Flint_Water_Crisis_final_with sign

Summer School 2016
Flint Water Crisis
Instructor: Otto, Jonah
Written by: Cortinovis, Fabrizio
Matriculation number: 1020951
Email: fabri.92.8@gmail.com
Written by: Schmidt, Julia Katharina
Email: Schmidt.sj.julia@gmail.com
Written by: Gu, Eric
Email:weijgu@indiana.edu
Written by: Viktrup, Jacob
Email: jacobviktrup@hotmail.com
Bergamo, 30/05/2016

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Cortinovis, Fabrizio; Gu, Eric; Schmidt, Julia; Viktrup, Jacob
Table of Contents
List of Figures ............................................................................................................................. IV
List of Abbreviations .................................................................................................................. IV
Abstract........................................................................................................................................ 1
1. Introduction.......................................................................................................................... 2
2. Problem Analysis.................................................................................................................. 3
2.1. Central Problem and Overall Context............................................................................. 3
2.2. The Strategic Management of Places Framework........................................................... 4
2.3. Application of the Framework......................................................................................... 5
2.3.1. Factors of Production................................................................................................... 5
Physical Capital........................................................................................................................ 6
Unskilled labor......................................................................................................................... 6
Human Capital......................................................................................................................... 7
2.3.2. Spatial Structure and Organization............................................................................. 8
2.3.3. The Human Element................................................................................................... 10
Networks and Linkages.......................................................................................................... 11
Identity and Image................................................................................................................. 11
Role of Leadership ................................................................................................................. 11
2.3.4. Policy........................................................................................................................... 12
Federal Economic Policy........................................................................................................ 12
Local Policy Failures Leading to the Water Crisis ............................................................... 13
3. Strategic Methods for Economic Stability and Growth.................................................... 17
Finish Construction of KWA New Water Pipeline ............................................................... 17
Health Care Solution.............................................................................................................. 18
Restoring City Image: A Human Dimension Approach ....................................................... 20
4. Conclusion .......................................................................................................................... 22

III
List of References....................................................................................................................... 23

IV
List of Figures
Figure 1: Strategic Management of Places framework; Source: Audretsch, 2015, p. 23.
Figure 2: Manufacturing Employment Slides; Source: Bureau of Labor Statistics 2016
Figure 3: Educational Attainment Lags; Source: Bureau of Labor Statistics 2016
Figure 4: Flint labor force divided by industries in March 2016; own illustration, 2016; data
source: Bureau of Labor Statistics, 2016
List of Abbreviations
APN Advanced Practice Nurse
CMS Centers for Medicare and Medicaid Services
CNN Cable News Network
DWSD Detroit Water and Sewage Department
EM Emergency Manager
EPA Environmental Protection Agency
Et al. Et alii / and others
FPL Federal Poverty Level
GM General Motors
HHS United States Department of Health and Human Services
Jr. Junior
KWA Karegnondi Water Authority
LCR Lead and Copper Rule
MDEQ Michigan Department of Environmental Quality
NAFTA North American Free Trade Agreement
NP Nurse Practitioner
NYC New York City
NYPD New York Police Department
p. Page
ppb Parts per billion
SWOT Strengths, Weaknesses, Opportunities, and Threats

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TTHM Trihalomethane
U-M University of Michigan
U.S. United States

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Abstract
The following paper discusses the water crisis in Flint, Michigan, concerning its underlying
causes, current situation, and future outlook of economic development. The problem analysis
is guided by the framework in the book Strategic Management of Places written by Professor
David Audretsch, with a focus on how federal and local policy decisions facing the
underlying factors of production led to the water crisis.
Main issues initiated by the water crisis include public health issues, environmental injustice,
and the city’s reputation which will likely dampen economic growth in the future. The
underlying causes for the water crisis involved the failed public policies dealing with the
water source, as well as the financial deficit resulting from the weak economy in Flint.
The goal is to present an overview of how a failing economy and policies poisoned an
American city and to seek solutions to overturn Flint’s situation in order to achieve long-
term economic growth.

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1. Introduction
An article in reference to the water crisis in Flint, Michigan stated: “The significant
consequences of these failures for Flint will be long-lasting. They have deeply affected
Flint’s public health, its economic future and residents’ trust in government” (Utecht and
McCoy, 2016) Therefore, the aim of this seminar paper is to analyze the economic, financial
and governmental problems that led to one of the most severe water crises in America. After
conducting in-home water tests in Flint, the tap water was found to contain critical amount
of lead and other toxic substances that cause severe health implications, especially in children
(Graves, 2016).
The origin of this problem lies in the financial deficit of the city, triggered by the weak
economy. While Flint was once a place of great wealth, the economic decline began as
General Motors (GM), the largest employer in Flint, downsized its industrial complex in the
1960’s (Kuhn, 2016). In order to get the city’s expenditures under control, the state of
Michigan appointed an emergency manager (EM) to take over Flint’s finance in 2011 (Fraser
et al, 2011). One of the critical expenditures was Flint’s water supply. In order to reduce the
water fund shortfall, it was decided by the EM to switch the water source from anti-corrosion
treated Detroit Water to the Flint River as a temporary measure in April 2014 until the new
Lake Huron water source is ready in 2016. However, the water quality from Flint River has
been historically poor due to containment of fecal coliform bacteria, low dissolved oxygen,
oils, and toxic substances. As a result, the corrosive Flint River water, without being treated
with anti-corrosive agent, caused lead from aging pipes to leach into the drinking water
(“Flint Water Crisis Fast Facts,” 2016).
While the weak economy has been an underlying indicator for the water crisis, a secure water
supply still needs to be established first in order to revitalize Flint’s economy. As said,
suggestions on supplying clean and safe water for the city are discussed in the first part of
the problem solution segment, as well as a healthcare solution, since access to healthcare is
an essential factor to attract skilled and unskilled labor and entrepreneurs. In addition,
methods on how to rebuild Flint’s city image are proposed in the final segment of the problem
solution to reach long-term economic growth.
In the next section, Professor Audretsch’s Strategic Management of Places framework will
be shortly described, as well as Flint’s weak economy that led to the water crisis.

