Market Extra: Flint water crisis victims will receive $641 million. Just don’t call it ‘justice’

United States

Seven years after it began, the Flint water crisis finally may be drawing to an unhappy end. Clean water is flowing in the Michigan city, several public officials have been charged, and a $ 641 million class-action settlement is afoot to bring some monetary relief to residents. But for some observers, the planned settlement is too little, too late for this traumatized, mostly Black and poor community.

Tens of thousands of residents were sickened, some seriously; an entire community went without safe drinking water, a basic necessity, for years; and while the official death toll is 12, independent investigations have linked dozens more deaths to the episode.

The settlement addresses civil claims against the state of Michigan, the city of Flint, McLaren-Flint hospital and Rowe Professional Services for the water crisis. Most of the money is expected to be paid to Flint residents who were children at the time of the lead exposure, with final approval expected later this year.

The deal is drawing fire for sticking Flint with part of the tab, while generating fees for Wall Street — some of the same issues that got the city into trouble in the first place. Importantly, it also may overlook the biggest issue of all: justice and a path forward for a traumatized community.

“You think about the lives lost, the impact of lead poisoning, Legionnaire’s disease,” said Ryan Bowers, a co-founder of research firm Activest, while also pointing to a generation of young people in Flint who are most at risk for cognitive impairments from drinking contaminated water.

“You’re looking at a city where you’ve eroded their tax base,” Bowers said. “You disrupted an entire community’s lives for years and years. What is being done to make people whole?”

Activest is a unique organization that, in its words, “blends economic modeling, financial analysis, and social policy research to advance racial justice in municipal finance.” MarketWatch profiled its early work in 2020.

The group on Wednesday released a report called “Flint Water Settlement Bonds: A Fiscal Justice Analysis,” and Bowers spoke exclusively with MarketWatch about the report, the settlement and how, they believe, justice has eluded Flint.

Flint’s story is one of a “shrinking, post-industrial city,” according to 2016 testimony from Wayne State professor Peter Hammer, addressing the Michigan Civil Rights Commission Hearings on the Flint Water Crisis.

The city’s population peaked at 200,000 in 1960 and by 2016 was less than half that, thanks in large part to the changing automobile industry, Hammer said. At one time, over 80,000 Flint-area residents were employed by General Motors Co. GM, -0.04%. On the eve of the 2008 financial crisis, the population was reportedly as low as 8,000. Flint’s official jobless rate in 2010 was 23.2%. In 2009, over one-third of residents lived below the poverty line.

Among Activest’s key concerns about the settlement: for-profit entities, from underwriters to lawyers, will profit from the new deal. Meanwhile, Michigan taxpayers will be on the hook for the payout — the state is set to borrow $ 700 million in the municipal bond market, to be paid back over 32 years, resulting in an estimated additional $ 400 million in interest.

The city itself will contribute $ 20 million to the settlement, a step Activest vigorously protests, noting that more “responsibility” should lie with the office of the governor. Finally, the team writes, “Survivors and families of those impacted need to have their concerns listened to, documented, summarized and reported to the public–and ultimately followed-up on by an investigative body.”

Flint’s City Council approved the $ 20 million payout, which comes from an insurance policy, not tax dollars, after lengthy debate over the merits of the current proposal, versus future court battles.

‘That’s not justice. Who’s making the city whole?’

— Ryan Bowers, Activest

So far, there are roughly 50,000 parties to the settlement, Bowers noted, meaning payouts will probably average roughly $ 12,000 each.

“That’s not justice,” he said. “That’s not institutional justice. Who’s making the city whole? If you don’t make the city whole, you know, people talk about service-level insolvency. In Flint, their budget numbers are all upside down. They’re in a very precarious position, with not enough revenues, a huge debt overhang, a huge pension overhang, and a dwindling population.”

Lessons from 9/11

When it comes to managing money meant to assuage grief, it’s hard to find anyone with more recent experience than attorney Kenneth Feinberg.

