Leslie Robinson has lived in Highland Park for almost 25 years. Her three-story Craftsman-style house in the southeast historic district has been in Robinson’s family since 1964. It was passed down from her grandmother to her mother and then to her. Though she plans to someday pass the home on to her two children, a potential city tax hike to cover millions in outstanding water debt, would make it hard for her to maintain it.
“The house is over a hundred years old, and I would hate the thought of having to choose between physically maintaining the house and paying taxes,” Robinson said.
The prospect of property tax increases hitting residents’ mailboxes as early as July is among the avenues being contemplated amid a yearslong legal battle between the city and the Great Lakes Water Authority over an estimated $20 million in unpaid water and sewer bills. GLWA sued the city in 2014, and Highland Park fought the charges all the way to the highest court, arguing the water authority had been overcharging the city. Last week, city officials and GLWA began a court-ordered mediation to negotiate a payment plan for the outstanding debt.
“If the Great Lakes Water Authority (GLWA) and the city of Highland Park do not reach an amicable and comprehensive settlement of the dispute, the $24.5 million judgment will be placed on the city of Highland Park’s tax rolls as a judgment levy,” Randal Brown, GLWA’s general counsel, said in a Tuesday statement to BridgeDetroit. “This remedy and process are detailed in Michigan statutes.”
GLWA officials note Highland Park’s wholesale charges are calculated and billed in the same way as other municipalities working with GLWA, but that rotting and damaged infrastructure have left leaky pipes, and that drives the city’s total cost higher than other cities.
“The city’s system loses more water out of their local water pipes each day than 40 other GLWA communities use individually,” Brown said. “For some perspective on these daily water losses, for every gallon of water consumed by a Highland Park resident, two gallons leak out of Highland Park’s water system.”
According to Michigan Sen. Stephanie Chang, D-Detroit, whose district includes Highland Park, the cost to replace the city’s lead service lines and fix water meters and sewer issues would reachwell over $10 million.
Last year, a Wayne County court ordered Highland Park to pay the debt. An appeals court reinstated the ruling, and last month, the Michigan Supreme Court rejected the city’s petition to hear the case. City Councilmember Khursheed Ash-Shafii said negotiating on behalf of Highland Park in the mediation proceedings are Mayor Glenda McDonald, Council President Jamal K. Thomas, City Administrator Cathy Square, and attorneys from Giamarco, Mullins & Horton, P.C. The city and GLWA are expected to reach an agreement by May 31. How the mediation plays out will determine if and how much residents would have to pay.
Brown said Tuesday that “amounts recovered from an amicable and comprehensive settlement or the judgment levy will be used to reimburse communities that have paid Highland Park’s bad debt expense.” He added that GLWA will not raise its charges to Highland Park to recover the outstanding debt “unless that is agreed upon by the parties.”
Robinson said it’s unfair for residents to shoulder the debt incurred by the city. Most, she argues, have paid their bills. Dropping off the tab at the doorsteps of the residents could make life even more challenging for homeowners in the city, which has a population of less than 9,000 and a poverty rate of about 41 percent, according to the U.S. Census Bureau. For comparison, in 2000, Highland Park had 16,746 residents. Ten years after that, the population dipped to 11,776.
“If people don’t pay their taxes, how will GLWA get that money?” Robinson asked. “Because you’re not getting blood out of a turnip.”
Because of the debt, Highland Park last month asked Gov. Gretchen Whitmer to review its finances under Public Act 436, which could lead to a number of outcomes, such as an emergency manager stepping in again and/or the city filing for Chapter 9 bankruptcy. A week later, the city council requested the governor skip ahead the financial review process and allow for the latter. The Michigan Department of Treasury confirmed to BridgeDetroit that it received and is reviewing the city’s request.
During the city council’s vote, McDonald said bankruptcy is necessary to protect residents from property tax increases and possible water shutoffs. Two weeks ago, in a 3-2 vote, the council rejected the mayor’s request to hire bankruptcy lawyers from the national law firm Troutman Pepper. Councilmember Kallela Martin voted against the proposal, along with councilmembers Sharmaine Robinson and Shafii, saying she walked into the meeting, was handed sixty pages of text and told to make a decision with no time to thoroughly review the material.
“Then there was a generic twenty-minute presentation,” Martin told BridgeDetroit. “Two bankruptcy lawyers explained what bankruptcy was, told us not to look at bankruptcy as something bad and to look at it as a protection. But there was no plan set in place that specifically addressed Highland Park.”
Deborah Kovsky-Apap, one of the two Troutman Pepper lawyers working with the city, told BridgeDetroit that she and her partner were asked to give a “high-level presentation on how Chapter 9 works and to answer questions about the process,” not to deliver a tailor-made presentation for Highland Park.