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2. Problem Analysis
2.1. Central Problem and Overall Context
65 miles North of Detroit, the city of Flint, Michigan is experiencing unsafe levels of lead
and iron in the drinking water. Thousands of residents, including children, have been
exposed to toxic levels of lead as a result of economically-motivated agendas, technical
issues with supply lines, and flawed governmental infrastructure. The issue began in April
2014 when state emergency officials decided to switch Flint’s water supply from the city of
Detroit to the Flint River in order to save the state of Michigan approximately one million
dollars per year. This decision was made in spite of the fact that Detroit was offering Flint a
deal involving cleaner water for residents. The economically-motivated decision was only
intended as temporary until a new state-run supply line from Flint to Lake Huron was finished
(Dickinson, 2016).
For more than two years, Flint has been relying on the water from the river while more
residents have expressed concern over the quality of the drinking water. The state of
Michigan as well as Flint’s former mayor tried to convince residents that the water was still
safe to drink; however, in August of 2015, a group of skeptical researchers from Virginia
Tech University came to Flint and did in-home water testing and found unsafe levels of lead
in the drinking water and made their findings public (Ganim and Tran, 2016). The events in
Flint have gained national attention as well as outrage from millions of Americans and the
President of the United States who was quoted calling the response of state authorities as
“inexplicable and inexcusable” (Dickinson, 2016). More importantly, it is still unclear in
terms of when the water will become safe for residents to drink again.
In order to fully understand the situation surrounding Flint, Michigan, it is important to
provide some brief overall context. In terms of the economic situation of the city, Flint used
to consist in a strong, affluent area with approximately 46,000 manufacturing workers;
however, this was in the 1950’s. Now, Flint has approximately 12,000 manufacturing
workers, only a fraction of the workforce in the previous decades. One cause of this shortage
of workers was due to Flint being a major hub for automobile manufacturing after World
War II; however, in recent decades, the automobile companies left the city and as a result,
took a vast majority of the jobs with them. This scenario is indicative of the rest of the state

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of Michigan which has experienced vast auto industry unemployment issues (Gillespie,
2016).
This economic situation leads into the fateful decisions by the governing infrastructure of
Flint and the state of Michigan. The primary goal of switching to the Flint River was to save
the state money; however, one of the laws set in place, due to motivation from Governor
Snyder, took away the decision power of Flint’s city council and placed the decision power
to an emergency manager. It is still unclear as to whether Snyder knew of the situation and
decided not to respond until it was too late (Nelson, 2016). It is clear that the infrastructural
system in Flint and the state require reformation in order to make sure the situation does not
happen again.
2.2. The Strategic Management of Places Framework
Before analyzing the economic situation in Flint, Michigan, it is necessary to provide a short
introduction about the general framework pertaining to the economic performance of places.
The framework is provided by Professor Audretsch’s book, Everything in its Place.
According to the book, there are four elements involved in the outcome of economic
performance (Audretsch, 2015, p.23):
- Resources or Factors of Production - Structure and Organization
- The Human Element - Public Policy
The following figure visually conveys the four elements in tandem with economic
performance:
Figure 1: Strategic Management of Places framework; Source: Audretsch, 2015, p. 23.

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It is important to understand the general factors involved in shaping the economic
performance of a particular place. As the book mentions, the three essential elements are
factors of production, the spatial and organizational dimension, and human capital or the
human dimension (Audretsch, 2015, p.26). It is also necessary to note a fourth crucial
element, policy implementation, which is critical to the economy as it influences the three
underlying forces (Audretsch, 2015, p.26). Without public policies shaping and guiding the
three underlying forces with an effective purpose, it is unlikely that there will be positive
results. It also results in unclear expectations and basic guidelines for the three elements.
That is why the combination of public policies and the three foundational elements usually
result in the positive economic performance of a place.
2.3. Application of the Framework
2.3.1. Factors of Production
As introduced above, the performance of a place is shaped and influenced by three underlying
forces. First is the resource-based theory which can be split into traditional and intangible
factors (Audretsch, 2015, p.23):
Traditional factors Intangible factors
- Physical Capital - Human Capital
- Natural Resources - Skilled/Unskilled labor
- Creative Workers
- Knowledge Capital
- Financing
The paper’s focus will be placed on the most relevant dimensions in conjunction with the
analysis of Flint’s economy, namely physical capital, unskilled labor, and human capital.

