U.S. bankruptcy judge hears testimony on Detroit water shutoffs

By Lisa Lambert DETROIT (Reuters) - A federal bankruptcy judge on Monday heard testimony from low-income families in Detroit who say they suffered hardships when the city cut off their water with no warning and are suing to prevent such shutoffs from happening again. U.S. Bankruptcy Judge Steven Rhodes - currently overseeing Detroit's historic bankruptcy case - is hearing arguments Monday and Tuesday before deciding whether to issue a six-month injunction against water cutoffs. The larger hearing to approve Detroit's plan for exiting bankruptcy is on hold for the week and will reconvene on Sept. 29. Nearly 20,000 Detroit residents lost access to water and sewers this summer, sparking protests and leading the mayor to issue a month-long moratorium on shutoffs as well as requirements that the water department post warnings on people's doors about the risk of losing water access. Sue McCormick, director of the Detroit Water and Sewerage Department, told the judge a six-month injunction would financially harm the city's water department, which is struggling with $90 million in unpaid water bills. McCormick, however, also recognized that the water service had not followed its own rules on personally notifying households of an imminent shutoff or on cutting off those with medical conditions. Maurika Lyda, a low-income mother of four, said the city cut off her home's water connection without warning in June and she had to send her children to stay with other family members. Lyda, one of the plaintiffs in a class-action lawsuit asking for a moratorium on water cutoffs, sued and her water was reconnected. But she said she recently learned she owes $424 and could have her water cut off again. Another Detroit resident, Tracy Peasant, testified that her household, which includes eight children, lacked water for nine months. McCormick said a long injunction could be financially devastating for the water department, noting the number of delinquent bills rose during the one-month moratorium. She added that the department receives almost all of its revenue from water charges, and a drop there could hurt its bond ratings. About 40 percent of Detroit's residents live at or below the federal poverty level, which is currently $23,850 for a family of four. A new regional water authority that the city council approved on Friday includes a water affordability plan and a cap on rate increases. The authority, which is also part of Detroit's bankruptcy plan, must still be approved by at least one neighboring county. (Additional reporting and writing by Karen Pierog and Fiona Ortiz in Chicago; editing by Matthew Lewis)