Feinberg is perhaps best known as the administrator of the U.S. government’s September 11th Victim Compensation Fund, but he’s overseen many other settlements, including the BP Deepwater Horizon disaster, the Boston Marathon bombing, and mass shootings at Virginia Tech and in Aurora, Colo.

“No dollar amount can ever be enough,” Feinberg said in an interview with MarketWatch about the Flint settlement. “Money is a very poor substitute for loss. No matter how much is offered, how much money or the genesis of the money, the most difficult part in calculating damages is the legitimate emotion suffered by the victims. Expect anger, frustration and a sense of uncertainty.”

Feinberg shares Activest’s concern that the grievances of Flint residents in their own words won’t be heard. He always takes the opportunity to let victims and survivors “vent” publicly, and also to speak to him in private, he said.

But he’s also clear on the role he’s there to play, which is to distribute money, and notes that may not be the same thing as delivering justice.

‘Money is a very poor substitute for loss.’

— Attorney Kenneth Feinberg

“When people say you’re not bringing me closure, I tell them bad things happen to good people every day in this country, and the number of funds with money available to citizens you can count on two hands. The fact that there’s some remedy is a plus. This is a compensation fund designed to help the victims. When it comes to punishing the wrongdoers, they should be brought to the courthouse,” Feinberg said.

Bowers at Activest thinks the weight of the damage done to Flint residents means they deserve more.

Beyond charges that state officials, including former Gov. Rick Snyder, knew that the Flint River would be a dangerous water source, there’s also the simple idea that Flint shouldn’t have been put in the situation in the first place.

In response to a MarketWatch request for comment, a spokesperson for the former governor’s legal team sent the following statement: “While no amount of money can ever make up for the tragedy in Flint, the Governor hopes this settlement provides some measure of peace and comfort to the residents impacted by the water crisis. He cares deeply for the people of Flint, and while in office, did everything in his power to help address the water crisis as facts and information became known. This included mobilizing the state government to provide direct support and relief during the crisis, as well as committing more than $ 300 million to help expand educational, nutritional, and economic support to the residents of Flint. The Governor’s actions to help the people of Flint are well documented in the thousands of internal emails he released to the public to provide transparency on the administration’s work to address the problem.”

‘Strategic’ second-class citizenship?

In his 2016 testimony, Wayne State’s Hammer outlined the steps that created the crisis, calling it a case of “strategic structural racism.”

The state hired an unelected emergency manager for the city, Hammer noted, and a succession of people in that role then ensnared Flint in a bond deal it could not afford, and left it with no choice but to use the Flint River as an interim drinking water source, even though it was known to be problematic.

Bowers recalled his reaction to Hammer’s testimony. “It was as if they were pillaging and raiding the commons, as if Flint was a prize to be exploited,” he said. “Because of its vulnerability, people were even more greedy. It was like a fire sale, with no regard for the health of the residents.”

But Feinberg says, gently, that every tragedy is unique. “In the Boston Marathon you had a history of a very successful institution run every year, and I received a fair amount of input from citizens saying this was a tragedy tarnishing a legendary event. In Orlando, when the Pulse nightclub was attacked, we heard from victims that this was an attack at a gay nightclub, everyone was there for an evening out, everyone was so comfortable and, my God, they were suddenly attacked by a terrorist.”

Flint’s special circumstances, Feinberg noted, is “a history of second class citizenship, leading to the culminating of decades of maltreatment, mistreatment, ignoring the citizens.”

The common denominator among all these unique events, according to Feinberg, is the emotion of victims: “Where’s the money coming from? Why aren’t they being punished? What you’re giving me is blood money.”

“Part of justice has to do with truth-telling and having peoples’ stories told, whether people honor that or not,” Bowers said. “As Black people, we haven’t often been on the winning side of things. We haven’t always won these battles. But part of what we share and the wisdom, and advice that’s been passed down, is that you have to do what’s right.”

Read next: In one chart, how U.S. state and local revenues got thumped by the pandemic — and recovered