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Physical Capital
Due to the absence of special natural resources, the capital investment in infrastructure is the
core focus of the examination of Flint’s economy.
Private capital investment was a high catalyst in the economic growth of the city. Flint is best
known for its automotive roots, since General Motors was founded there in 1908 and also
other major automobile manufacturers such as Chrysler, Chevrolet, Buick, Nash and
Champion got their start (Hudson, E.D. 2002). GM brought many jobs to the city, provided
a good standard of living, and was responsible for the growth of the middle class in Genesee
County. Especially in the post-World War II era, the areas around Flint and Detroit had some
of the best economic performances in North America and the world (Audretsch, 2015, p. 31).
The major reason for the success in producing goods such as cars was economies of scale in
manufacturing, which were achieved from the high degree of productivity through mass
production. This strategy allowed General Motors to produce quickly at low costs.
However, on the other hand, a lack of capital investment could lead to problematic situations.
In the Flint water crisis case, a shortfall in physical capital, specifically the underfunding of
the water distributing system, is rather concerning. According to a government brief from the
Department of Environmental Quality, the water supply system has suffered from a lack of
infrastructure investment and asset management. A majority of the city’s water pipes are now
over 75 years old and are constructed of cast iron piping, which is vulnerable to corrosive
water. Due to a declining user base resulting from vacancy in households, businesses, and
factories, the city of Flint has experienced a significant decline in water use. This is leading
to excess water residing in aging water distribution system, causing acceleration in
tuberculation, biofilm growth, and disinfectant residual degradation (Busch, 2014).
Unskilled labor
Flint used to be a city of factories with the unskilled manufacturing workforce as a significant
factor involved with economic development. As figure 2.2 indicates, over 30 percent of the
workforce in Flint was attributable to manufacturing jobs in the 1990’s. This number has
declined to 9 percent in 2016 (Yadoo, 2016).

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Figure 2: Manufacturing Employment Slides; Source: Yadoo, 2016
Human Capital
In contrast to other cities in the United States where the decline in manufacturing industries
has led to an increasing degree of education, the share of the population aged 25 and older
with a minimum of a bachelor’s degree is 12.5 percent lower (Bloomberg 2016). Figure 2.3
demonstrates the rise of adults in the U.S. having received an undergraduate degree. Flint,
however, remained mostly stagnant.
Figure 3: Educational Attainment Lags; Source: Yadoo, 2016

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For this reason, there has been a shift away from the manufacturing industries toward
knowledge-based economies such as high-technology or the service industries, where higher
degrees are required.
2.3.2. Spatial Structure and Organization
Natural resources, physical capital, and the availability of skilled and unskilled labor is
essential for the economic performance of places, but equally important is the method in
which the underlying resources and factors are organized and structured. The spatial
organization and structural dimension as mentioned in the framework Professor Audretsch’s
book focuses on the following structural aspects (Audretsch, 2015, p.60):
- Market Power - Specialization
- Competition - Diversity
- Entrepreneurship - Clusters
Market Power
Market power refers to the extent to which economic activity is organized within firms
possessing market power (Audretsch 2015, p.60). Since companies operating in monopoly
industries can be very determining to the economy of a place, it is obvious that the
government should maintain core focus on market power of businesses operating in
monopoly industries; however, Flint only has few businesses that possess strong market
power.
Competition
In contrast to the argument in the paragraph above, Porter states that organizations with
monopolistic structures will impede locational performance (Jacobs, 1969). In his opinion,
firms operating in competitive markets are much more sustainable.
The city of Flint, who used to thrive on automobile manufacturing, still has a relationship
with the automotive industry due to its General Motors factory. With reference to an official
SWOT Analysis issued by the General Motors Corporation, the competition among firms
operating in the global automotive industry is extremely intense (General Motors Co., 2014).
The spur of competition is what drives strong performance, as firms are constantly forced to

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stay competitive on several factors including price, quality, availability options, safety,
reliability, fuel economy and functionality. Knowledge spillovers or knowledge externalities
play a key role in taking advantage of a highly competitive environment (Audretsch 2015, p.
67).
Entrepreneurship
The dimension of entrepreneurship involves the extent to which entrepreneurial start-ups and
new firms play a role in a certain region. According to a study of comprehensive annual
business data from the U.S. Bureau of the Census, Acs and Armington found that places with
the highest rates of new-firm formation are the fastest growing economic areas (Acs &
Armington, 2006). There appears to be some startups in Detroit and other parts of Michigan
(Kriewall, 2015, p.8). Flint’s business area, on the other hand, has a very low start-up density
(Hathaway, 2013, p.26). In terms of the technology sector, the amount of business formations
have even decreased since 1990 (Hathaway, 2013, p.26).
Specialization
Specialization refers to the extent to which an area is specialized in terms of economic
activity in order to take advantage of the economies of scale and lower transaction costs
(Audretsch 2015, p.60). While pursuing a strategy of specialization may lead to positive
economic performance and growth in certain places, there are other examples where
specialization is associated with a poor economic performance (Audretsch 2015, p.77). Flint
has undergone both outcomes. Up until the industry decline of American manufacturing in
the 1970s, Flint had been an auto industry powerhouse and one of the most wealthy cities in
the U.S. However, the city’s economy was strongly dependent on one industry, or even
worse, on one company. As the globalization led to manufacturing jobs flowing overseas and
GM closing plants as well as laying off workers in the 1980s, the ongoing economic recession
of Flint, including disinvestment, deindustrialization and depopulation had begun (Rundles,
J. 2016).
Diversity
As opposed to the specialization point mentioned above, this segment involves the variety of
economic activity in a particular place (Audretsch 2015, p.60). As illustrated by figure 2.4,
Flint’s approximately 174,500-person workforce in March 2016 is attributable to diverse
industries. 36,000 people are working in the farming industry and each around 28,000 in the
trade, transportation, and utilities sector and in education and health services (Bureau of

