generally, a service line is an underground pipeline that connects the water main to the plumbing in individual homes and businesses. A portion of the service line is typically on private property. Water System Rendering, Exhibit B. 5

with health but rather because they demonstrated that corrosion control treatment was effectively

working on lead pipes. MDEQ has not provided an explanation for why it changed the lead action level before the EPA completed its study; what information it studied and considered in doing so; and why it abandoned its initial proposed action level of 10 ppb for 12 ppb.

23. The Rules also require (1) a complete inventory of the materials used in a water

system’s service lines, which will involve the costly excavation of service lines simply to identify

the material of which the service line is made, without coordination of this excavation with any

other improvements to the service lines that would otherwise require excavation (Rule 325.11604), and (2) the creation of local water advisory councils charged with organizing public awareness campaigns about lead and figuring out how to gain access to private property to replace a service line located thereon, among other things. (Rule 325.10410).

24. As they currently stand, the Rules do not address myriad related public health issues and were passed (1) based on a deeply flawed estimate of the costs imposed on water supplies by the Rules; (2) without addressing the various issues and concerns raised during the comment period by water supplies and stakeholders; and (3) without incorporating or providing any solutions to the various logistical, legal, and financial handicaps water supplies will face in implementing these

Rules. MDEQ made no statement or explanation (even though statutorily required of them) of why this particular iteration of the Rules is the most effective way to promote the public health even given the enormous burden to water supplies and ratepayers.

25. Rather than craft complete Rules that address the very real concerns raised by stakeholders, MDEQ has passed incomplete and arbitrary Rules, overreaching in some places (for example, requiring a repeating materials inventory that is not coordinated with any other service line work) and yet in other areas failing to address serious sources of lead exposure, all the while

leaving water supplies to figure out how to implement and pay for these costly changes despite real concerns that compliance with the Rules as written will cause the water supplies to violate the

Michigan constitution and various statutes and bond covenants (all of which will require water supplies to potentially defend lawsuits and defeat the goals of the Rules).

26. The key deficiencies in the Rules are as follows:

Wholesale Service Line Replacement Has Been Mandated Without Any Meaningful Study or Consideration of Cost or Funding

27. MDEQ has mandated service line replacement without any consideration, guidance, fact finding, or solution for funding the enormous cost of this state-wide infrastructure upgrade, particularly in the context of affordability, and how water supplies should fund these improvements while balancing their other public health and permit related infrastructure and legal obligations.

28. Importantly, water supplies are required by MDEQ to utilize Asset Management

Plans (“AMPs”) that forecast and allocate infrastructure spending years in advance. Rule

325.11606. Instead of requiring that lead service line replacement be included in a water supply’s

AMP, and done at a sustainable rate along with other necessary infrastructure improvements, which support public health and permit requirements, MDEQ has required five (5) percent lead service line replacement per year, not to exceed 20 years, even if this pace would entirely deplete or exceed all of the funds allocated to a water supply’s AMP.

29. Without an asset management approach to service line replacement, water supplies may not have the capacity to continue investing in other needed drinking water, sanitary sewer, storm water infrastructure, and water main repairs and improvements, thereby creating an entirely different set of public health problems and unintended consequences.

30. For example, Plaintiff DWSD’s AMP provides for $37 million in improvements system wide annually. DWSD has issued over 400 work orders to address leaks and main breaks since January 2018 on the public side of the system. It has issued over 600 work orders to repair leaks on the customer’s private side of the line. The replacement of five (5) percent of Detroit’s

125,000 service lines in one year would cost an estimated $42 million – far exceeding the entire amount allocated to its AMP and leaving nothing to address other public health issues like main breaks. This approach also forces dramatic increases in water rates and exacerbates the affordability and collection challenges with which DWSD and its customers are already grappling.

31. Moreover, MDEQ made little effort to engage in a thorough and complete calculation of the cost associated with the service line replacement rule. MDEQ’s cursory estimate that service line replacement will cost $499 million over 20 years (allocating on average only

$5,000 per line removal) is entirely inaccurate and based on major false assumptions about how many service lines need to be replaced and how much it costs to replace them. MDEQ’s cost estimate does not take into consideration the cost of obtaining legal access to private property to replace service lines, preparing temporary construction or permanent easements on private property, and updating local ordinances as required by the Rules, among other things. Further,

MDEQ’s cost estimate does not consider restoration of private landscaping and roadways as well as legacy costs that are likely to arise in many replacement efforts. MDEQ has stated that lead service line replacement means removal of the lead pipe rather than abandonment in the ground, making this is yet another cost not taken into consideration by MDEQ in its estimate. The more accurate (and still conservative) estimate is over $2.5 billion to replace service lines over 20 years.

(See Plaintiffs’ calculation of costs, Regulatory Impact Statement (“RIS”) with Plaintiffs’

Comments, Exhibit C, pp 11-12).

32. MDEQ also failed to consider how municipalities can feasibly pay for this massive

infrastructure expansion and upgrade. When asked to comment on how water supplies are to fund

these extraordinary costs, MDEQ has suggested that water supplies get “creative” in figuring it

out, and that “no identification of funding source or appropriation has taken place” at the State level. (RIS, Ex. C, Questions 9 and 13, pp 8, 13).

33. In failing to consider this important issue, MDEQ has left water supplies and local

governments no choice but to charge their rate payers the cost of service line replacement, a particularly onerous burden for municipalities like Pontiac and Detroit that have a large portion of their population living below the poverty line and already grapple with issues of charging and

collecting utility rates, and for numerous other small communities without resources to comply.

34. And finally, as it pertains to funding service line replacement, MDEQ did not

address or consider the fact that the Michigan Constitution bars it from mandating increased or

new services on local governments without providing funding. Const 1963, art 9, § 29. This is

the subject of a separate Headlee Amendment action to be filed in courts of appropriate

jurisdiction.

MDEQ Has Mandated Service Line Replacement On Private Property Without Considering The Legal Implications Of Providing Free Service To Private Property Owners.

35. MDEQ’s requirement that lead service lines on private property also be replaced at

the water supply’s expense is especially problematic in its arbitrariness and failure to consider

other laws. Most public water supplies, including Pontiac and Detroit, did not install and do not

own these private lead service lines.

36. MDEQ did not consider that private service line replacement violates Michigan’s

Safe Drinking Water Act – the very statute that authorizes MDEQ to promulgate these Rules.

37. The MSDWA only gives MDEQ “power and control over public water supplies

and suppliers of water.” MCL 325.1003 (emphasis added). There is no mention of MDEQ

regulating, monitoring or replacing privately owned water apparatus located on private property.

38. Similarly, nowhere in the MSDWA are private service lines contemplated as part

of the “waterworks system” that the MSDWA governs. MCL 325.1002(x). Thus, the Rules expand

“public water supply” beyond the statutory framework by adding private lines to the definition.

39. For MDEQ to require inventory and replacement of private service lines goes beyond the scope of the MSDWA.

40. Moreover, MDEQ did not address the fact that paying for service line replacement on private property may lead to lawsuits from ratepayers alleging various constitutional and statutory claims. In both its Regulatory Impact Statement and the Rules, MDEQ ignored this important issue despite various water supplies repeatedly raising it during the rulemaking process.

41. For example, Article 9, Section18 of the Michigan Constitution prohibits both the

State and certain units of local government—counties, authorities, townships—from providing free improvements even if the improvement is meant to serve the public interest.4

42. Yet the Rules compel water supplies to do just that. Specifically, the Rules require

water supplies to replace privately-owned infrastructure at their own expense (as opposed to the

owner’s).

4 More specifically, Article 9 Section 18 of the Michigan Constitution, which applies to counties and townships, states: “[t]he credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution.” This prohibition applies both to the state of Michigan, and “to local governments” like Oakland County “as political subdivisions and instrumentalities of the state.” Advisory Opinion on Constitutionality of 1986 PA 281, 430 Mich 93, 119; 422 NW2d 186 (1988), citing Oakland Cty Drain Comm’r v City of Royal Oak, 306 Mich 124, 142; 94 NW2d 875 (1943). A municipality “grant[s]” its credit within the meaning of Art 9, § 18 when it gives away something of value without consideration, Advisory Opinion of 1986 PA 281, 430 Mich at 126-27, quoting Alan v Wayne Cty, 388 Mich 210, 325; 200 NW2d 628 (1972), or when it creates an obligation legally enforceable against itself for the benefit of another. Petrus v Dickinson Cty Bd of Comm'rs, 184 Mich App 282, 297; 457 NW2d 359 (1990). 10

43. Similarly, Article 7, § 26 of the Michigan Constitution prohibits Michigan’s cities and villages from giving away free service and goods unless (1) authorized by law and (2) for a public purpose. Const 1963, art 7, §26; Advisory Opinion on Constitutionality of 1986 PA 281,

430 Mich 93, 119; 422 NW2d 186 (1988).

44. By providing free service line replacement on private property, cities and villages are concerned they will face lawsuits claiming they have provided free goods and services for a private purpose (i.e., the benefit of service line replacement on private property is conferred only on the private property owner and not the public).

45. Local governments that attempt to pass on the cost of private service line removal to their ratepayers are concerned they will face Headlee challenges as they risk being in violation of Article 9, § 31 of the Michigan Constitution (Headlee Amendment), which prohibits municipalities from assessing a fee upon ratepayers if it is otherwise a tax (i.e., if it is not regulatory in nature, proportional to the benefits conferred, and/or voluntary). This concern is heightened in the context of rental properties where the landlord will receive a windfall benefit for which his or her rent paying tenants and other unrelated ratepayers will be required to pay the bill. Detroit has approximately 133,000 rental homes. Given that supplies will be barred from charging the property owners who directly benefit from private service line replacement, a water supply’s only option is to increase rates and charges to other ratepayers to cover that cost.

46. Similarly, water supplies will face ratepayer lawsuits alleging violation of the

Revenue Bond Act, which prohibits water supplies from providing free service to any person.

MCL 141.118.

47. And in requiring private service line replacement, MDEQ has not considered or addressed the fact that the State itself is violating the Revenue Bond Act’s prohibition against the

State regulating a water supply’s rates. MCL 141.129. MDEQ is regulating rates by prohibiting

water supplies from charging customers for lead service line replacement. By mandating

replacement and barring charges to the property owner without providing a source of funding for

that purpose, MDEQ is increasing the revenue requirement that water supplies will have to collect

from other customers through rates, thereby impermissibly regulating said rates.

48. Yet, when asked to comment on laws that may be implicated or violated in passing

the Rules, MDEQ has stated that there are no such laws without any further elaboration or

explanation. (RIS, Ex. C, Question 3, p 3).

A Materials Inventory Has Been Required Without Coordinating This Massive Effort With Other Pipe Repairs Or Replacements.

49. The Rules also require that water supplies must submit to MDEQ a complete

distribution system materials inventory identifying, among other things, all materials in its service

lines, including the portion of the service line on private property. Rule 325.11604. The materials

inventory must be updated every five (5) years and submitted to MDEQ. Id.

50. A physical inventory of service lines requires exposure of underground

infrastructure, and creating that exposure outside of any other infrastructure improvements is

unnecessarily burdensome and inefficient. It would be far more efficient and effective to require a

materials inventory at the same time that other work is planned.

51. Yet, MDEQ has required the materials inventory on a completely different timeline

than service line replacement, meaning water supplies will have to excavate and access service

lines twice, an extremely costly and unnecessary requirement.

52. MDEQ has offered no explanation for why these efforts cannot be coordinated despite various water supplies raising the issue during the rulemaking process.

The Lead Action Level Was Lowered Without Any Reasoned Explanation or Justification for the Lower Limit in the RIS or During Rulemaking

53. The Rules also lower the lead action level from 15 ppb to 12 ppb meaning any water

supply that falls at or above the action level must undergo costly water and pipe remedial treatment.

54. During the public comment period, MDEQ proposed to lower the lead action level

from 15 ppb to 10 ppb. The water supply stakeholders expressed concern that lowering the action

level was premature and arbitrary. The water supplies noted that the EPA was in the midst of

studying lead action levels and their relationship to lead blood levels and MDEQ should wait for

the completion of this study to properly assess the best way to lower the action level and to avoid

confusion when the EPA concludes its own study and picks a potentially different lead action level.

The water supplies also pointed to the EPA’s statement that the lead action level does not currently

indicate a correlation with lead blood levels, and it is not clear whether a change from 15 ppb to

10 ppb or 12 ppb would have any impact on lead blood levels.

55. MDEQ did not address a single one of these concerns and arbitrarily passed a Rule

that lowered the lead action level to 12 ppb without explanation as to why the original 10 ppb was

abandoned, and why they could not wait for the EPA to finish its detailed study of the subject.

Other than that 12 is a lower number than 15, MDEQ offered no explanation for this change.

