The EPA says it cannot forgive loans the city of Flint took out 15 years ago to improve its water system. The federal agency responded this week in a letter to U.S. Congressman Dan Kildee, D-Michigan, who made the inquiry last month.
Kildee says he’s disappointed, but still hopeful they can figure something out.
“I think it’s a technical problem, one that we can get to. I hope it doesn’t require a legislative remedy but if it does, that’s the approach we’ll take,” Kildee said.
There are four loans in total. The state recently approved restructuring the loans so the city could delay paying on the principal balance, but it doesn’t have the legal authority to forgive them. The city still owes more than $20 million on the loans.
Kildee says cities like Flint couldn’t have foreseen this debt piling up.
“Obviously a lot of these older cites are saddled with debt that was never anticipated; given the loss of population, and the loss of available rate payers, the costs of these systems, and the fact that they’ve deteriorated so much,” he said, “So if there’s ever a case for loan forgiveness or any principal forgiveness this would be the classic case.”
In the letter to Kildee, the EPA noted the state could offer some forgiveness on new loans, but not existing ones.
For example, in 2009, Flint applied for a $13 million loan for water system improvements. The state offered to forgive half of that new loan, so the city would have only paid $6 million.
But only a few weeks after city officials applied for the loan, they declined the offer, citing concerns about the city’s financial position. It was under the control of a state appointed emergency financial manager at the time.