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Labor Statistics; 2016). Another 36 percent are employed by the manufacturing industry,
government, professional and business services as well as leisure and hospitality. Although
Flint had a specialization in automotive manufacturing until the 1980s, it seems reasonable
to argue that the today’s economy is diversified.
Figure 4: Flint labor force divided by industries in March 2016; own illustration, 2016; data
source: Bureau of Labor Statistics, 2016
2.3.3. The Human Element
The human element has to be distinguished from the human capital dimension as a factor of
production. While the latter refers to education and the intellectual capital available in a
certain area, the human element is associated with the degree to which individuals engage in
social networks in order to shape economic performance. Furthermore, it includes the
emotional attachment that people have about their place and the role of leadership
(Audretsch, 2015, p. 85):
- Networks and Linkages - Identity and Image
- Social Capital - Leadership

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Networks and Linkages
In the twenty-first century, knowledge spillover has become increasingly important for
economic growth. The extent to which people in a place interact and are linked together
through networks is vital in this process, as this will lead to a better communication and
successful exchange of ideas. High interaction of people within a network will aid in gaining
knowledge for fueling economic growth (Acs and Armington, 2006).
In terms of networks, the workforce in Flint has a strong engagement in the local Chamber
of Commerce. According to Thomas (2016), Senior Director of Operations at the Michigan
Chamber Foundation “Flint & Genesee Chamber of Commerce is among the top ten largest
chambers in the state measured by revenue and number of members” (Thomas, 2016). The
Chamber offers a range of networking events, educational programs and business roundtables
to facilitate and stimulate economic growth (Flint & Genesee Chamber of Commerce, 2016).
Identity and Image
The identity and image of a city or place can significantly impact the economic performance
in both a positive and negative manner. The image of Flint was poor prior to the water crisis
due to high unemployment, a great amount of residents living below the poverty line, and
crime (“Flint Water Crisis Fast Facts,” 2016). In comparison to the rest of the United States,
which have a violent crime rate of 3.34 per 1,000 residents, Flint has a rate of 17.05 (“Crime
Rates for Flint,” 2016). The water crisis that started in 2014 has exacerbated the issue due to
massive publications of news articles and magazines throughout the United States and the
whole world. Flint became the city of poisoning water, bad government decisions and health
issues (“Flint Water Crisis Fast Facts,” 2016; Rappleye et a, 2016; Flores d’Arcais, 2016;
Kuhn, 2016).
Role of Leadership
The role of leadership is strongly linked to the other human dimensions as discussed earlier
in this chapter. Ideally, leadership has the capability of igniting those human interactions and
guiding them to reach sustainable economic success. However, in Flint, under frequent
emergency management, the people of Flint are not being well represented in the democracy
process. There seems to be a lack of connection between the governing body and the residents

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it represents. Congressman John Conyers, Jr. representing the 13th District of Michigan
argues the anti-democracy of the Michigan emergency manager law, citing that voter turnout
rate has dropped drastically under emergency management (Morris, 2016). Without the
proper democracy process and the connection with the people, it is nearly impossible to be
involved with the citizens’ activities on a daily basis to further ignite human interactions as
civic leaders of the city to achieve more economic growth.
2.3.4. Policy
Federal Economic Policy
As the country has been questioning what led to the water crisis in Flint, the general answer
after all the debates is that the state emergency manager, appointed by state Governor Rick
Snyder, ordered a change in the water supply to save the state money. This was done so that
the city may escape a greater financial deficit in the future. The city of Flint was under
emergency financial management since July 2002, on and off up until April 30, 2015 (Fonger,
2015), right before the water crisis became infamous nationwide. As a matter of fact, there
are three major policy failures which contribute to the decline of a once historically iconic
and vibrant American city.
North American Free Trade Agreement (NAFTA)
On January 1, 1994, after approval from both Congress and President Clinton, the North
American Free Trade Agreement, commonly known as NAFTA, was enacted into law.
Although it promoted free trade among the North American region, the negative impact of
NAFTA has caused manufacturing jobs to leave “Mittelstand” cities, especially Flint. Since
the enactment of NAFTA, the top one percent’s share of national income has increased by
40 percent, while 60,000 manufacturing facilities have been lost nationwide (Riegle, 2016).
This has damaged the vulnerable single-industry cities in America. The U.S. Bureau of Labor
Statistics shows a 76 percent decline in manufacturing jobs in Flint since 1992 compared
with a 30 percent decline for the U.S. While there are a variety of other factors that triggered
the decline of an industrial, middle-sized Michigan city, NAFTA failed to conserve the
manufacturing job market.