56. Because of the deficiencies stated above, Plaintiffs seeks to invalidate the current

Rules as procedurally, substantively, constitutionally and statutorily invalid, in favor of lead

regulation that actually addresses and provides a solution for the financial, legal, and, logistical

issues at hand, and thereby creates meaningful, effective and scientifically-sound minimization of lead exposure.

COUNT I (BROUGHT BY ALL PLAINTIFFS) VIOLATION OF THE ADMINISTRATIVE PROCEDURES ACT

57. Plaintiffs incorporate the above allegations as if restated here.

58. Plaintiffs seek a declaratory judgment that the Rules are procedurally invalid

because they were passed without any regard for the rulemaking process required of MDEQ

pursuant to the Administrative Procedures Act (“APA”), MCL 24.201, et seq.

59. Under Michigan law, an agency rule is procedurally invalid if the agency fails to follow the rulemaking procedure codified in the APA. MCL 24.243(1); Michigan Charitable

Gaming Ass'n v Michigan, 310 Mich App 584, 594; 873 NW2d 827 (2015).

60. The APA requires that an agency promulgating a rule must draft a Regulatory

Impact Statement or RIS that includes a long list of analyses and information codified in the APA.

MCL 24.245(3). In other words, the RIS is required to provide the technical and legal foundation for the proposed rules.

61. First, the APA mandates that a RIS include “[a]n estimate of the actual statewide compliance costs of the proposed rule on individuals.” MCL 24.245(3)(j).

62. But the RIS provides only a flawed and grossly inaccurate estimate of the enormous cost of wholesale service line replacement mandated by the Rules. MDEQ’s estimate that service line replacement will cost $499 million over 20 years is entirely inaccurate and based on major false assumptions about how many service lines need to be replaced and how much it costs to replace them. (Ex. C, pp 9-12).

63. Moreover, MDEQ’s cost estimate completely omits a number of costs associated with service line replacement on private property such as the cost of obtaining legal access to private property to replace service lines, preparing temporary construction or permanent easements on private property, and the updating of local ordinances that will be required by the Rules. The

more accurate (and still conservative) estimate is over $2.5 billion to replace service lines over 20

years. (Ex. C, pp 11-12).

64. Similarly, the RIS’s cost estimates of complying with the new sampling, inventory

and lead action requirements are also inaccurate and extremely conservative. Id.

65. The RIS further states that “[t]here are no direct compliance costs to the public for

this rule,” yet in the same breath admits that municipalities will have to “increase their utility rates

to pay for their infrastructure upgrades and additional compliance costs,” resulting in “higher costs

to homeowners, but it is very difficult to estimate this impact” (even though earlier in the statement

it claimed the impact was $5,000 per line). (Id. at Question 27, p 17).

66. Moreover, the RIS does not consider or quantify the impact on ratepayers who will

ultimately shoulder this enormous cost, an especially onerous requirement in communities such as

Pontiac and Detroit where most lead services lines are found and where a large portion of the population lives below the poverty line and in rental homes, as well as for numerous other small

communities without the resources to comply with these Rules.

67. Thus, MDEQ has failed to include an “estimate of the actual statewide compliance

costs of the proposed rule on individuals” as required by MCL 24.245(3)(j).

68. The APA also mandates that the RIS include “[a] demonstration that the proposed rule is necessary and suitable to achieve its purpose in proportion to the burden it places on individuals” and “[a]n estimate of the primary and direct benefits of the rule.” MCL 24.245(3)(k);

MCL 24.245(3)(v)(emphasis added).

69. The RIS does not include any statement of why the iteration of the Rules passed by

MDEQ are “necessary and suitable to achieve its purpose in proportion to the burden it places” on

water supplies, which must also address a myriad of other public health issues.

70. For instance, the RIS offers no explanation or analysis of the benefit provided by

replacing lead service lines at a rate of five (5) percent per year, rather than incorporating replacement through a water supply’s Asset Management Plan, in proportion to the enormous cost of requiring service line replacement at a rate that will deplete a water supply’s entire budget, leaving no money for other necessary repairs and work that affect public health and safety such as, without limitation, collapsed mains, sewer backups, sinkholes, lack of sufficient water, and core

operating costs under bond ordinance covenants which require supplies to keep their system in

good repair in order to generate revenue to pay bonds.

71. The RIS provides no explanation or analysis of the benefit of wholesale service line

replacement; that is, given the enormous costs, the RIS does not address proportional benefit in

prioritizing changing a lead service line when compared to addressing other types of health risks

associated with lead.

72. The RIS provides no explanation or analysis of the benefit of requiring a complete

inventory of service line materials every five years in proportion to the enormous cost of digging

up all service lines, especially without coordination with other repairs and improvements.

73. The RIS provides no explanation or analysis of the benefit of lowering the lead

action level from 15 ppb to 12 ppb in proportion to the cost of the increased remedial measures that will have to be undertaken by water supplies that now fall below the lead action level.

74. Rather, when it comes to comparing cost and benefit, the bare bones RIS states only that the Rules are necessary for “protecting the public health” but offers no meaningful analysis on how the Rules protect the public health in relation to the financial burdens created by the Rules.

(RIS, Ex. C, Questions 1, 2, 4, and 5, pp 1-3, 4-6).

75. Further, where the RIS does offer specifics related to the benefit of its Rules, it

makes misleading statements. The RIS claims that the Rules will confer $270M of benefit on the

State because a 2016 report by the Ecology Center found that state-wide costs associated with

elevated blood lead levels totaled $270 million in 2014. (RIS, Ex. C, Question 29, pp 18-19). But

the Ecology Center’s report explicitly states that “these figures indicate the baseline costs and

economic impacts of lead exposure in Michigan, largely associated with lead paint” and that the

“problem of lead in drinking water has received national attention . . . [but] . . . the costs of that

contamination and potential remediation is beyond the scope of this report.” (Ecology Center and

Michigan Network for Children’s Environmental Health, Costs of Lead Exposure and Remediation

in Michigan: Update, October, 2016, Exhibit D, pp 5, 10.) (emphasis added).

76. Thus, the RIS is deficient in that it provides neither an “estimate of the primary and direct benefits” of the Rules nor an explanation or analysis of why the Rules are “necessary and suitable to achieve its purpose in proportion to the burden it places on individuals.” This is a violation of MCL 24.245(3)(k) and MCL 24.245(3)(v).

77. The APA also requires the Regulatory Impact Statement to identify potential alternatives to the rules that would achieve the same or similar goals. MCL 24.245(3)(g). Again,

MDEQ has failed to comply.

78. The RIS states that there are no reasonable alternatives to the Rules that would protect the public health. (RIS, Ex. C, Question 33, p 21).

79. However, a number of stakeholders proposed reasonable alternatives that would protect the public health which MDEQ never considered, addressed or analyzed. These include: strengthening provisions for corrosion control; establishing and implementing protocols for blood level testing; requiring follow up investigation and remediation of the source of lead causing an

elevated blood level; requiring service line replacement as part of an Asset Management Plan; and establishing a dedicated state level revenue source to pay for lead line and/or plumbing fixture replacement on private property when it is a known source of contamination and the property owner qualifies for financial assistance.

80. At the very least, the RIS was required to identify and discuss reasonable alternatives to the Rules’ requirement that water supplies bear the entire cost of implementing the

Rules. Alternatives that should have been considered include State funding, a dedicated revenue stream for lead service line replacement, a loan from the Drinking Water Revolving Fund, and other ideas suggested by water supplies, as these funding solutions could achieve the same result of promoting the public health.

81. Yet, MDEQ admits in its RIS that no appropriation or funding alternatives have been examined. (RIS, Ex. C, Question 9 and 13, pp 8 and 13).

82. MDEQ’s failure to examine alternatives for funding that would achieve the same or similar goals is disingenuous and violates MDEQ’s requirements under the APA. MCL

24.245(3)(g).

83. The APA also requires that an agency provide in its RIS any other information requested by the Office of Regulatory Reinvention (“ORR”). MCL 24.245(3)(bb).

84. The ORR presented MDEQ with a number of questions in the RIS that were ignored or incompletely answered by MDEQ.

85. For example, ORR requested that MDEQ “describe why it is necessary that the proposed rule(s) exceed the federal standard or law, and specify the costs and benefits arising out of the deviation.” (RIS, Ex. C, Question 1, p 1) (emphasis added).

86. The RIS simply ignored the question when it should have addressed why MDEQ has lowered the lead action level from 15 ppb to 12 ppb even before receiving the results of a sophisticated EPA study on the cost benefit analysis of lowering the lead action level. The RIS does not discuss any cost associated with this deviation nor any benefits arising out of it, as explicitly required by the APA. MCL 24.245(3)(bb); (RIS, Ex. C, Question 1, p 1). The RIS also offers no analysis of the effectiveness and feasibility of various other deviations that make its Rules more stringent than the EPA’s lead and copper regulation in proportion to the burdens placed on municipalities implementing the Rules, especially considering all other important public health issues that must be addressed. Again, this is in direct contravention of the APA’s requirements.

87. Similarly, as asked by the ORR and required by the APA, MDEQ was to explain why its standards were more stringent than those in other similar states. (Id. at Question 2, pp 2-

3). Again, MDEQ did not answer the question, stating only that other states would follow suit soon enough. Id.

88. The ORR also asked MDEQ to identify any laws that may conflict with the Rules.

(Id. at Question 3, pp 3-4).

89. MDEQ claimed there were none without considering that in requiring water supplies to replace private lines at the supply’s expense, water supplies and local governments risk

Michigan constitutional violations such as Article 9, § 18 (prohibition against local governments giving away something of value without consideration); Article 7, § 26 (prohibition against cities and villages giving away something of value without consideration unless for a public purpose); and Article 9, § 31 (Headlee Amendment prohibition against levying charges that are taxes (and not fees) without vote). Local governments and water supplies also risk facing lawsuits claiming violations of the Revenue Bond Act, MCL 141.118(1) which prohibits water supplies from

providing free services. In addition, in the absence of statutory authority to access and modify

private property to replace lead service lines, which also require access to the structure, water

supplies run the risk of a challenge based on inverse condemnation or takings. Loretto v

Teleprompter Manhattan CATV Corp, 458 US 419; 102 S Ct 3164; 73 L Ed 2d 290 (1982).

90. None of these laws are mentioned or considered in the Regulatory Impact

Statement, despite various water supplies bringing it to MDEQ’s attention during the rulemaking

process. This is in direct contravention of the APA.

91. Nor does the RIS address MDEQ’s own violations of Article 9, § 18 of the

Michigan Constitution in requiring the credit of various local governments to be used for a private purpose (i.e., the replacement of private service lines at the water supply’s expense) or its violation of the Revenue Bond Act, which prohibits the State from regulating local water rate setting.

92. In sum, the Regulatory Impact Statement is woefully deficient in that it fails to

provide statutorily-required information and is generally full of vague and conclusory statements that do not provide any actual information to the public about MDEQ’s decision making process or the cost and benefit of the Rules.

93. In publishing such a deficient RIS and completely disregarding the statutorily-

mandated rulemaking process, MDEQ violated the Administrative Procedures Act, rendering its

Rules procedurally invalid.

94. Wherefore, Plaintiffs seek a declaratory judgment that the Rules are procedurally

invalid.

COUNT II (BROUGHT BY ALL PLAINTIFFS) THE RULES ARE SUBSTANTIVELY INVALID UNDER MICHIGAN LAW BECAUSE THEY ARE ARBITRARY AND CAPRICIOUS AND BEYOND THE SCOPE OF MICHIGAN’S SAFE DRINKING WATER ACT

95. Plaintiffs incorporate the above allegation as if restated here.

96. Under Michigan law, courts employ a three-part test to determine the substantive validity of the rules promulgated by an agency: “(1) whether the rule is within the matter covered by the enabling statute; (2) if so, whether it complies with the underlying legislative intent; and (3) if it meets the first two requirements . . . it is neither arbitrary nor capricious.” Ins Institute of

Michigan v Comm’r, Fin & Ins Servs, 486 Mich 370, 385; 785 NW2d 67 (2010). An arbitrary and capricious rule is “an exercise of will . . . without consideration or adjustment with reference to principles, circumstances, or significance,” Blank v Dep't of Corr, 222 Mich App 385, 407 (1997), aff'd in part, 462 Mich 103 (2000) (citation omitted).

97. Rule 325.10604f(6), requiring service line replacement, is arbitrary and capricious because it does not in any way take into account the burdens caused by such a massive infrastructure update relative to benefit; does not incorporate line replacement into the water supply’s asset management plan; does not consider that having to replace five (5) percent of service lines per year could deplete or exceed a water supply’s entire capital budget leaving nothing for other essential water-related costs such as water main repairs and improvements; and does not consider any funding sources to undertake this massive update.

98. The portion of the Rule requiring replacement of lead service lines on private property is particularly arbitrary and capricious as it fails to take into account conflicting laws.

