A circuit court judge declined Highland Park’s request for a stay against the Great Lakes Water Authority Thursday, reinstating a judgment that would allow the utility to recover an estimated $24 million in water debt from city residents and businesses. In his ruling, Wayne County Circuit Court Judge Edward Joseph gave the two parties until May 31 to devise a plan for how to settle the bill.
The decision follows a decade of litigation over Highland Park’s water and sewerage debt, which the city disputes. Highland Park was first sued by the Detroit Water and Sewerage Department in 2014 over a 2009 agreement concerning sewage debts. In 2012, the state shut down Highland Park’s water treatment plant, hooking the city up to water from DWSD and then GLWA service.
Highland Park residents and officials fear that GLWA’s efforts to recover the sizable debt through property taxes could devastate a city where the poverty rate is 41% and yearly property taxes total just $9.6 million, less than half of what the utility says the city owes.
Some also worry that GLWA could cut off residents’ water as part of its effort to collect payment. Judge Joseph also denied a separate stay on water shutoffs. He suggested the tax increases could hit residents as soon as this summer.
“If I just grant the stay, I’m effectively putting them on hold until 2024, and I just don’t think that’s what the Court of Appeals intended when they told me to reinstate the judgment,” he said.
Eban Morales, a Highland Park resident and water rights activist, expressed concern about what water shutoffs or a tax levy could mean for Highland Park’s low-income, elderly, and disabled residents. “The city is hanging on by a thread,” Morales told Planet Detroit.
“Citizens are not the ones that are to blame,” he said. Noting the city’s years under emergency management and the state’s role in closing the Highland Park water plant, Morales said state leaders should help resolve the debt issue.
This might mean allowing the city to declare bankruptcy, which Morales believes is
Highland Park’s only remaining option.
On Monday, Highland Park City Council passed a resolution requesting Gov. Gretchen Whitmer expedite a Chapter 9 bankruptcy filing for the city, which could mean selling off assets and nullifying city contracts. This followed an earlier request to begin the Public Act 436 process, Michigan’s financial emergency law.
But it’s unclear if this can happen fast enough to head off the dispute with GLWA before Judge Joseph’s May 31 deadline. The process can take weeks and Whitmer spokesperson Bobby Leddy said, “they cannot skip to the end.”
In a statement on Tuesday, Highland Park Mayor Glenda McDonald said if Judge Joseph denied a stay on water shutoffs, it could result in disconnections. GLWA CEO Suzanne Coffey said the utility didn’t intend to shut off water service. But in an email to Planet Detroit, GLWA suggested it would pursue a levy.
“If the judgment is entered by the Court, Michigan law allows for the judgment to be added to the tax rolls, it will then become a part of property tax bills,” the utility’s statement said.
Suburban communities have added to the pressure on GLWA with complaints that they shouldered the burden of Highland Park’s debt. In June, Macomb County Executive Mark Hackel and Public Works Commissioner Candice Miller called for communities to partially withhold payments until the debt issue had been resolved.
Following Thursday’s decision, Highland Park issued a statement that pointed to an earlier circuit ruling that would have resulted in GLWA paying the city $1 million in overcharges. However, this was overturned by an appeals court.
“Highland Park is hopeful that this court-ordered facilitation by Judge Edward Joseph will allow for the extended payment plan that the city has wanted since 2014,” the statement reads.
However, city officials also suggested deep tensions that need to be negotiated, saying “DWSD/GLWA has refused” to negotiate a payment plan “because they wanted a tax levy.”
Highland Park City Administrator Cathy Square said a judgment levy is the only way GLWA can recover the money. She said GLWA can convert the judgment levy to a lien on properties, forcing businesses and homeowners to pay the debt. Square said this would be a “catastrophe” for the city.
She said most of this money would be paid by businesses whose properties have higher taxable values. But she added it would still be an extreme hardship for those living below the poverty line who own homes.
Morales concurs with Square’s assessment, saying water shutoffs or a levy “would kill the city.”
“All the businesses would flee,” he said. “We don’t have a lot of businesses as it is. We can’t afford to lose the ones that we’ve got. We can’t afford to lose any of the residents we’ve got.”
State Sen. Stephanie Chang (D-Detroit), whose district includes Highland Park, says she has been meeting with local officials, the governor’s office and the state treasury department to get a handle on the options for helping the city.
“I do believe the state should play a role in helping resolve this,” she said. However, she added that state officials must follow the steps laid out for bankruptcy or other remedies under Public Act 436, potentially delaying action.
Chang previously said that the state might be able to help the city pay down its debt or pursue a consent agreement. The governor’s office has said that a $25 million appropriation the state made to GLWA last year should be used to help resolve the dispute.
However, Miller told the Detroit News that money should be used to help reimburse suburban communities who she said subsidized Highland Park’s water bills over the past decade.
“I hope that whatever we do, we’re able to find a resolution that doesn’t put this burden on the residents,” Chang said.