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Repeal of the Glass-Steagall Act
In 1933, the Glass-Steagall Act was proposed in order to separate investment and commercial
banking with the aim to protect individuals’ deposits within the commercial banking system
from investment failures. In 1999, most of the act was repealed by the Gramm-Leach-Bliley
Act with an intent to loosen some of the limits to gain global competitiveness. This led to the
significant growth of mega-banks, such as Citigroup, JPMorgan, Chase, and Bank of
America. The rise of risk-taking allowed the credit bubble to inflate during the 2000’s, and
eventually led to one of the biggest financial crises in history (Irwin, 2015). During the crisis,
the unemployment rate in Flint more than doubled from 8 to 17 percent (Riegle, 2016). The
situation worsened the level of poverty, causing residents to lose their health insurance, thus
advancing public health issues in the region.
Local Policy Failures Leading to the Water Crisis
The source of the water crisis in Flint with regards to its local public policy can be generalized
as a failure of judgement and negotiation, government officials’ misinterpretation of
environmental regulations, and the lack of government agencies’ transparency to the general
public. “The Flint water crisis is a story of government failure, intransigence,
unpreparedness, delay, inaction and environmental injustice,” said Chris Kolb, co-chairman
of the Flint Water Advisory Task Force and president of Michigan Environmental Council
(Davis, 2016). Undeniably, a series of oblivious government decision making and the
absence of citizens’ participation in the decision-making process amplifies the seriousness of
the water crisis issue in Flint, as well as the regional economic stagnation. In this section, a
list of failures in policy leading to the water crisis will be analyzed.
Failures in Negotiating
Since 1967, the Detroit Water and Sewerage Department (DWSD) has served as the city’s
main water supply, while water from the Flint River has served as an emergency backup. As
the city’s contract with DWSD ended in 2000, Flint has been renewing the contract each year
to keep an adequate water supply. The water has been treated for corrosion control for over
20 years (Davis, 2016). In April 2013, however, Flint’s City Council (in a 7-1 vote), along
with Flint’s state-appointed emergency manager at the time, Ed Kurtz, decided to join the
Karegnondi Water Authority (KWA), a municipal corporation, to construct a new water
supply pipeline to directly extract water from Lake Huron. According to City Council

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meeting minutes, this proposal was to save the region $200 million over 25 years and was in
the best interest of the people and their elected government officials (Egan, 2015). On the
other hand, DWSD responded to this proposal by deciding to terminate the contract with
Flint, effective in one year, leaving Flint deprived of an adequate water supply from April
2014 until mid-2016 when the KWA pipeline was to be finished. After several failed
negotiations with DWSD on alternative water supply terms, the Flint’s emergency manager
decided to turn to its backyard, the Flint River, for water supply, without consulting the city
council (Davis, 2016).
Failure to Follow the EPA Law
In April 2014, the City of Flint turned off the flow of water from Detroit, and began treatment
and supply of the Flint River water. According to the Environmental Protection Agency’s
(EPA) Lead and Copper Rule (LCR), drinking water at customer taps must be monitored. If
lead concentrations exceed an action level of 15 parts per billion (ppb) in more than 10
percent of customer taps sampled, the system must undergo corrosion control by adding anti-
corrosive chemicals during water treatment. The rule also states that “if the action level for
lead is exceeded, the system must also inform the public about steps they should take to
protect their health and may have to replace lead service lines under their control” (United
States Environmental Protection Agency, 2016). Michigan Department of Environmental
Quality (MDEQ) failed to consult EPA on its standards and requirement of the LCR, instead,
misinterpreted the law enforcement, and advised Flint water treatment staff, that corrosion
control treatment was not required until after two 6-month monitoring periods (Davis, 2016).
Failure to Inform the General Public
Soon after the Flint River water was being distributed without anti-corrosive treatment, Flint
residents began to notice and complain about the irregular odor, taste and appearance of the
tap water. In response to expressed concern from the public, Mayor Dayne Walling stated,
“It’s a quality, safe product. I think people are wasting their precious money buying bottled
water” (Fonger, 2014). A few months later, in August 2014, a local “boil water advisory”
was issued due to a detected E. coli bacteria violation in water samples within half a square
mile on the west side of the city (Emery, 2014). With the advisory being lifted within a week,
there were still no investigations or evidence showing the city warning citizens about other
potential risks regarding the water, such as high levels of lead. In October 2014, right before
the General Motors plant in Flint decided to discontinue the usage of the city’s water due to