These include Article 9, § 18 (prohibition against local governments giving away something of value without consideration); Article 7, § 26 (prohibition against cities and villages giving away

something of value without consideration unless for a public purpose); Article 9, § 31 (Headlee

Amendment prohibition against levying charges that are taxes (and not fees) without vote);

Revenue Bond Act, MCL 141.118 (prohibition against water supplies providing free services);

Revenue Bond Act, MCL 141.129 (prohibition against State regulating water supply rates); and challenges based on inverse condemnation or takings. Loretto, 458 US at 419.

99. In addition to being arbitrary and capricious, the replacement of private service lines is also beyond the scope of the enabling statute.

100. The MSDWA only gives MDEQ “power and control over public water supplies and suppliers of water.” MCL 325.1003 (emphasis added).

101. There is no mention of MDEQ regulating, monitoring, or replacing privately- owned water apparatus located on private property.

102. Similarly, nowhere in the MSDWA are private service lines contemplated as part of the “waterworks system” that the MSDWA governs. MCL 325.1002(x).

103. Thus, Rule 325.10604f(6) is arbitrary and capricious and beyond the scope of the enabling statute, rendering it substantively invalid.

104. Rule 325.10401a regarding lowering the lead action level from 15 ppb to 12 ppb is arbitrary and capricious because it was approved prematurely and without any regard for the EPA’s ongoing and detailed study of lead action levels and their impact on lead blood levels. Given that

MDEQ lacks the scientific and technical resources available to the EPA to undertake a sophisticated analysis of this scope and nature, it is arbitrary to lower the lead action level before receiving the results of the EPA’s study.

105. For the reasons already expressed above in Paragraphs 21 and 52-55, Rule

325.10401a regarding lowering the lead action level from 15 ppb to 12 ppb is arbitrary and

capricious rendering it substantively invalid.5

106. Rule 325.11604(c) requires water supplies to submit to MDEQ a complete

distribution system materials inventory every five (5) years, which identifies, among other things,

all materials in its service lines, including the portion of the service line on private property.

107. A physical inventory of lead service lines requiring exposure of underground

infrastructure that is not performed in conjunction with any other infrastructure improvements is

inefficient and incredibly burdensome for a municipality. It would be far more effective to require

a materials inventory at the same time that other work in the area is planned. Thus, Rule

325.11604(c) is arbitrary and capricious rendering it substantively invalid.

108. Rule 325.10410(7) mandates that water supplies that serve a population of more

than 50,000 create advisory councils that, among other things, will “develop plans for continuing

public awareness of lead in drinking water, even when the action level is not exceeded,” and

“advise and consult with the water supply on efforts to replace private lead service lines at locations

where the owner declined service line replacement,” among other things. Rule 325.10410(7)(f).

109. By requiring the establishment of municipal water councils, MDEQ imposes

additional financial burdens on water supplies not contemplated by the MSDWA and without a

funding source.

110. Thus, Rule 325.10410(7) is substantively invalid.

5 MDEQ is well aware that the EPA has stated that the current lead action level is not a “health-based” figure and more study is required on the correlation between lead action level and lead blood level, making MDEQ’s decision to prematurely lower the lead action level arbitrary. (Letter to Rep. Jeremy Moss, Exhibit E). 23

111. And, finally, the Rules are substantively invalid because, as detailed in Count I, they were enacted by MDEQ without any explanation in its Regulatory Impact Statement of the technical and legal foundation behind the Rules. Because the assumptions articulated in the RIS are flawed and/or unsupported, the Rules themselves are substantively flawed.

112. Wherefore, Plaintiffs seek a declaratory judgment that the Rules are substantively

invalid because they go beyond the scope and intent of the enabling statute and are arbitrary and

capricious.

COUNT III (BROUGHT BY WRC ONLY) THE RULES VIOLATE ARTICLE 9 SECTION 18 OF THE MICHIGAN CONSTITUTION

113. Plaintiffs incorporate the above allegations as if restated here.

114. Article 9, § 18 of the Michigan 1963 Constitution, which relates to counties,

townships and authorities, states in pertinent part that: “[t]he credit of the state shall not be granted

to, nor in aid of any person, association or corporation, public or private, except as authorized in

this constitution.”

115. This prohibition applies both to the state of Michigan, and “to local governments”

like Oakland County “as political subdivisions and instrumentalities of the state.” Advisory

Opinion of 1986 PA 281, 430 Mich at 119 (citations omitted); see also Wayne Cty Bd of Comm’rs

v Wayne Cty Airport Auth, 253 Mich App 144, 181; 658 NW2d 804 (2002).

116. A local government “grant[s]” its credit within the meaning of Article 9, Section

18 when it gives away something of value without consideration, Advisory Opinion of 1986 PA

281, 430 Mich at 126-27, quoting Alan, 388 Mich at 325, or when it creates an obligation legally enforceable against itself for the benefit of another. Petrus v Dickinson Cty Bd of Comm'rs, 184

Mich App 282, 297; 457 NW2d 359 (1990).

117. By requiring water supplies to replace privately owned lead and other service lines

located on private property at the cost of the water supply and without state funding, MDEQ has

granted the credit of the various local government units that own and operate water supplies (here, the WRC) to private citizens whose service lines meet the criteria for replacement under the Rules.

118. For these reasons, WRC seeks a declaration that the Rules are constitutionally

invalid because they violate Article 9, § 18 of the Michigan Constitution.

COUNT IV (BROUGHT BY LIVONIA AND DWSD) THE RULE REQUIRING REPLACEMENT OF PRIVATE SERVICE LINES VIOLATES ARTICLE 7 SECTION 26 OF THE MICHIGAN CONSTITUTION

119. Plaintiffs Livonia and DWSD incorporate the above allegations as if restated here.

120. Article 7, § 26 of the Michigan Constitution prohibits Michigan’s villages and cities

from giving away free services or goods unless authorized by law and for a public purpose.6

121. In requiring free replacement of privately owned service lines on private property, the State has violated this provision of the Constitution because it requires Michigan’s villages and cities to give away free services or goods without a statutory declaration of public purpose, particularly in the context of rental property where the property owner is not a rate payer, and without providing any state funds to pay for it.

122. The free service is neither authorized by law (as no statute so provides and these

Rules should be deemed invalid) nor with any public purpose articulated by statute.

123. For these reasons, Livonia and DWSD seek a declaratory judgment that the Rules violate Const 1963, art 7, § 26.

6 More specifically, Article 7, § 26 states that “[e]xcept as otherwise provided in this constitution, no city or village shall have the power to loan its credit for any private purpose or, except as provided by law, for any public purpose.” Thus, “[i]n order to conform to the requirements of the art. 7 § 26 exception, the loan of a municipality’s credit must be both: (1) authorized by law, and (2) for a public purpose.” Advisory Opinion of 1986 PA 281, 430 Mich at 119. 25

COUNT V (BROUGHT BY WRC, DWSD, AND LIVONIA) THE RULE REQUIRING REPLACEMENT OF PRIVATE SERVICE LINES VIOLATES THE REVENUE BOND ACT

124. Plaintiffs WRC, DWSD, and Livonia incorporate the above allegations as if restated here.

125. The Revenue Bond Act, MCL 141.101 et seq, explicitly prohibits a “public improvement” from providing any “free service” to a person, firm, corporation . . . or to a public agency or instrumentality.” MCL 141.103(b); MCL 141.118(1)

126. A “public improvement” includes “water supply systems, including plants, works, instrumentalities, and properties used or useful in connection with obtaining a water supply, the treatment of water, or the distribution of water” and encompasses “any interest or participation in

[the public improvement] . . . .” MCL 141.103(b).

127. In requiring water supplies to pay for service line replacement on private property,

MDEQ is requiring water supplies to provide a free service to persons owning said private property.

128. Thus, the Rules violate MCL 141.118(1).

129. Further, the Revenue Bond Act prohibits state agencies such as MDEQ from regulating or supervising local water rate setting. “Rates charged for the services furnished by any public improvement . . . shall not be subject to supervision or regulation by any state bureau, board, commission, or other like instrumentality or agency thereof.” MCL 141.129.

130. The Rules, specifically Rule 325.10604f(6)(e), by barring charges to the property owner, dictate that the cost of replacing private lead water service lines be treated as an expense of the supply which must be paid for out of the rates. MCL 141. 121(1).

131. Thus, MDEQ is asserting a power it is prohibited by law from exercising–the power to regulate and/or supervise local water rate setting.

132. For these reasons, Plaintiffs WRC, DWSD, and Livonia request a declaration that the Rules are invalid because they violate the Revenue Bond Act.

WHEREFORE, all Plaintiffs request the following relief:

Declaratory judgment that the Rules are procedurally invalid because they violate the Administrative Procedures Act;

Declaratory judgment that the Rules are substantively invalid because they are arbitrary and capricious and go beyond the scope and intent of the enabling statute;

A stay of any upcoming deadlines mandated by the Rules, particularly the December 11, 2018 deadline by which water supplies must create advisory councils pursuant to Rule 325.10410(7)(f), until the adjudication of this dispute.

WHEREFORE, Plaintiff WRC request the following relief:

Declaratory judgment that the Rules are constitutionally invalid because they violate Article 9, Section 18;

WHEREFORE, Plaintiff Livonia and DWSD request the following relief:

Declaratory judgment that the Rules are constitutionally invalid because they violate Article 7, Section 26 of the Michigan Constitution.

WHEREFORE, Plaintiffs WRC, DWSD, and Livonia request the following relief:

Declaratory judgment that the Rules are invalid because they violate the Revenue Bond Act.

Attorneys for Plaintiffs

By: Peter H. Webster (P48783) Scott A. Petz (P70757) Farayha Arrine (P73535) DICKINSON WRIGHT PLLC Counsel for Plaintiff WRC 2600 W. Big Beaver Road, Suite 300 Troy, MI 48084 (248) 433-7200

By: Steven E. Chester (P32984) Amanda Van Dusen (P31195) Sonal Mithani (P51984) Miller, Canfield, Paddock and Stone, PLC Counsel for Plaintiff DWSD 1 E. Michigan Ave. Ste. 900 Lansing, MI 48933 (517) 483-4933

By: Michael Fisher (P37037) Counsel for Plaintiff City of Livonia 33000 Civic Center Dr. Livonia, MI 48154 (734) 466-2520

By: ______Randal Brown (P70031) Lavonda Jackson (P54982) Counsel for Plaintiff Great Lakes Water Authority 735 Randolph Suite 1900 Detroit, MI 48226 (313) 964-9068 BLOOMFIELD 12840-415 2247874v3

VERIFICATION

Pursuant to Section 6434(2) of the Comt of Claims Act, MCL 600.6434(2), a complaint must be verified.

I, Ben L. Lewis Jr., P.E., being first duly sworn, depose and say that I hold the position of

Manager with Plaintiff Oakland County Water Resource Commissioner, as County Agent for the

County of Oakland, and that I am duly authorized to sign this Verification for and on behalf of

Oakland County Water Resource Commissioner. While I may not have personal knowledge of all of the facts recited in the Verified Complaint, the information contained herein has been collected and made available to me by others (including information provided by affidavit), and I declare, pursuant to MCR 1.109(D)(3)(a), that the allegations contained in this Verified

Complaint are true to the best of my information, knowledge, and belief.

OAKLAND COUNTY WATER RESOURCES COMMISSIONER as County Agent for the County of Oakland

ByP0? r4� Ben L. Lewis Jr., P.K Its: Manager

Subscribed and sworn to before me, a Notary Public in and for said County, this 10th day of December, 2018

Coo� Notary Public, State of Michigan, County of Oakland Acting in Oakland County, Michigan My commission expires 06/25/2024 VERIFICATION

Pursuant to Section 6434(2) of the Court of Claims Act, MCL 600.6434(2), a complaint must be verified.

I, Cheryl Porter, being first duly sworn, depose and say that I hold the position of Chief

Operating Officer of Water and Field Services with Plaintiff Great Lakes Water Authority, and that I am duly authorized to sign this Verification for and on behalf of Great Lakes Water

Authority. While I may not have personal knowledge of all of the facts recited in the Verified

Complaint, the information contained herein has been collected and made available to me by others, and I declare, pursuant to MCR 1.109(D)(3)(a), that the allegations contained in this

Verified Complaint are true to the best of my information, knowledge, and belief.

GREAT LAKES WATER AUTHORITY

Its: Coo w/ G L� Ac

Subscribed and sworn to beforeme, a Notar� Public and forsaid County, b this /) '11-ctay of �c , 2018 LATANYAWHITFIELD NotaryPublic, Wayne County,,Mich. Notary Public, State of Michigan, My CommissionExpires: MAY 30, 2020 County of Acting in-...... *� � County, Michigan My commissi expires /?l

Pursuant to Section 6434(2) of the Court of Claims Act, MCL 600.6434(2), a complaint

must be verified.