Martin and Shafii also wondered how the law firm would be compensated for its services. “We’re already spending a million dollars a year on Giarmarco alone,” Shafii said.
The two council members who voted to hire Troutman Pepper, president Thomas and member Temeko Manica, declined an interview with BridgeDetroit. Thomas said because he has been in his seat for only four months – as is the case with the other four members – he is prioritizing acclimating to the role and obtaining knowledge over discussing the city’s issues with the media.
The council’s rejection prompted McDonald to issue a state of emergency, though she didn’t elaborate on how the state of emergency would affect the city’s mediation with GLWA or its bankruptcy contingency plan. McDonald couldn’t be reached for comment.
Bankruptcy not ‘for just one debt’
Not everyone believes bankruptcy is the solution. Eric Lupher, president of the Citizens Research Council of Michigan, released a report late last month that argues Highland Park’s move toward bankruptcy wouldn’t be in the best interest of the city or Southeast Michigan. One reason, Lupher explained to BridgeDetroit, is that the city has been paying down its debts in recent years, outside of the GLWA debt.
Highland Park closed its water treatment facility in 2012 and began accruing debt from its water and sewer service. In 2014, the city was sued over the issue. Since then, debate ensued over who is responsible. In the 1990s, the state began reviewing Highland Park’s finances and later moved the struggling city to emergency financial management from 2001 to 2009.
“The $24 million debt is more than just the elephant in the room; it’s the elephant in the booth,” Lupher said. “But when you look at the overall picture of what’s going on in Highland Park, you’d have a hard time justifying everything that could happen in a bankruptcy process because you don’t file for bankruptcy for just one debt; you do it for all the finances.”
Lupher said for that reason, Highland Park’s situation is different from when Detroit filed for bankruptcy a decade ago. “Detroit’s financial condition was in shambles,” Lupher said. “They didn’t know how much money was coming in, they didn’t know who all they owed money to. They were over their head in paying their debts.”
When it comes to asking residents how the city racked up millions in water and sewer debt, there has been enough blame to pass around – from a former emergency manager and the decision to shut down the city’s own water plant to accusing city officials of money mismanagement and outright theft. Anne Zobel, a life-long resident, said if there is a culprit, it would be the lack of urban policy.
“We rely on the fact that bill collectors are doing the right thing, but there was just no planning, no foresight,” Zobel said. “Infrastructure takes leadership to manage. Infrastructure takes planning and budgets that are not one-year-long; they’re one-decade-long.”
However the situation plays out, Robinson is sure of one thing: “I am not losing my home,” she said. “That’s not an option. I will do whatever it takes.”
Other help could be on the way. Whitmer proposed that GLWA use a $25 million clean water grant from the state to pay the bill on Highland Park’s behalf. GLWA hasn’t explicitly said it will do so.
“GLWA has not yet received the $25 million in funding from the state,” Brown, the attorney for GLWA, said. “Once received, GLWA will spend the money in accordance with the language of the Legislature’s appropriation.
“GLWA will not speculate to the restrictions on the potential uses of the grant,” Brown added in Tuesday’s statement.
Brown said that the water authority hopes to provide a “comprehensive solution” to the city’s infrastructure needs during the mediation.
In an email to BridgeDetroit, the Michigan Department of Environment, Great Lakes and Energy said the grant must be used for “clean water infrastructure improvements” and it will be issued to GLWA “as soon as all remaining questions and reviews are completed.”
Another potential option for Highland Park rests with the Michigan Senate’s Department of Health and Human Services committee’s proposed budget, which could allocate $20.3 million toward the city’s water debt. The proposed allocation was introduced by Sen. Sylvia Santana, D-Detroit).
Chang said one of her biggest priorities is making sure residents don’t shoulder the burden. Depending on how the city’s mediation with GLWA unfolds, she said, the budget proposal language could be rewritten to allow Highland Park to also use the money to fix water infrastructure issues.
“We got to think about the big picture,” she said.
The state budget will be finalized in June, after the city and GLWA’s expected agreement.
“So, we’re closely watching the mediation, and we have to wait and see what happens in order to adjust as we go,” Chang said.
On Monday, some residents showed up to a council budget meeting expecting an update on the mediation and the potential of a property tax increase but left with no answers as the meeting ended before it began.
After roll call, Martin demanded an apology from a fellow council member that she said called her intelligence and ability to serve on the council into question in an email. When no public apology was given, Martin, Shafii, and councilmember Sharmaine Robinson voted “no” on the approval of the agenda and left the chambers. Martin was unavailable for comment.
Runae Ford, who’s been a Highland Park resident for more than 50 years, said residents shouldn’t be punished over personal conflicts among the council and called for the three councilmembers’ jobs.
“I wanted to know what happened in mediation and what is our next move,” Ford said. “If you don’t approve the agenda, how do we get our questions answered?”