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high levels of chlorine corroding the engine parts, the MDEQ released a government briefing
stating the potential causes for the high E. coli level. The department suggested increasing
chlorine in the water to avoid boil water advisories in the future (Busch, 2014). Two months
later, the MDEQ again viewed Flint in violation of the Michigan Safe Drinking Water Act
due to high levels of total Trihalomethane (TTHM), which could cause liver, kidney or
central nervous system issues as well as an increased risk of cancer in the long-term (Fonger,
2015). Following that, the city still claimed the water safe for the general public, only
excluding the elderly and the children. Meanwhile, they began to install water coolers in state
offices, and to provide state employees and visitors bottled water (Davis, 2016).
In addition, throughout the water crisis, the state officials have failed to acknowledge an
outbreak of Legionnaires disease in 2014, which was later found to be the result of lead
contamination in Flint’s water (Goodnough, 2016); In 2015, the MDEQ silenced medical
research conducted by Dr. Mona Hanna-Attisha of Hurley Medical Center in Flint which
found high levels of lead in the blood of children by simply stating, “Flint’s drinking water
is safe in that it’s meeting state and federal standards” (The Associated Press, 2015).
Revealed emails between Governor Snyder and his colleagues showed that concerns
regarding contamination of Flint’s water were actually raised a year before Governor Snyder
publicly acted on the issue (Davey & Bosman, 2016). It is evident to conclude that the series
of failures in delivering valid information to the general public have deeply aggravated the
crisis during the past year.
Failure of Due Process
Following Flint resident, Lee-Anne Walters who is a mother of four, contacting the EPA with
concerns over her tap water quality, the EPA testing found 104 ppb (almost seven times
greater than EPA’s limit of 15 ppb). Further testing showed an even higher and more
alarming lead level (397 ppb) in her home. Flint City Council members immediately voted 7
to 1 in March of 2015 in support of cutting the supply from the Flint River; however, under
the Michigan Act 436 of 2012, Section 141. 1549, “Following appointment of an emergency
manager and during the pendency of receivership, the governing body and the chief
administrative officer of the local government shall not exercise any of the powers of those
office” (Act 436, 2012), which leaves all the political power to a state-appointed individual
– the emergency manager of Flint, Jerry Ambrose. On this very concerning matter, he issued
a statement on March 24, 2015, calling the city council decision “incomprehensible” (Fonger,

16
2015). Claiming that the Flint water was safe by all standards, he also argued that with Flint’s
high rates due to decreased number of users and the old age of the system, paying the money
(more than $12 million a year) to a foreign system does not benefit the local economy. On
the other hand, councilman Eric Mays, who proposed the resolution, called for further
negotiations between Flint’s city council and emergency manager to form a mutual
understanding in order to benefit the people of Flint. In spite of his attempt to negotiate,
emergency manager Ambrose struck down the resolution, stating the cost of water would
likely rise 30 percent or more if the city returned to buying water from Detroit (Fonger, 2015).
Appointing an emergency manager was meant to take over local governmental authority in
a crisis; however, in Michigan, due to Governor Snyder’s expansion of the emergency
manager law, inefficiencies in operations have risen. Instead of granting control only over
government spending (like most other states), emergency managers in Michigan have gained
nearly complete control over a variety of city functions.
In Flint, where 57 percent of the population are African-American, more than 41 percent of
its population live in poverty. Also, the city council has almost no political power, which
indicates the absence of citizens’ participation in the democratic policy and decision making
process. As a result, in 2013, about half of Michigan’s African-American population lived in
a city under emergency management, compared to about 2% of white residents (Morris,
2016). Lawsuits challenging the constitutionality of the Michigan emergency manager law
have been brought to court, indicating the social inequality and inefficiency in Flint’s
emergency management.

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3. Strategic Methods for Economic Stability and Growth
After gaining insights of what caused the Flint water crisis from an economic perspective,
methods will be introduced, with a special focus on policies and their implications.
Finish Construction of KWA New Water Pipeline
From a technical point of view, the first step is to ensure the safety of drinking water in the
area. A short-term solution that has seen progression involves the distribution of filters to
Flint residents in order to limit the level of lead in the running water. This was implemented
due to the previous filters containing unsafe levels of lead and not performing optimally.
CNN reported that more than 27,000 cases of bottled water and over 210,000 new
replacement filters have been handed out (Botelho, 2016).
In the long-term, one crucial issue that must be resolved is the cleanliness of the water source.
The removal of lead from the water supply is a long-term process due to high lead levels not
declining instantaneously; therefore, this solution requires significant resources in terms of
cost, time and people.
People are fundamental in this process because their role is controlling and monitoring the
removal of lead. The solution will impact the economy of Flint due to the costs associated
with the elongated timeframe of completion. Due to this burden, the city is on a tough path
to recover their social, economic, and political crisis (Botelho, 2016).
The solution is being carried out by Karegnondi Water Authority. KWA will be responsible
for substituting the old pipeline with a new water line between the city and Lake Huron. This
project requires a great amount of investment due to the cost of replacement totaling
approximately 1.5 billion dollars.
The substitution of the pipes is mandatory because the lead in the pipes -- besides aiding in
the formation of rust -- is still running to Flint residents creating infrastructural and health-
related issues for the population (Botelho, 2016).
This enormous investment can be seen as “human capital” due to the pipeline creating new
jobs in Flint (Botelho, 2016).
As Professor David B. Audretsch (2015) stated, an infrastructural investment may bring
vitality to a place, thus positively impacting economic performance for both the company
building the infrastructure and the place where construction is taking place. (Audretsch,
2015, p. 47).