I, Debra N. Pospiech, being first duly sworn, depose and say that I hold the position of

General Counsel and Chief Administrative Officer with Plaintiff Detroit Water and Sewerage

Department, and that I am duly authorized to sign this Verification for and on behalf of Detroit

Water and Sewerage Department. While I may not have personal knowledge of all of the facts

recited in the Verified Complaint, the information contained herein has been collected and made

available to me by others and I declare, pursuant to MCR 1.109(D)(3)(a), that the

allegations contained in this Verified Complaint are true to the best ofmy information, knowledge,

and belief.

Its: General Counsel and Chief Administrative Officer

Subscribed and sworn to before me, a Notary Public in and forsaid County, this jQ__day of l�e111b&v , 2018 ' '-..,I

!LQ TIANA CHALL l De (/J{cwfl Notary Public • State ol Michigan County of Oakland Notary Public, State of Michigan, My Commission Expires Ma� 12, � County of QaljCA-<:) Acting in the County of Acting in U ;.._Q_ County, Michigan � My commiss expires � / � ��3 Pursuant to Section 6434(2) of the Court of Claims Act, MCL 600.6434(2), a complaint VERIFICATION must be verified.

I, Donald R. Rohraff, being first duly sworn, depose and say that I hold the position of

Director of Public Works with Plaintiff City of Livonia, and that I am duly authorized to sign this

Verification for and on behalf of City of Livonia. While I may not have personal knowledge of

all of the facts recited in the Verified Complaint, the information contained herein has been

collected and made available to me by others, and I declare, pmsuant to MCR 1.109(D)(3)(a),

that the allegations contained in this Verified Complaint are true to the best of my

information, knowledge, and belief.

�Y=V�_..> CITYDonald OF LIV� R. Rohraffey

Its: Director of Public Works

Subscribed and sworn to before me, a Notary Public in for said County, � this /()iA.day of /� , 2018

Notary Publi�, State of Michigan County of 6J� Acting in Lu0g� e, Coun y, Michigan My commission' expires _1_J_�� J.��-- . - - BRENDA KAY SMYSER NOTARY PUBLIC, STATE OF Ml =-<., COUNTY OF WAYNE EXPIRES Apr 25, 2023 MY COMMISSION � ACTING IN COUNTY OF, . . ·, -.,,, P:\Brenda\Mary1fit1gat1on\Lead and Coppcr\Venficauon.docx ...____ - ...... INDEX OF EXHIBITS

Exhibit A: MDEQ Denial Letter

Exhibit B: Water System Rendering

Exhibit C: MDEQ Regulatory Impact Statement with Comments from Water Suppliers

Exhibit D: Ecology Center and Michigan Network for Children’s Environmental Health, Costs of Lead Exposure and Remediation in Michigan: Update, October 2016.

Exhibit E: MDEQ Letter to Representative Jeremy Moss EXHIBIT A

STATE OF MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY

LANSING RICK SNYDER C. HEIDI GRETHER GOVERNOR DIRECTOR

October 12, 2018

VIA E-MAIL

Mr. Steven E. Chester Mr. Peter H. Webster Miller, Canfield, Paddock and Stone, P.L.C. Dickinson Wright PLLC One Michigan Avenue, Suite 900 2600 West Big Beaver Road, Suite 300 Lansing, Michigan 48933 Troy, Michigan 48084

Dear Mr. Chester and Mr. Webster:

SUBJECT: Request for Declaratory Ruling Regarding the Lead and Copper Rules

On August 13, 2018, the Great Lakes Water Authority (GLWA), the Detroit Water and Sewerage Department (DWSD), and the Oakland County Water Resources Commissioner (Oakland County) submitted a Request for Declaratory Ruling (Request) with the Michigan Department of Environmental Quality (MDEQ). The Request serves to “challenge the validity of the MDEQ Lead and Copper Rules (‘LCRs’), which were filed with the Secretary of State on June 14, 2018.” Under the Safe Drinking Water Act, 1976 PA 399, as amended, MCL 325.1001 et seq. (SDWA), the MDEQ is required to “promulgate and enforce rules….” MCL 325.1005(1). As the owner or operator of a public water supply for its customers in southeastern Michigan, the GLWA, DWSD, and Oakland County are subject to the SDWA and the revised LCRs as “supplier[s] of water….” MCL 325.1002(t)

The basis of the Request is its assertion that certain provisions of the revised LCRs “exceed the scope of the MDEQ’s authority under state law and are arbitrary and capricious.” Specifically, the Request raises the following substantive challenges:

(1) The SDWA does not authorize the requirement that water suppliers replace the private portion of services lines, as provided for under Mich Admin Code R 325.10604f(5)(c) and (6)(e);

(2) The SDWA does not authorize the requirement that water suppliers create a water system advisory council, as provided under Mich Admin Code R 325.10410(7);

(3) The reduction of the lead-action levels under Mich Admin Code R 325.10604f(1)(c), (e), and (f) is “arbitrary and capricious” and does not meaningfully contribute to reducing blood lead levels;

(4) The requirement of sequential sampling under Mich Admin Code R 325.10710a(2)(b) conflicts with federal law;

CONSTITUTION HALL • 525 WEST ALLEGAN STREET • P.O. BOX 30473 • LANSING, MICHIGAN 48909-7973 www.michigan.gov/deq • (800) 662-9278 Mr. Steven E. Chester Mr. Peter H. Webster Page 2 October 12, 2018

(5) The requirement for water suppliers to replace lead service lines within 20 years under Mich Admin Code R 325.10604f(6)(b) is “arbitrary and capricious”;

(6) The ban on partial lead service line replacement under Mich Admin Code R 325.10604f(6) is “arbitrary and capricious”; and

(7) The Regulatory Impact Statement and Cost-Benefit Analysis prepared by the MDEQ during the revised LCRs promulgation process was deficient for a variety of reasons.

The Administrative Procedures Act, 1969 PA 306, as amended (APA), under which the Request was submitted, authorizes an agency to issue a declaratory ruling on “the applicability to an actual state of facts of a statute administered by the agency or of a rule or order of the agency.” MCL 24.263. See also Mich Admin Code R 324.81(1). It is well-settled that an agency is not empowered to address the validity of an administrative rule through the APA declaratory ruling process. Rand v. Civil Service Commission, 71 Mich App 581 (1976); see also LeDuc, Michigan Administrative Law, § 8:13, pp 576-77 (“Section 63 empowers an agency to issue a declaratory ruling only as to the applicability of a rule, not as to its validity.”). Because this Request seeks a determination that the revised LCRs are invalid, rather than a determination as to the applicability of those rules to an actual state of facts, the relief sought is beyond the MDEQ’s authority under the APA.

Based on the foregoing, the Request for Declaratory Ruling that the GLWA, the DWSD, and Oakland County submitted on August 13, 2018, is denied.1

Sincerely,

C. Heidi Grether Director 517-284-6700

Enclosure cc/enc: Mr. S. Peter Manning, Michigan Department of Attorney General Mr. Zachary Larsen, Michigan Department of Attorney General Mr. Aaron B. Keatley, Chief Deputy Director, MDEQ Mr. Eric Oswald, MDEQ

1 This decision also applies to the numerous Concurrences with the Request submitted by the local units of government listed in Enclosure A. Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

Received September 5, 2018 City of Wayne Department of Public Works Mr. Ed Queen, Assistant Director, Department of Public Works, City of Wayne, 35200 Forest Avenue, Wayne, MI 48184 [email protected]

Received September 11, 2018 Brownstown Township Mr. Andy Linko, Supervisor, Charter Township of Brownstown, 21313 Telegraph Road, Brownstown Township, MI 48183 [email protected] (listed on Web site as Supervisor’s Assistant)

Mr. William Turner, Director of Public Works, Charter Township of Brownstown, 21313 Telegraph Road, Brownstown Township, MI 48183 [email protected]

Received September 13, 2018 Village of Lake Orion Mr. Kenneth VanPortfliet, President of Village Council, Village of Lake Orion, 21 East Church Street, Lake Orion, MI 48362 [email protected]

City of Bay City Mr. Neil P. Wackerly, City Attorney, City of Bay City, Allsopp Wackerly & Blossom, P.C., 301 Washington Avenue, Suite 107, Bay City, MI 48708 [email protected]

Received September 14, 2018 City of Center Line Mr. Dennis E. Champine, City Manager/City Clerk, City of Center Line, 7070 East 10 Mile Road, Center Line, MI 48015 [email protected]

City of Riverview Mr. Jeffrey V. Webb, Director of Public Works, City of Riverview, 14100 Civic Park Drive, Riverview, MI 48193 [email protected]

Received September 17, 2018 City of Gibraltar Mayor James F. Gorris, City of Gibraltar, 29450 Munro Avenue, Gibraltar, MI 48173 [email protected]

Page 1 Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

City of Jackson Ms. Bethany M. Smith, City Attorney, City of Jackson, 161 West Michigan Avenue, Jackson, MI 49201 [email protected]

Received September 20, 2018 City of Dearborn (amended on September 26, 2018) Mr. William M. DeBiasi, Assistant Corporation Counsel, City of Dearborn, Dearborn Administrative Center, 16901 Michigan Avenue, Suite 14, Dearborn, MI 48126-2967 [email protected]

Received September 21, 2018 City of Livonia1 Mayor Dennis K. Wright, City of Livonia, 33000 Civic Center Drive, Livonia, MI 48154 [email protected]

Mr. Michael E. Fisher, Chief Assistant City Attorney, City of Livonia, Department of Law, 33000 Civic Center Drive, Livonia, MI 48154-3097 [email protected]

Canton Township (also received on September 24, 2018) Mr. Patrick Williams, Supervisor, Canton Township, 1150 South Canton Center Road, Canton, MI 48187 [email protected]

Huron Charter Township Mr. David A. Glaab, Township Supervisor, Huron Charter Township, 22950 Huron River Drive, New Boston, MI 48164 [email protected]

Received September 24, 2018 Charter Township of Bloomfield Mr. Leo Savoie, Township Supervisor, Charter Township of Bloomfield, 4200 Telegraph Road, Bloomfield Hills, MI 48303 [email protected]

1 On September 25, 2018, the City of Livonia also submitted a Request for Declaratory Ruling that adopts and incorporates the pending Request, including the Relief sought in that submission. On September 26, 2018, GLWA, DWSD, and Oakland County submitted a Concurrence with what it termed the City of Livonia’s Request for Declaratory Ruling. In form and function, the City of Livonia’s September 25 submission is a Concurrence, while expanding somewhat on the LCR’s purported statutory and substantive legal defects argued in the Request and is treated as such.

Page 2 Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

Charter Township of Northville Mr. Chip Snider, Township Manager, Charter Township of Northville, 44405 Six Mile Road, Northville, MI 48168 [email protected]

City of Grosse Pointe Woods Mr. Bruce Smith, City Administrator, City of Grosse Pointe Woods, 20025 Mack Plaza Drive, Grosse Pointe Woods, MI 48236 [email protected]

City of Huntington Woods Mr. Rocco Fortura, Director of Public Works, City of Huntington Woods, 12795 West Eleven Mile Road, Huntington Woods, MI 48070 [email protected]

Village of Douglas Mr. Philip A. Erickson, City Attorney, Plunkett Cooney, 325 East Grand River Avenue, Suite 250, East Lansing, MI 48823 [email protected]

Received September 26, 2018 City of Allen Park Mr. Tom Murray, Director of Public Services, City of Allen Park, 15915 Southfield Road, Allen Park, MI 48101 [email protected]

City of Westland Mr. Doug Morton, Water & Sewer Superintendent, City of Westland, 36300 Warren Road, Westland, MI 48185 [email protected]

City of Inkster Mayor Byron Nolen, City of Inkster, 26215 Trowbridge, Inkster, MI 48141 [email protected]

Received September 27, 2018 Southeastern Oakland County Water Authority Mr. Jeff McKeen, General Manager, Southeastern Oakland County Water Authority, 3910 West Webster, Royal Oak, MI 48073 [email protected]

Received September 28, 2018 City of Hart Ms. Julie A. Springstead Waltz, City Attorney, Springstead Law Offices, P.C., 214 Washington Street, Hart, MI 49420 [email protected]

Page 3 Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

City of Hazel Park Mr. Edward Klobucher, City Manager, City of Hazel Park, 111 East Nine Mile Road, Hazel Park, MI 48030 [email protected]

Charter Township of Plymouth Mr. Patrick J. Fellrath, Director of Public Services, Charter Township of Plymouth, 9955 Haggerty, Plymouth, MI 48170 [email protected]

City of Warren Mr. Thomas Pawelkowski, Water Division Superintendent, City of Warren, One City Square, Suite 420, Warren, MI 48093 [email protected]

Received October 2, 2018 Sumpter Township Mr. Kenneth Kunka, Water & Sewer Superintendent, Sumpter Township, 23480 Sumpter Road, Belleville, MI 48111 [email protected]

City of Farmington Mr. Charles J. Eudy, Superintendent of Public Works, City of Farmington, 23600 Liberty Street, Farmington, MI 48335 [email protected]

City of Ferndale Mr. Daniel Harper, Water Department Supervisor, City of Ferndale, 300 East Nine Mile, Ferndale, MI 48220 [email protected]

City of Lincoln Park Mr. John Kozuh, Department of Public Services Director, City of Lincoln Park, 1355 Southfield Road, Lincoln Park, MI 48146 [email protected]

City of Oak Park Mr. Erik Tungate, City Manager, City of Oak Park, 14000 Oak Park Boulevard, Oak Park, MI 48237 [email protected]

Mr. David DeCoster, Deputy Director, Department of Public Works, City of Oak Park, 14000 Oak Park Boulevard, Oak Park, MI 48237 [email protected]

Page 4 Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

City of Rochester Mayor Rob Ray, City of Rochester, 400 Sixth Street, Rochester, MI 48307 [email protected]

City of Rochester Hills Mayor Bryan K. Barnett, City of Rochester Hills, 1000 Rochester Hills Drive, Rochester Hills, MI 48309 [email protected]

Mr. Allan E. Schneck, P.E., Director, Department of Public Services, City of Rochester Hills, 1000 Rochester Hills Drive, Rochester Hills, MI 48309 [email protected]

Ms. Tracey A. Balint, P.E., Public Utilities Engineering Manager, Department of Public Services, City of Rochester Hills, 1000 Rochester Hills Drive, Rochester Hills, MI 48309 [email protected]

City of Royal Oak Mr. Donald Johnson, City Manager, City of Royal Oak, 211 Williams Street, Royal Oak, MI 48073 [email protected]

City of Saginaw Ms. Amy L. Lusk, City Attorney, Gilbert & Smith, P.C., 721 South Michigan Avenue, Saginaw, MI 48602-1529 [email protected]

Received October 3, 2018 City of Bloomfield Hills Mr. David Hendrickson, City Manager, City of Bloomfield Hills, 45 East Long Lake Road, Bloomfield Hills, MI 48304 [email protected]

City of Clawson Mr. Mark W. Pollock, City Manager/Finance Director, City of Clawson, 425 North Main Street, Clawson, MI 48017 [email protected]

City of Grosse Pointe Mr. Peter J. Dame, City Manager, City of Grosse Pointe, 17147 Maumee, Grosse Pointe, MI 48230 [email protected]

Page 5 Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

Village of Bingham Farms Mr. Kenneth Marten, Village Administrator, Village of Bingham Farms, 24255 Thirteen Mile, Suite 190, Bingham Farms, MI 48025 [email protected]

Village of Clinton Mr. Kevin Cornish, Village Manager, Village of Clinton, 119 East Michigan Avenue, Clinton, MI 49236 [email protected]

Received October 4, 2018 City of Hamtramck Mr. Ryan Kern, P.E., City Engineer/Project Manager, Hennessey Engineers on behalf of City of Hamtramck, 3401 Evaline, Hamtramck, MI 48212 [email protected]

City of North Muskegon Mr. Sam Janson, City Manager, City of North Muskegon, 1502 Ruddiman Drive, North Muskegon, MI 49445 [email protected]

Received October 5, 2018 City of Montague Mr. Jeff Auch, City Manager, City of Montague, 8778 Ferry Street, Montague, MI 49437 [email protected]

City of Romulus Mayor LeRoy D. Burcroff, City of Romulus, 11111 South Wayne Road, Romulus, MI 48174 [email protected]

Mr. Stephen J. Hitchcock, Giarmarco, Mullins & Horton, P.C., Tenth Floor Columbia Center, 101 West Big Beaver Road, Troy, MI 48084-5280 [email protected]

Received October 8, 2018 City of Taylor Mr. Keith Boc, Director of Public Services, City of Taylor, 25605 Northline Road, Taylor, MI 48180 [email protected]

Page 6 Enclosure A Concurrences with the Request for Declaratory Ruling Submitted on August 13, 2018

Received October 9, 2018 Village of Beverly Hills Mr. Chris D. Wilson, Village Manager, Village of Beverly Hills, 18500 West Thirteen Mile Road, Beverly Hills, MI 48025 [email protected]

City of Jonesville Mr. Jeffrey M. Gray, City Manager, City of Jonesville, 265 East Chicago Street, Jonesville, MI 49250 [email protected]

Received October 11, 2018 Village of Kingsley Mr. Dan Hawkins, Village Manager, Village of Kingsley, 207 South Brownson Street, Kingsley, MI 49649 [email protected]

City of Gladstone Mr. Darcy Long, City Manager, City of Gladstone, 1100 Delta Avenue, Gladstone, MI 49837 [email protected]

City of Rogers City Mr. Joseph Hefele, City Manager, City of Rogers City, 193 East Michigan Avenue, Rogers City, MI 49779 [email protected]

Page 7 EXHIBIT B

Who owns what? EXHIBIT C

EXHIBIT D

Costs of Lead Exposure and Remediation in Michigan: Update

October, 2016 repor prepared by the Ecology Center and the Michigan Network for Children’s Environmental Health

Costs of Lead Exposure and Remediation: Update 1 Acknowledgements

About the Author Costs of Lead Exposure and Remediation: Update was written by Tracy Swinburn, MSc. Ms. Swinburn has a degree in Economic Development from the London School of Economics.

Report Reviewers Special thanks to our reviewers for their contributions to the report:

Tracey Easthope, MPH, Ecology Center, Sprout Consulting Rebecca Meuninck, Ecology Center, Michigan Network for Children’s Environmental Health Tina Reynolds, Michigan Envir onmental Council Robert Scott, PhD, Michigan Department of Health and Human Services Prof. Lyke Thompson, PhD, Wayne State University

Report Design : Tracey Easthope

Costs of Lead Exposure and Remediation: Update 2 Sponsoring Organizations

About the Sponsoring Organizations

Founded in 1970, the Ecology Center is organized for one purpose -‐-‐ to develop innovative solutions for healthy people and a healthy planet. We believe that the central question of our time is how human beings are going to thrive in the world without destroying the earth's ability to sustain us. In the face of enormous environmental challenges, virtually all sectors of our society are now scrambling to create solutions, and the Ecology Center plays critical role in advancing the best models. To do that, we do the following:

• Educate consumers to help their keep families healthy and safe • Push corporations to use clean energy, make safe products, and provide healthy food • Provide innovative services that promote healthy people and a healthy planet • Work with policymakers to establish laws that protect communities and the environment

The Michigan Network for Children’s Environmental Health is a coalition of health professionals, health -‐affected groups, environmental organizations, and others dedicated to a safe and less toxic world for Michigan's children. Through education, outreach, and advocacy, the MNCEH works to change current policies and practices that result in exposure of children to environmental toxicants. The MNCEH is led by the Ecology Center. For more information about the Michigan Network for Children’s Environmental Health: http://www.mnceh.org/

Costs of Lead Exposure and Remediation: Update 3 Table of Contents

Executive Summary 5

Ful Report 10 Summary Background Analysis Costs of Lea Exposure Summary Costs of Lead Abatement Discussion

References 31

Costs of Lead Exposure and Remediation: Update 4 Costs of Lead Exposure and Remediation in Michigan: Update Executive Summary

and lifetime earnings in 2014, so these Overview calculations reflect little of the costs associated with Flint’s water As an update to our 2014 report contamination. Instead, “Economic Impacts of Lead Exposure in these figures indicate the baseline costs Michigan,” this assessment evaluates the and economic impacts of lead exposure economic impacts of lead poisoning in Michigan, largely associated with lead among Michigan children by considering paint. Based o the literature, we the costs of four well-‐documented assume lead paint contributes about 70% impacts of lead exposure: 1) increased of children’s total lead levels. The need for health care, 2) increased crime, additional 30% we assume comes from 3) increased need for special education, other sources including water. The and 4) decline in lifetime earnings. By significant costs to the residents of Flint applying methods and metrics from and Michigan taxpayers as a result of published research to Michigan children, water contamination in Flint would be this report illustrates the costs – to the additional to the annual costs estimated Michigan taxpayer, and to the public here. more broadly – of lead exposure. These impacts are estimated for one snapshot year, 2014 , compared to our previo us report, which considered the impacts in a 201 snapshot year.

We note that this research began in 2013 before Flint’s water -‐related lead exposures, and the scope of the work is state-‐wide. The impacts here are calculated using state-‐wide elevated blood lead levels in 2014, and associated costs of education, crime, health care,

Costs of Lead Exposure and Remediation: Update 5 We estimate the costs of lead exposure for becoming lead poisoned and are also in Michigan in 2014 to total nearly $270 the most vulnerable to lead’s effects. million ($112 million of that is estimated Childhood lead exposure is associated to be passed along to the taxpayer) , with with a wide range of irreversible, number of conservative assumptions. persistent, and costly health effects, Compared to estimated costs of lead including reduced cognitive function paint remediation /abatement ($600 (leading to reduced academic million), investment in lead achievement and lower IQ), behavioral remediation/abatement pays for itself in problems, and aggressive behaviors just over 3 years and beyond that (including attention -‐deficit/hyperactivity provides many years of positive returns. disorder and delinquent, criminal, or These findings correspond with estimates antisocial behavior). in Gould (2009) that investments in lead paint hazard control have rates of return While elimination of leade d gasoline and of $12 -‐$155 per every dollar invested. lead paints have greatly reduced This illustrative analysis suggests that children’s exposure to lead in recent lead abatement would be a worthwhile years, there are ongoing exposures to economic investment, with considerable historic sources of contamination, most public health benefits, as well. often, lead -‐based paint in older homes.

Background Costs of Lead Exposure

This research builds on two important Using established methods and metrics, reports, The Price of Pollution, and this assessment applies four well-‐ Economic Impacts of Lead Exposure in documented costs of children’s lead Michigan. The Price of Pollution was exposure in Michigan: increased health released by the Ecology Center and the care, increased crime, increased special Michigan Network for Children’s education, and decline in lifetime Environmental Health in 2010, and earnings. These costs are discussed examined the annual economic cost of below: lead poisoning, asthma, cancer, and developmental disabilities. Healthcare

The Economic Impacts of Lead Exposure The costs of both the immediate in Michigan, published in 2014, delved treatment of children with BLLs above 10 more deeply into the economic μg/dL as well as treatment for lead -‐ impacts of lead exposure, and associated ADHD were estimated. compared these costs to the cost of Immediate treatment (including lead abatement in homes. diagnostic testing, nurse visits, environmental assessment of the home Costs of Lead Exposure and and oral or intravenous chelation) cost an Remediation: Update is an update of estimated $271,000 annually. Lead-‐ the 2014 report using the latest associated ADHD treatment, including available full data set from the State of medication and counseling, totaled over Michigan. $1 million annually . We believe these estimates are conservative because they We focus on childhood lead exposure focus on just two metrics (immediate because children are at the highest risk treatment starting at 10 μg/dL and

Costs of Lead Exposure and Remediation: Update 6 ADHD treatment) while ignoring other children with blood lead levels measured health and developmental impacts of at or above 2 μg/dL at age receive cognitive disability that may require special education, fo a average o 9 regular and continuing healthcare costs. years This special educatio cost an Additionally, the wider impacts on estimated $2. million net presen value productivity and stress on family (NPV), lifetime coshe fot cohor o2c members and caretakers were not yearc old i 2014. Thi estimate does considered, nor are other pro-‐active no include indirect cost suc alosof health measures, such as programs to parental productivity i caring fo child improve nutrition in response to lead with specia needs, healt an stress exposure (such as in Flint) included. impacts o family members anth costs associated wit children whos BL peaks Crime later than year oage Additionally, this conservativ estimate only considers A estimated 10% of juvenile crimes in special education costs fo children with Michigan were associated with lead BLLs o 25 µg/dl, when research exposure, costing an estimated $13.4 indicates tha impact a lower level may million annually in incarceration alone for also require special educational support lead-‐associated juvenile crime. Furthermore, adult crimes can be linked Decrease Lifetime Earnings to childhood lead exposure, and applying established standards to adult crime Elevated blood lea levels are correlated statistics in Michigan, an estimated $64 with irreversible declines in IQ, which million annually can be attributed to correspond (on average to reductions in lead-‐associated crimes. This includes lifetime earnings Usin established costs to victims, legal proceedings, standards loss o lifetime earnings in incarceration, and lost earnings for both Michigan wer estimated a$171 million the criminal and victim. These fo the 2014 cohort o 2c yearc olds. conservative estimates do not quantify This calculation i conservativ ait additional indirect costs associated with includes only blood lead levels o2c year lead-‐related crime, such as pain and old children, ignoring children whos lead suffering, costs associated with levels ma peak a othe times. healthcare to address the physical and Additionally, bloo lea levels under 5 mental impacts of the crime , and lost μg/d were no considered despite quality of life. Inclusion of these costs evidenc suggestin impacts o Iat would substa ntially increase these blood lead levels betwee2c μg/dL. figures.