18
The situation will remain critical for a long time from a technical point of view. CNN reported
the following: “[...] the fact there's no clear end in sight reflects the considerable technical
challenges of removing lead that has been in a water supply for months and is coming through
what are now contaminated pipes” (Botelho, 2016).
Health Care Solution
One potential solution to the Flint water crisis is already being implemented by the Centers
for Medicare & Medicaid Services (CMS). The state of Michigan proposed the “1115
waiver” for approval earlier this year. The waiver agreement was approved and will
encompass a number of important factors aiding the recovery in Flint. According to the U.S.
Department of Health & Human Services, the waiver will extend coverage to 15,000
additional children and pregnant women. 30,000 current Medicaid beneficiaries in the area
will also be eligible for expanded services. Some of the services include lead-blood level
monitoring and behavioral health services (“HHS Approves,” 2016).
One of the most important aspects of this waiver is the expanded eligibility point for
beneficiaries which will be extended to 400% of the Federal Poverty Level (FPL). The
normal FPL is 138%, respectively. Those who fall within the new FPL are thus eligible for
Medicaid coverage and services. Connecting children with primary care providers early and
following their progression through life stages will be critical for the success of this waiver.
Children whose health are able to be followed during the critical period of possible negative
effects of high lead exposure will likely lead to higher qualities of life in the future (“HHS
Approves,” 2016).
This waiver could aid in solving the issue surrounding the low-performing economic
situation in Flint due to focusing on the healthy development of children in order to make
sure that they thrive. A study published in the Bulletin of the World Health Organization
arguing for governments’ investment in the healthy development of children stated: “[…]
making greater investments in children’s health results in better educated and more
productive adults, sets in motion favorable demographic changes, and shows that
safeguarding health during childhood is more important than at any other age because poor
health during children’s early years is likely to permanently impair them over the course of
their life” (Belli et al., 2005). In terms of the elements involved in the economic performance
of a place, this policy would aid in the “human capital” and “factors of production” segments.

19
By making sure children grow healthily, there is an improved chance that their capabilities,
knowledge, cognitive abilities, and even personal attributes will yield positive economic
value for Flint. For factors of production, this potential solution would involve improving
the human capital piece and thus positively affect the performance of Flint (Audretsch, 2015,
p. 26).
Due to the waiver being approved in March of this year, it is difficult to find any results
pertaining to the effectiveness of the waiver and its effect on the economy of Flint; however,
as stated earlier, the waiver is expected to expand coverage for approximately 15,000
additional children and pregnant women. Also, 30,000 current Medicaid beneficiaries will
be eligible for expanded services (“HHS Approves,” 2016). The previously discussed study
also found that investing in children’s health will likely lead to positive outcomes involving
more productive adults which will likely lead to an improved economy (Belli et al., 2005).
In terms of the expectations of the results, we were pleased to see that a significant portion
of the population in Flint would be receiving expanded Medicaid services; however, it may
be difficult for primary care physicians to provide that level of care. With the increases of an
aging population and chronic illnesses, primary care physicians will already have enough on
their plate to handle. Also, the solution appears to have a short-term effect due to the waiver
lasting for only five years (“HHS Approves,” 2016). What happens after the end of the
waiver is up to interpretation. The purpose of the waiver is to provide adequate care while
the pipelines are repaired and the water is properly treated; however, there is a potential
solution to this situation.
The outlook for the future of Flint as a result of this potential solution depends on the
availability of health care providers as well as the success of establishing an effective water
way to Flint and the proper treatment of the water by the time the waiver runs out. In order
to alleviate the increased burden placed on primary care physicians, we propose developing
a policy focused on expanding the scope of practice for Nurse Practitioners (NP’s) in Flint.
This policy would allow NP’s to perform duties comparable to that of physicians. These
duties would include referring patients, prescribing medication, and ordering tests and
procedures.
Nurse Practitioners are Advanced Practice Nurses (APN’s) who are required to obtain a
master's or doctoral degree in their respective field. These nurses specialize in areas such as
pediatrics, neonatal, psychiatrics and family care. They largely act independently in daily