Special Education

Because of lead -‐associated reduction in cognitive ability, an estimated 20% of

Costs of Lead Exposure and Remediation: Update 7 Summary of Costs Associated with Lead Exposure, 2014

271,049 18,032,787 2,492,971 Blood lead treatment

Treatment of lead-‐related ADHD 64,663,668 Increases in special educaLon

ReducLon lifeLme earnings, NPV 170,918,336 Increased crime, direct costs

Juvenile incarceraLon related 13,351,800 to childhood lead Adult crimes related to childhood lead

Together, the costs of lead exposure totaled nearly $270 million annually, including $112.5 million born by taxpayers.

accrues benefits of $190 million annually, Costs of Lead Abatement paying for itself after just over three years and the n accruing cost savings for In line with published research, we years to come. The returns per dollar conservatively assume that 70% of lead invested from a taxpayer perspective exposure is associated with lead paint in accrue more slowly but are also homes. We illustrate a scenario where significant – the $600 million spent on 100,000 most at risk homes in Michigan abatement returns $112.5 million are lead abated, reducing the lead annually. exposure and associated costs by 70% (which creates cost savings of $190 $600 million investment in abatement million annually). With an average cost at one time is extremely unlikely. But we of abatement at $6,000 per unit, this believe this is a helpful illustrative abatement scenario costs an estimated scenario, showing the return on $60 million. investment from lead abatement. Discussion This assessment relied on established, published metrics (largely from national This assessment indicates that the annua l studies) and applied them to Michigan. A costs of lead exposure – to the public and number of assumptions were made to the taxpayer -‐-‐ are substantial: more about exposure levels in Michigan, costs than $270 million and $112.5 million, of healthcare and education, and lead respectively. In a lead paint abatement abatement costs and targeting. We scenario, an investment of $600 million believe the assumptions made were

Costs of Lead Exposure and Remediation: Update 8 wherever possible conservative, making children, there were no additional this illustrative analysis conservative elevated BLLs other than those that were overall. We quantified only a narrow tested. This is a hugely conservati ve range of the economic impacts of lead assumption, but because 78% of 1 and 2 -‐ exposure – those impacts that have been year olds not receiving Medicaid were well demonstrated and quantified in not tested, it was difficult to make published literature. Wider impacts, such assumptions about this largely untested as productivity for parents of lead group. With further information on poisoned children, wider impacts of lead -‐ these impacts and on lead exposures in associated crime, and lost quality of life Michigan (for example, more information were not quantified, and would likely add o untested children), the calculations significantly to the costs estimated here. here could be updated and improved.

The assumptions of the number of These economic returns on investment in children with elevated blood lead levels lead abatement are all in addition to the were conservative in a number of value of the health and -‐ well being of respects. For example, we assumed that thousands of Michigan children, and their child’s tested blood lead level in 2014 families, who experience the effects of was that child’s ‘peak’ level (it is this lead exposure each year. This ‘peak’ level from which the other impacts assessment suggests that further lead are measured), when really the peak is at abatement is could well be a sound least this high -‐ he or she could well have economic, as well as a public health, higher lead levels at other times. We investment. also assumed that among non -‐Medicaid

Costs of Lead Exposure and Remediation: Update 9 Costs of Lead Exposure and Remediation in Michigan: Update Full Report

Background 2013). Today, children are most In 2010 the Ecology Center and Michigan commonly exposed to lead as a result of Network for Children’s Environmental exposure to lead paint in older homes. Health (MNCEH) published Price of Because of their natural behaviors, such Pollution (MNCEH and the Ecology Center as hand to mouth activity and crawling 2010), an economic estimate of and playing on the floor, children may environmentally attributable costs of consume paint chips or ingest lead dust four pediatric conditions – lead (produced from deteriorating surfaces or poisoning, asthma, cancer, and renovations) through everyday activities, developmental disabilities. In 2014, such as opening windows with lead -‐ Economic Impacts of Lead Exposure and painted frames (Levin et al 2008). Remediation in Michigan (UMRSC and MNCEH 2014), was published to provide The problem of lead in drinking water has more thorough assessment of the received national attention as a result of impacts of lead exposure and costs of the Flint water contamination potentially reducing these exposures. catastrophe. The costs of that This report provides an updated version contamination and potential remediation of those calculations, using updated data are beyond the scope of this report. and the same methodology.

Given that priorities for environmental and public health investment are increasingly driven by economic considerations, this assessment is designed to provide an economic context for Michigan’s public health efforts related to lead prevention and remediation.

Children are the segment of the population most at risk for lead poisoning and most vulnerable to its effects. While environmental and public health policies such as banning leaded gasoline and lead paint in the 1970s have greatly reduced children’s exposure to lead, historic sources of contamination persist (EPA

Costs of Lead Exposure and Remediation: Update 10

Adults are much better at expelling lead (through urine and feces) than children , Analysis whose bodies absorb a large proportion of the lead ingested, storing it in their The assessment in this paper is not novel bones. Once stored, lead impacts a in approach – the metrics and impacts child’s rapidly developing central nervous considered are drawn from established system. Lead exposure is associated with research. This paper draws heavily from reduced cognitive function, leading to Price of Pollution and reports by Gould reduced academic achievement and (2009) and Korfmacher (2003). Our lower IQ. Lead exposure is also approach is to bring together established associated with behavioral problems and standards and apply them in a Michigan -‐ aggressive behaviors, including attention -‐ specific assessment, producing a one -‐ deficit/hyperactivity disorder and year (2014) snapshot illustration of the delinquent, criminal, or ant isocial estimated costs of lead exposure and the behavior (EPA 2013 , Gould 2009, comparative costs of mitigating that Lanphear 2005). exposure through lead abatement.

These effects tend to be linked to a Throughout the analysis, conservative child’s maximal blood lead level (the peak assumptions are made where ver level observed, rather than the average possible. For instance, we assumed that level, although there is also evidence that the detrimental impacts of lead exposure average levels may be helpful p redictor are o the low side of what research for effects in older children (Lanphear indicates and that costs of abatement are 2005), and the impacts of lead on o the high side of demonst rated costs . cognitive development are irreversible Conservative assumptions at each phase and persistent (EPA 2013). A recent of the assessment are explained in more study indicates an “irreversible pattern of detail in the “D iscussion” section of the neuronal dysfunction” found in adults paper. that were exposed to lead as children (Cecil at al 2011, p. 403). In the following section, we estimate lead exposure among Michigan children, as Abating lead in contaminated homes measured by blood lead level (BLL) (often by repairing or r eplacing window testing. We then identify four well -‐ and door frames or documented impacts and costs of lead encapsulating/enclosing areas of chipped exposure: 1) increased health care, 2) paint) greatly reduce s children’s increased crime, 3) increased need for exposure to lead and the negat ive health special education, and 4) decline in impacts associated with lead poisoning lifetime earnings. We apply these (PTF 2000). However, targeting the right metrics to the assumed lea d exp osure homes for abatement is challenging and level among Michigan children, can add to the overall cost of successful estimating the costs associated with lead abatement programs. exposure in one year. In the final section, we compare these costs to the cost of lead abatement and discuss the economic and public health implications of the results.

Costs of Lead Exposure and Remediation: Update 11 Children Exposed to Lead in Michigan communities, were mostly Medicaid recipients. In this assessment, we divide The Michigan Department of Health and the observations by children receiving Human Services (DHHS) collects data on Medicaid and those not receiving BLL testing among children in Michigan Medicaid. Although not the same as annually. Through correspondence with 2012’s “children who should be tested” DHHS, we o btained results of 2014 we believe this is a similar and helpful testing. In our previous report, we built categorization. the method around Michigan’s Statewide Testing Plan, which defined “children In this study, we chose to focus largely on who should be tested,” and we identified the cohort of and 2-‐year olds for the proportion of targeted children who several reasons. Elevated BLLs tend to actually were tested and noted the peak at around age 2 (likely because of difference in results between targeted crawling and hand -‐to-‐mouth behaviors children and those that were not part of typical at that age) (USPSTF 2006), and this targeted group in 2012. “Children peak levels tend to drive the associated who should be tested” was defined as 1 health impacts that will be considered in and 2-‐year-‐olds who were insured by this assessment. The Centers for Disease Medicaid or lived in any of 14 “Target Control and Prevention (CDC) and Communities” in Michigan. These 14 American Academy of Pediatrics Target Communities were urban areas, recommend BLL testing at ages 1 and 2 and about 50% of Michigan’s 234,000 1 (CDC 2007). In addition, we can draw and 2-‐year-‐olds qualified as “children better inferences from the larger sample who should be tested.” Just under of 1 and 2-‐year olds (compared to the 88,000 1 and 2-‐year-‐olds were tested in relatively smaller sample size of all 2012. Just under 150,000 of Michigan’s children under age 6). Of the 234,000 700,000 children under 6 were tested. children ages 1 and 2 in Michigan in 2014, 38% are included in the testing For this updated 201 4 snapshot, the sample, compared to 20% of children “children who should be tested” under 6 in the testing sample (DHHS designation n longer exists. However, 2016). data is available for children insured by Medicaid, and we found that this group Test results for 1 and 2-‐year olds, makes up most of the “children who separated by Medicaid status are should be tested.” For example, in the provided in Table 1. While there is no 201 data, there were 120,000 1 and -‐ 2 “safe” amount of blood lead, 5 μg/dL is year-‐olds “who should be tested” and in the CDC “action level” for lead exposure 201 there were 121,000 children on in children (EPA 2013). Figure 1 Medicaid. This suggests that the illustrates the breakdown of all Michigan “children who should be tested,” who 1 and 2-‐year olds by testing and Medicaid were Medicaid recipients plus targeted status in 2014.

Costs of Lead Exposure and Remediation: Update 12 Table 1: Michigan Blood Lead Level Testing for 1 and 2-year-olds, 20141

Population Number of % Children % of Children with % of children tested with BLL 5-9 those venous BLL >= those tested μg/dL tested 10 μg/dL tested 1 and 2 -‐ yr 121,568 63,127 51.9% 2170 3.4% 497 0.79% olds receiving Medicaid 1 and 2-‐yr 112,535 24,790 22.0% 421 1.7% 53 0.21% olds not receiving Medicaid All 1 and 2 234,103 87,917 37.6% 2591 2.9% 550 0.63% yr-‐olds

1 Data from correspondence with DHHS (2016)

Costs of Lead Exposure and Remediation: Update 13 Figure 1: 2014 Michigan 1 and 2-year-olds by BLL testing and Medicaid Status

Receiving Medicaid, tested

Receiving Medicaid, not tested

Not receiving Medicaid, tested

Not receiving Medicaid, not tested 0% 20% 40% 60% 80% 100% Michigan 1 and 2-year -olds

There are some challenges in generalizing contain lower BLLs than is from the sample to estimating BLLs for all representative). and 2 -‐year-‐old children in Michigan: • There is a significant difference in test results by Medicaid status • Testing (for 1 and 2-‐year-‐olds) is (see Table 1). For example, aimed at Medicaid recipients , nearly 3.4% of children receiving and these children are Medicaid have elevated BLLs of disproportionately in the test 5-‐9 μg/dL , while only 1.7% of sample. Medicaid recipients are children not receiving Medicaid more likely to live in older test at this elevated level. The housing and have lower incomes, difference is even greater at BLLs factors which often correlate >1 μg/dL, with rates of 0.79% with lead exposure (therefore, and 0.21%, respectively. T his the sample may contain higher suggests that Medicaid status BLLs than is representative in the may be a helpful prioritization. overall population ). However, we have a fairly small • Despite the fact that BLL testing sample of non-‐Medicaid 1 and 2 -‐ prioritized children receiving year-‐olds, so it is difficult to know Medicaid, only 52% of these if these 22% are representative children were tested. There may of the non -‐Medicaid 1 and 2 -‐ be reason to believe that the 48% year-‐old population. of 1 and -‐ 2 year-‐olds receiving • Maximal or peak BLL corresponds Medicaid and not tested might to the impacts in this not be receiving recommended assessment. While we know the health care and therefore may be children tested in the DHHS data more generally in a high risk have actual BLLs at least at the situation, and possibly more at level recorded, many children risk to be exposed to lead in the may have had or will have a home (therefore, the sample may higher level at some point.

Costs of Lead Exposure and Remediation: Update 14 Therefore, the recorded BLLs are few of the non -‐Medicaid 1 and 2 -‐year-‐ at or lower than “peak” BLLs, olds were tested (22%) it is very difficult making the impacts estimations to extrapolate potential BLLs, so we that follow conservative. assume quite conservatively that only those sampled had elevated BLLs and With these data challenges in mind, we none of the remaining 78% of non -‐ estimated rates of elevated BLLs for all Medicaid children had an elevated BLL . Michigan 1 and 2 -‐year-‐old children in These estimations are shown in Table 2. 2014, making several conservative assumptions. We also derived the more specific BLL range estimates in Table 3 , as these will Among 1 and -‐ 2 year-‐olds, 52% of be needed for the impact estimations in children receiving Medicaid were tested, following sections. We estimate that the and we assume that the remaining 48 % tested elevated BLLs represent about of targeted children would have a similar 55% of the total population of elevated distribution of test results. Given that so BLLs.

Table 2: Michigan 1 and 2-year-old BLL Test Results and Projections for Those Untested (Projections in Blue)

Number of Number of Children Children with with BLL Venous BLL >= Results: Tested Children Population 5-9 ug/dL Rate 10ug/dL Rate Children receiving Medicaid 63,127 2,170 3.4% 497 0.8% Non-‐Medicaid children 24,790 421 1.7% 53 0.2% Untested children projected results Children receiving Medicaid 58,441 2,009 3.4% 460 0.8% Non-‐Medicaid children 87,745 0 0 0 0

TOTAL estimates for all Michigan 1 and 2-year olds 234,103 4,600 2.0% 1,010 0.4% Tested children as proportion of total estimate 0.56 0.54

Table 3: Estimated elevated BLLs for Michigan 1 and 2-year-olds, 2014

5-9 10-14 15-19 20-44 Population ug/dL ug/dL ug/dL ug/dL >=45 ug/dL Projected results -‐ all Michigan 1 and 2-‐yr olds 234,103 4,600 618 209 173 10 Assumed distribution of results in the 10+ BLL category2 1,010 61% 21% 17% 1%

2 Derived from the distribution of 10+ BLL results from 2012, data sourced from MDCH (2013), calculated in UMRSC and MNCEH 2014.

Costs of Lead Exposure and Remediation: Update 15

For calculations in this assessment of 2 -‐ year-‐olds only, w e assume that the Immediate Treatment elevated BLLs in Table 3 would be distributed evenly among 1 and 2-‐ year-‐ The recommended treatment for olds. children who se test results show elevated BLLs and the estimated costs of this treatment (drawn from Gould 2009) Costs of lead exposure are presented in Table 4. Treatment may include diagnostic testing, nurse visits, Drawing from established methods and environmental investigation of the home, metrics, this assessment estimates four and oral and intravenous chelation in well-‐documented costs of children’s lead extreme cases. The estimated costs of exposure in Michigan: these treatments are applied to the • Increased health care number of children under the age of 6 in • Increased crime 2014 who tested at the corresponding • Increased special education blood levels. • Decline in l ifetime earnings No extrapolation is made to children who were not tested, as those untested would Health care unfortunately not be receiving recommended treatment. In effect, we We estimate two health care costs are estimating the actual cost of associated with elevated BLLs as a child: immediate treatment for elevated BLLs in the immediate treatment of children who 2014, and we expect similar costs will are tested and have results of 10 μg/dL occur in the following year for those with or greater , and the cost of treatment for elevated BLLs in that year – we expect lead-‐attributable attention deficit this is a re -‐occurring cost. Also, these hyperactivity disorder (ADHD). estimates are applied to all children under the age of 6 to reflect the actual health care costs associated with lead exposure among Michigan children in 2014. Because no extrapolation is made to untested children, the sample of children under 6 (rather than 1 and 2 year olds only) is used.

Costs of Lead Exposure and Remediation: Update 16 Table 4: Healthcare Costs for Children with Elevated BLLs

# of Children in Cost of Blood Michigan Recommended Lead Level Under the Age Treatment (in in μg/dL of 63 Recommended Treatment4 2014 USD)5 Total Cost Diagnostic testing, venipuncture, lead assay, nurse -‐ 10-20 715 only visit $87 $61,926 Above treatments, plus eight visits for diagnostic testing, nurse follow-‐up, environmental 20-45 155 investigation of the home $1,207 $187,152 Above treatments, plus oral 45-70 14 chelation $1,569 $21,971 Above treatments, except oral chelation is replaced with 70+6 0 intravenous chelation $4,048.13 0 $271,049

ADHD treatment

According to the CDC, an estimated 8.4% of children age 3-‐17 in the US have been diagnosed with ADHD (Bloom et al 2010). Gould (2009), drawing from Braun et al (2006), estimates that 21.1% of ADHD cases in children aged 4 -‐15 are associated with elevated BLLs. This standard is applied to Michigan , estimating the costs of treating lead-‐ associated ADHD in Table 5.

3 Data from MDCH ( 2013) 4 Source: Gould (2009), derived from CDC recommendations and Kemper et al (1998) 5 Source: Gould (2009), inflated here to 2014 USD 6 Because the MDCH data category is 45 μg/dL or greater, we conservatively estimate that all Michigan children in this category fall within the 45 -‐70 range, and no children are within the 75+ range.

Costs of Lead Exposure and Remediation: Update 17 Table 5: Healthcare Costs of Lead-Associated ADHD, 2014

Estimated 21.1 % of Cases Healthcare Costs - Michigan 8.4% Associated with Medication and Children Diagnosed Elevated Blood Counseling per Age 4-157 with ADHD8 Lead Levels9 Child for One Year10 Total costs 1,533,486 128,813 27,180 $663.47 $18,032,787

7 data from CGI Census, estimat e for 2012, we assume the same population in2014 8 calculations based on data in Bloom et al (2010) 9 Gould (2009), from Braun et al (2006) 10 Inflated from 2006 USD figures in Gould 2009

Costs of Lead Exposure and Remediation: Update 18 In sum, we estimate the healthcare costs Crime for immediately treating those under 6 for lead exposure, and for treating lead -‐ Childhood lead exposure has been linked associated ADHD among adolescents , to to criminal behavior by juveniles and be $18.3 million in 2014. adults, in the US and internationally (Nevin 2007, Nevin 2000, Gould 2009 , This estimate is thought to be Pichery 2011). We assess the costs of conservative in that we consider just 2 juvenile crime by estimating the costs of metrics of increased health care for juvenile incarceration associated with children associated with elevated BLLs , lead exposure. The standard from while other health and developmental Korfmacher (2003) is applied in Table 6, impacts also require health care. Also, assuming that 10% of juvenile studies suggest numerous lasting health delinquency i s attributable to lead impacts, as well as wider productivity exposure, totaling an estimated $32 impacts and stress on family members million annual cost of lead -‐associated and caretakers , which are not quantified juvenile crime. We note that in this here (Gould 2009). study, compared to the 2012 report, a Michigan-‐specific metric was identified (Weemhof & Staley 2014) , and this lowered the estimated cost per year of care to $34,000 .

Table 6: Cost of Lead-Associated Juvenile Crime (Incarceration), 2014

Cost per Number of Michigan year of 10% attributable youth in prison 11 care11 Total cost per year to lead12 3927 34,000 $133,518,000 $13,351,800

11 Weemhof and Staley (2014) -‐ figures are for 2013, assumed to be the same in 2014 12 Standard from Korfmacher (2003)

Costs of Lead Exposure and Remediation: Update 19 In addition to juvenile delinquency, crimes averted by a reduction in lead exposure as a child is linked to average preschool BLL by 1 μg/dL. crime as an adult. Applying standards This is a conservative estimate of established by Gould (2009), drawing lead-‐linked crimes, given that even from Nevin (2006), Table 7 estimates larger (or especially well targeted) the direct costs of crimes in Michigan reductions in lead exposure would linked to childhood lead exposure. have even more significant reductions This standard estimates the number in crime. of crimes ‘linked to childhood lead’ as

Table 7: Cost of Adult Crime Linked to Childhood Lead Exposure

Proportion Number of crimes of crimes Offenses linked to linked to Direct costs of reported childhood childhood Direct costs lead linked 201413 lead14 lead per crime15 crimes Burglaries16 173,202 2.9% 5,018 4,709 23,631,033 Robberies 8,206 0.4% 32 26,857 855,981 Aggravated Assaults 23,109 5.1% 1,172 23,912 28,028,384 Rape 9,417 3.7% 348 33,367 11,616,117 Murder 508 2.9% 15 36,532 532,153 TOTAL 214,442 $64,663,668

13 Data from Michigan State Police, Michigan Incident Crime Reporting (2014) http://www.micrstats.state.mi.us/MICR/Reports/Query.aspx 14 Proportions were calculated based on figures from Gould (2009) derived from Nevin (2000) 15 From Gould (2009), figures inflated to 2014 values 16 “Burglaries” includes larceny and motor vehicle theft

Costs of Lead Exposure and Remediation: Update 20 The direct costs of crime estimated six) and poor academic performance here total nearly $65 million annually in the third, fifth, and eighth grade and include direct victim costs, legal (Zhang et al 2013). proceedings, incarceration, and lost earnings to both the criminal and Table 8 estimates the costs of special victim (Gould 2009). education associated with increased BLLs at 25 μg/dL or above (drawing For both juvenile and adult crimes, from the assumed population BLLs in other indirect costs accrue, such as Table 3). Korfmacher (2003), drawing lost wages, pain, suffering, associated from Schwartz (1994) estimates that healthcare costs to address physical 20% of children with blood lead levels and mental impacts of crime, and lost of 25 μg/dL or above require special quality of life. These would all education for an average of 3 years. increase the total costs of lead-‐ Sarbaugh-‐Thompson et al (2008), in a related crime substantially. Gould Detroit-‐specific assessment, estimate (2009) estimates that these indirect that children receiving special costs total around ten times the education because of lead-‐related direct costs calculated in Table 7. reduced cognitive ability receive However, in this conservative special education for between 9 and estimate we do not estimate or 20 years, depending on the level of include these more indirect costs. cognitive impairments. We assume 9 years of special education for 20% of children measured at 25 μg/dL or Special Education above at age 2, which totals nearly $2.5 million in special education Childhood lead exposure is associated costs. These are the lifetime special with declines in IQ and an associated education costs incurred by the 2014 need for special education. A recent cohort of 2-‐year olds, so it isan Detroit-‐specific study found an annual figure we expect to accrue in association between childhood lead following years. exposure (exposure before the age of

Table 8: Costs of special education related to lead exposure – incured by 2-year-old cohort in 2014

Cost per year of Total cost for 9 years of special 2-year-olds with BLL 25+ special education for 20% of children μg/dL17 education18 with blood lead level 25+ μg/dL 74 18,786 $2,492,971

17 This calculation assumes children within the 20-‐44 μg/dL group are evenly distributed, and therefore 19/24 = 79.1% of children in this category have blood lead levels of 25 or greater. 18 From Kor fmacher (2003), inflated to 2014 values

Costs of Lead Exposure and Remediation: Update 21 We believe this estimate tobe conservative by only considering special education costs for children with an elevated BLL of 25+ μg/dL, when the impacts at lower levels could also require educational support (Zhang et al 2013, Sarbaugh-‐ Thompson et al 2008). Also, we do not include indirect costs of children with lowered cognitive abilities, including loss of parental productivity in caring for a child with special needs and the health and stress impacts on family members. Furthermore, this assumes a peak BLL at age 2, and no costs are assumed for children whose BLL peaks at a later age.

Decreased Lifetime Earnings

Lead is also associated with reductions in IQ and resulting reductions in lifetime earnings (Canfield et al 2003, Lanphear 2005, Carlisle et al 2009): elevated BLLs are correlated with irreversible declines in IQ, and reduced IQ (on average) leads to reductions in lifetime earnings.

Table 9 applies the standards established in Lanphear et al (2005) and Gould (2009) to estimate lead-‐ associated IQ loss and lifetime earnings loss for Michigan’s 2c yearc olds in4 201 . The approach here divides children with elevated BLLs into four categories and then applies the associated loss of IQ points for each BLL category.19

19 For the 5-‐10 μg/dL category and the 30+ μg/dL category, we make the conservative assumptions that children have the floor levels of measured bloo d lead (5 30 categories, children are assumed to have an even μg/dL and 30 μg/dL , respectively). For the 10-‐20 and 20-‐ distribution of blood lead levels across the category.