20
diagnoses and clinical operations. Nurse Practitioners are also cost-effective and highly
regarded. An article in the Wall Street Journal stated: “As the National Governors
Association concluded in 2012, ‘Most studies showed that NP-provided care is comparable
to physician-provided care on several process and outcome measures’” (“The Experts,”
2013). Due to their competence level, it makes sense to increase access to health care services
by allowing NP’s to practice in accordance with their level of education. This policy of
practicing without physician supervision would lead to increases in access to care for Flint
residents thus improving the human dimension segment. The healthier population will thus
have a positive impact on the improvement of the economy in Flint.
Restoring City Image: A Human Dimension Approach
Flint, Michigan, is known as the “Vehicle City” due to its booming automotive industry after
World War II. However, since the industry decline and the regional economic depression
since the 1980s, rising crime rate and vacancy rate have been eroding the city’s reputation.
For recent years, Flint has ranked as one of America’s Most Dangerous Cities, according to
FBI crime statistics of violent crimes per capita (Sterbenz, 2013). Today, because of the water
crisis, Flint is now entitled with a new name – The Poisoned City. In David B. Audretsch’s
book Everything in Its Place, “[...] a clear link is made between [the] underlying identity of
a place and its economic performance” (Audretsch, 2015, p. 117). Therefore, this solution is
focusing on renovating Flint’s image and identity by overturning its bad reputation of being
“One of America’s Most Dangerous Cities” and the well-known “Poisoned City.”
Our first step proposed is to allocate funds for the Flint Police Department, as Flint’s per
capita violent crime rate remains seven times higher than the national average. With U-M
School of Public Health research investigator Dr. Shervin Assari’s studying concluding a
link between obesity and a fear of violence, the need to address this issue became even more
significant in order to maintain a healthy working population in Flint. New York City (NYC)
underwent a successful case in combating high crime rate back in the late 1970s by funding
New York Police Department (NYPD) to develop a series of strategies targeting different
locations in the city. The process lasted for decades with multiple projects, which ultimately
reduced NYC’s annual homicides level back to less than one murder per day on average in
2013 (Kelling, 2009). Similarly, the city of Flint is currently occupying more police force
seizing guns on Flint streets and bringing new federal training programs to help with data

21
analysis to help reduce crime rate (Carmody, 2015). This solution requires a long-term
planning. Thus, a sustainable fund is necessary to maintain the operation and advancement
of the police department in a long run.
The second step is to initiate urban development projects in the city of Flint to enhance its
livability. According to a survey of urban professionals conducted by the Economist
Intelligence Unit shows that livability, such as “[…] jobs, cost of living, public transport and
roads, safety and security and culture and nightlife all rank highly among our respondents’
list of factors contributing to a city’s attractiveness as a place to live and work”
(“Liveanomics: Urban Liveability and Economic Growth,” 2011). Flint has experienced
constant population drop, with nearly 125,000 people in 2000, to roughly 101,000 by 2011
(Sterbenz, 2013). In order to obtain pre-existing population, and to increase future human
capital inflow, making city of Flint more livable is critical. Facing similar issues, such as
high crime rate, unemployment rate, and vacancy rate, the city of Detroit has been undergoing
urban development projects to enhance livability. One of the most successful cases is the
Detroit RiverFront Project, operated by Detroit RiverFront Conservancy Inc., converting the
underused piece of real estate riverfront area of Detroit into a tourist attraction surrounded
by parks and recreational facilities. The project operator has been working with local
businesses to engage and draw citizens to the riverfront area through programming and
implementing other public infrastructures in the region. According to the 2009 Detroit
RiverFront Conservancy Annual Report, other than the impacts on locals and visitors, the
projects have supported 16,700 construction jobs and provide on-going annual support for
1,300 jobs. Annual spending by visitors, residents, employees and other operations along the
riverfront is estimated at $43.7 million (2009 Annual Report, 2009). If a similar project along
the Flint River is implemented, it would not only increase land value, provide employment
opportunities and increase local tourism, but also greatly ignite the human interactions within
the region through community programs. We predict that, by rebranding the Flint River, the
city of Flint will become more livable and attractive to skilled workers, which contributes to
human capital inflow to stimulate the regional economic growth. Although restoring a city’s
image cannot happen overnight, however, through leadership, investment and hope,
ultimately, the image and identity of “Vehicle City” will again be the pride of all Flint’s
residents.

22
4. Conclusion
The Flint water crisis is the latest, and maybe most horrifying example of colossal and
obscene failure of government leading to various social issues (Graves, 2016). It has been
observed that the weak economy, which originated from the failure to shift Flint’s economy
from manufacturing to a knowledge-based economy after the collapse of the American
manufacturing industry, led to poverty and crime, and most importantly, the financial deficit
of the city. Failed economically-motivated regional financial policies in response to this
financial deficit then provoked the water crisis.
Currently, Flint is suffering from several problems initiated by the crisis. However, there is
no singular approach that can fix all issues. To address many of its present challenges, and
foster long-term economic growth, Flint must create policies that impact in the short-term,
medium-term, and long-term. The considerations provided in this paper state the urgency to
solve the water quality in the short-term, and provide policy suggestions to ensure a healthy,
working population and to fix the city’s image in order to create a place where future
economic growth can occur.

23
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28
Plagiarism Statement
This case study was written by me and in my own words, except for quotations from
published and unpublished sources which are clearly indicated and acknowledged as such. I
am conscious that the incorporation of material from other works or a paraphrase of such
material without acknowledgement will be treated as plagiarism, subject to the custom and
usage of the subject, according to the University Regulations on Conduct of Examinations. I
agree that an electronic version of my case study will be checked by a software in order to
detect plagiarism. I agree that in order to check my case study by Ephorus B.V. (Netherlands)
my data will be saved in a database of the Faculty of Business and Economics at the
University of Augsburg.
The source of any picture, map or other illustration is also indicated, as is the source,
published or unpublished, of any material not resulting from my own experimentation,
observation or specimen-collecting.
I am aware of the fact that plagiarism leads to the failure of this course.
Bergamo, 30/05/2016 (Surname, First Name)

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