Costs of Lead Exposure and Remediation: Update 22 The IQ loss associated with each In total, we estimate that more than category demonstrates the non-‐linear $170 million in NPV lifetime earnings nature of the relationship between are lost among Michigan 2c yearc blood lead and IQ loss. Each olds with elevated BLLs in 2014. We additional μg/dL of lead at the lower consider only 2-‐year-‐ olds here as an levels of exposure has a greater annual assessment. The following impact on IQ than each additional year we expect the next cohort of 2-‐ μg/dL at higher levels of exposure. year-‐olds to experience similar lossof For example, increasing from 5 μg/dL lifetime earnings because of their to 10 μg/dL equates to more decline elevated BLLs. in IQ than increasing from 25 μg/dL to 30 μg/dL. Low level exposures are In addition to the conservative significant. assumptions made in estimating the BLLs for Michigan’s population in Loss of lifetime earnings is calculated Table 3, this calculation is also using the standard in Gould (2009), conservative in that we base IQ inflated to 2014 figures, assuming decline on the 2-‐year old BLL, when each IQ point lost equates to a loss of BLLs may peak at other times. There $21,077 in net present value (NPV) of is evidence to suggest that IQ loss and lifetime earnings earnings loss can occur at levels below 5 μg/dL (Lanphear 2005, Carlisle et al 2009), and this could impact many more children.

Table 9: Reduction in lifetime earnings

Associated Lifetime Maximal Estimated loss in IQ earnings loss blood lead number of 2- points for per child, Total lifetime lost level year-olds20 each child21 NPV22 earnings, NPV 5-‐10 2300 2.565 54,062 $124,342,600 10-‐20 414 3.9 82,200 $34,030,800 20-‐30 36 5.8 122,246 $4,400,856 30 or greater 56 6.9 145,430 $8,144,080 $170,918,336

20 See footnote 8 above 21 The associated decline in IQ points for the groups of 10 μg/dL or more is from Lanphear et al 2005. The decline associated with the group 5-‐10 μg/dL applies the standard from Gould (2009) (which is derived from Lanphear et al 2005), with the conservative assumption that all children in the 5-‐10 μg/dL group tested at 5 μg/dL. 22 Lifetime earnings loss per child is calculated as the estimated decline in IQ points times the assumed loss in lifetime earnings per IQ point loss in net present value (NPV), derived from Gould (2009).

Costs of Lead Exposure and Remediation: Update 23

Summary This table also estimates how much of Table 10 summarizes the annual costs the costs described are born by the of lead exposure described above. taxpayer – an estimated 40% with the assumptions described in Table 10.

Table 10: Summary of Costs Associated with Lead Exposure, 2014

Category Amount Costs to Description of Assumed Taxpayer Taxpayer Costs Increased in health care Estimated 90% of children wit h elevated BLL are on Michigan Blood lead treatment 271,049 243,944 Medicaid programs Estimated 90% of children wit h Treatment of lead-related elevated BLL are on Michigan ADHD 18,032,787 16,229,508 Medicaid programs Estimated 100% of costs through Increases in special public education education 2,492,971 2,492,971 Reduction lifetime earnings, Estimated 8% state and local NPV 170,918,336 13,673,467 effective tax rate Estimated 20% effective federal 34,183,667 tax rate Increased crime Juvenile incarceration related to childhood lead 13,351,800 13,351,800 100% taxpayer cost Adult crimes related to childhood lead 64,663,668 32,331,834 50% taxpayer cost

TOTAL costs of lead 269,730,611 112,507,191 exposure in year (2014)

Costs of Lead Exposure and Remediation: Update 24 Figure 2: Summary of Costs Associated with Lead Exposure, 2014 Snapshot Estimate

271,049 18,032,787 2,492,971 Blood lead treatment

Treatment of lead-‐related ADHD 64,663,668 Increases in special educaLon ReducLon lifeLme earnings, NPV 170,918,336 Increase crime, direct

13,351,800 costs Juvenil incarceraLon relate to childhood lead Adul crime related to childhood lead

Costs of Lead Abatement abatement of lead paint in homes, we estimate that 70% of the incidence of By comparison to the costs of lead lead exposure and associated costs exposure, we estimate the costs of above could be eliminated. The eliminating exposures to lead by remaining 30% (exposure through abating lead in homes. We use lead soil, water and other sources) would abatement here to describe whatever remain. treatments are needed in a home to reduce or eliminate lead exposures There are many challenges in from paint. This may be eliminating identifying which and how many the lead, like replacing windows and homes should be targeted for lead doors that create lead dust when abatement. If targeting were 100% opened and closed. Or, this may accurate, the costs of lead abatement include more interim controls, such as could be reasonably straightforward. encapsulation or enclosure of the But it is difficult to know which homes paint in areas where it is chipping or with lead paint hazards will actually peeling. lead to dangerous exposures in children, especially considering that We assume that 70% of elevated BLLs exposure may occur in a home other are attributable to lead paint than a child’s residence. On the other exposure in homes, consistent with hand, homes that are successfully findings in Levin et al (2008). lead-‐abated may lead to many years, Therefore, in a scenario of complete and, where lead is eliminated, even

Costs of Lead Exposure and Remediation: Update 25 generations of avoided lead exposures for children. Gould (2009), compares the benefits 1960s homes as the comparative of lead abatement with the costs of indicator here because these homes abating homes likely to be at are those thought to be most at risk significant risk of having lead paint for lead hazard, although lead paint hazards, as identified by the was available until the 1970s President’s Task Force (2000), andwe (President’s Task Force 2000). apply a similar metric to Michigan. The President’s Task Force (2000) estimated that 2.3 million-‐ low income housing units would be most at risk for lead paint hazards in 2010,23 and this is roughly 6% of all 38 million houses with lead-‐based paint (Jacobs et al 2002). This national rate corresponds with the 100,000 housing units in Michigan that have been estimated to be at “high risk” of lead hazards, defined as pre-‐1960s homes whose occupants live below the poverty level (Scorecard 2016). Targeting for lead abatement is not Our own calculations indicate 100,000 perfect – not all lead poisoned homes is a reasonable proportion of children live in older homes and not the 2.3 million at-‐risk housing units all are below the poverty line, but nationally. According to the 2012 US these criteria are strong indicators. A Census American Community Survey, low-‐income child living in older 29.5% of the US housing stock, or 34 housing is 4 times more likely to be million units, were built before 1960, lead poisoned than the average rate while 37.4% of Michigan housing for all children in older homes.24 stock, or 1.4 million units, were built Similarly, not all homes that contain before 1960 (ACS 2012). Therefore, lead paint present a hazard for Michigan contains an estimated 4% of children, so effective targeting is an the nation’s pre-‐1960s housing stock. important part of a cost-‐effective lead The assumed 100,000 high lead risk abatement approach. In our homes in Michigan is a similar in example, targeting 100,000 homes in proportion (4.3%) of the nation’s 2.3 Michigan, sets a relatively wide million high lead risk homes, so we margin compared to the estimated consider 100,000 homes as targeted 5,600 1 and 2-‐year-‐olds with elevated in our scenario. We selected pre-‐ BLLs (Table 3).

23 These figures assumed that 1.4 million homes would no longer be a lead paint hazard because of HUD regulation of Federally-‐Assisted Housing between 2000-‐ 24 Author’s calculations from data in the President’s Task 2010. Force (2000)

Costs of Lead Exposure and Remediation: Update 26 We now consider the cost to $10,000-‐ $11,000 per25 unit. We successfully abate these 100,000 expect the homes abated through housing units. Gould (2009) these programs would be among estimates the cost of abatement those needing the most help – among across the US, to range between the most expensive of homes needing $1,200 for a house that requires remediation. We compare that to a screening and interim controls to much wider group of 100,000 homes, $10,800 for a house that requires risk and we would expect the average assessment and full abatement. cost of remediation to be considerably less than $10,000 per considerably less than $10,000 per unit, as it’s no longer the most needy unit, as it’s no longer the most needy modest interim controls, as described homes, and some will only need by Gould. modest interim controls, as described by Gould.

In the illustrative scenario, the lead abatement of 100,000 homes reduces lead exposure by 70%, reducing the annual costs of lead exposure from nearly $270 million to $81 million (a cost savings of nearly $190 million annually). The $600 million in lead abatement would pay for itself after just over 3 years, and then accrue benefit on the order of $190 million Assuming the average cost of lead annually for many years to come. abatement is $6,000 per unit, the cost to abate all 100,000 high-‐risk homes From a strictly taxpayer perspective, in Michigan is an estimated $600 the break-‐even point would take million. We believe an average of longer, as the taxpayer proportion of $6,000 per home abated would bea lead-‐associated costs is just under high estimate. By comparison, the half of the total, about $112 million Michigan Department of Health and annually. Again, we assume in the Human Services abated 122 homes, 100,000 home lead abatement using state general funds, in fiscal scenario that 70% of exposures, and year 2014 at an average cost of 70% of the $145 million annual costs $6,900 per unit, and in 2015 abated are eliminated, which equals taxpayer 116 homes at an average cost of savings of $78 million annually. After $9,950 per unit. U.S. Housing and 7-‐8 years, $600 million in abatement Urban Development funds abated 326 costs would pay for themselves, and homes in Michigan in 2014 and 192 homes in 2015, at an average cost of

25 Figures obtained from correspondence with HUD and DHHS

Costs of Lead Exposure and Remediation: Update 27 taxpayer savings would then accrue families whose lead exposure is on the order of $78 million annually. prevented. The case is strengthened when considering the many years, This isn a illustrative example, as the and even potentially generations, of actual timing of abatement would exposure and cost savings beyond the influence when costs savings would one snapshot illustrated. These accrue. However, with quite findings correspond with estimates in conservative assumptions, the one-‐ Gould (2009) that investments in lead year snapshot illustration suggests paint hazard control have rates of that abatement is a worthwhile return of $12-‐$155 per every dollar investment economically, in addition invested. to the public health benefits for

Costs of Lead Exposure and Remediation: Update 28 Discussion

This assessment estimated the social and taxpayer costs of lead exposure in Michigan, and compared these costs to an illustrative lead abatement scenario, in order to explore the economic case for lead abatement in Michigan.

In valuing the cost of health care, special education, crime and lost earnings associated with lead exposure, we relied on established, published metrics (largely from national studies) and applied them to Michigan. A number of assumptions considerably. We quantified only a were made about exposure levels in narrow range of the economic Michigan, costs of healthcare and impacts of lead exposure – those education, and lead abatement costs impacts that have been well and targeting. demonstrated and quantified in published literature. We believe the assumptions made were conservative, making this Wider impacts, such as productivity illustrative analysis conservative for parents of lead poisoned children, overall. We based much of the wider impacts of lead-‐associated estimate on data of BLLs at 2 years of crime, and lost quality of life were not age, assuming that these levels would quantified, and would likely add be the maximal level for each child, significantly to the costs estimated although many children may have here. With further information on higher BLLs at other times in their these impacts and on lead exposures childhood. For many of the impacts in Michigan (for example, more measured here we considered information on untested children), impacts starting at BLL 5 or 10 μg/dL, the calculations here could be and for special education we updated and improved. considered impacts starting at 25 μg/dL. Though there are not well This assessment indicates that the established metrics for these impacts, annual costs of lead exposure – to the there may well be considerable public and to the taxpayer -‐-‐ are impacts at BLLs lower than our substantial: nearly $270 million and measures (for example, special $112 million, respectively. Even with education or lifetime earnings), and conservative assumptions this this would increase the costs assessment indicates that lead

Costs of Lead Exposure and Remediation: Update 29 abatement would be a worthwhile Recent lead exposures through water economic investment. We estimated in Flint have brought national that all 100,000 of Michigan’s most attention to the impacts of lead at-‐risk homes could be abated for exposure. This exposure is tragic, and $600 million, an investment that the response to assist those impacted would pay for itself after 3+ years and and to prevent further exposures is then accrue benefits of $190 million critical and has been warranted. A annually. From a strictly taxpayer discussion of lead in water perspective, a $600 million contamination is beyond the scope of investment in abatement would pay this report. Still there are also for itself in 7-‐8 years and then accrue thousands of other Michigan children taxpayer savings of $78 million each year who experience lead annually, for many years to come. poisoning, mostly through lead based paint and dust exposures. The A $600 million investment in renewed attention on lead abatement at one time is extremely contamination should remind us that unlikely. But we believe this is a these exposures are equally worthy of consideration for assistance and prevention. reventing P lead paint exposures could also provide sound economic returns by preventing future costs associated with lead exposures.

These economic returns on investment in lead abatement are all in addition to the value of health and well-‐being of thousands of Michigan helpful illustrative scenario, showing children, and their families, who the return on investment from lead experience the effects of lead abatement. And, conceptually, exposure each year. Furthermore, starting with the most needy homes much of the impacts of lead are would likely yield disproportionately disproportionately in urban positive benefits. It seems reasonable communities facing other social, that investing in lead abatement in educational, and public health areas with the highest levels of lead challenges, so the impacts of lead on poisoning (highest BLLs by zip code social and cognitive abilities are identified by DHHS) would yield compounds those challenges. Even benefits even greater than the without this benefit, on an economic average in this scenario. basis alone, this assessment suggests that lead abatement is a sound investment.

Costs of Lead Exposure and Remediation: Update 30

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Costs of Lead Exposure and Remediation: Update 34 EXHIBIT E