Will Michigan's largest water provider target tiny city for next shutoffs?
Highland Park, a tiny and steadily shrinking city north of downtown Detroit, was once the center of an industrial empire that built the vehicles that shaped 20th century America.
Henry Ford planted the first flag, establishing a production line on Woodward Avenue in 1910 that assembled Model Ts for an increasingly car-bound nation. Chrysler followed and then fled. When the company announced in 1992 that it was relocating its headquarters to the outer suburb of Auburn Hills, Highland Park’s precipitous downturn was already in motion. From a peak of 53,000 residents in 1930, the population is now less than 9,000 – and falling.
The city’s disintegrating fortune reverberates throughout municipal life, down to the basic functions of government, like providing residents access to clean water. Highland Park is today enmeshed in a long-running lawsuit with the Great Lakes Water Authority, which supplies Detroit and other cities in eight counties and wants to collect over $24 million in unpaid water bills plus interest on the debt.
The cost of water service and unpaid water bills have been sources of conflict for years in southeast Michigan, and the cause of one of the nation’s most serious instances of water-related contamination. In 2014, after state-appointed city administrators decided to save money by changing Flint’s water supply, the new source of water from the Flint River corroded distribution lines and leaked toxic lead into thousands of homes. Throughout the 2010s, Detroit’s water utility sought payment for delinquent bills and shut off water to whole blocks of city residences.
Highland Park residents fear similarly serious disruption in their lives. They worry that the debt could be placed on property taxes thereby risking mass foreclosures and eroded public services in a community with a poverty rate above 40 percent. The city claims that property tax bills could triple if the water authority pushes ahead with the judgment, which the Michigan Supreme Court affirmed it could do. Residents are horrified.
“It’s really troublesome that they would even think and talk like that,” Gracie Wooten, a Highland Park resident, told Circle of Blue, about the possibility of such a large tax increase.
Both sides recently pulled back from the brink. On June 9, Highland Park paid the Great Lakes Water Authority, or GLWA, $1 million as part of an interim agreement while the parties negotiate a settlement. The funds will reimburse GLWA member agencies, some of which are displeased with Highland Park’s accumulating debt. The agreement also paused a separate lawsuit in which GLWA is seeking payments from Highland Park of water debts that accrued after 2014.
On one level, the lawsuits are an argument about contracts. Which interpretation of a financial agreement – first with Detroit, which completely surrounds Highland Park, and then with GLWA, which was formed out of Detroit’s 2014 bankruptcy – governs Highland Park’s relationship with those entities for water and sewer service?
In a broader sense, the dispute is an aftershock of the suburbanization of southeast Michigan, a flight of wealthier, white residents to the fringes of the Detroit metro area that began in the 1960s and still resonates in the region’s economic, social, and political debates. Highland Park’s declining population, financial pressures, and aging infrastructure are a similar mix of stressors that precipitated water crises in the last decade in majority Black cities of Benton Harbor, Detroit, and Flint.
“This is the poorest city in Michigan,” Eric Scorsone, director of the MSU Extension Center for Local Government Finance and Policy, told Circle of Blue. “It’s lost most of its population. It’s got the highest tax burden of any city in Michigan because of pension debt. It’s a very tough situation.”
Highland Park in 2023 looks nothing like Highland Park in 1930. In that inter-war period, Highland Park was the tenth largest city in Michigan and 97 percent white. Now it sits just outside the Top 100 in population and is 85 percent Black. Empty lots, like missing teeth, blemish tree-lined streets where homes used to stand.
Highland Park, once the tenth largest city in Michigan, now sits outside the Top 100.
Detroit’s water agency provided sewer service to Highland Park starting in 1926 – and for almost as long the two sides have argued over payments. Informal arrangements led to litigation on several occasions in the last century. In 2014, Detroit filed suit once again against Highland Park, claiming the city was not paying its bills, primarily for sewage, but also for water service that Detroit began providing to Highland Park in 2012.
Highland Park, which at the time of the lawsuit was under the supervision of a state-appointed emergency financial manager, countered with the argument that it was complying with an existing service agreement. In the city’s view, a 1996 agreement had set a fixed sewage rate and Detroit’s subsequent rate increases for sewage and then for water should not apply.
The outcome of the case seesawed. Highland Park lost a partial judgment, then won in trial court in 2015. The Court of Appeals, however, overturned the trial court ruling, a decision that favored GLWA, which had joined the suit after the Detroit bankruptcy. In April, the Michigan Supreme Court denied Highland Park’s appeal.
GLWA now has the option to enforce the $24 million judgment by placing the debt on the city’s taxable property, an act that would collect the money through property taxes.
When asked via written questions if GLWA would exercise that option, Randal Brown, the authority’s general counsel, replied: “Given the recent execution of the Interim Agreement and the parties’ compliance with its terms, GLWA is solely focused on working with the city of Highland Park and the state of Michigan on finding an amicable resolution.”
Phone or email messages to Glenda McDonald, mayor of Highland Park, LaKisha Brown, the city public relations director, and Jeffrey Thomson, co-counsel for Highland Park, were not returned.
What does a permanent solution entail? Randal Brown wrote that it would need to address the remaining unpaid bills as well as Highland Park’s infrastructure. Since the 2014 lawsuit, Highland Park has accrued an additional $54 million in debt for unpaid water, sewer, and industrial wastewater bills, GLWA says. GLWA filed a separate lawsuit for the post-2014 debt in September 2020. That lawsuit is stayed until at least December 5, 2023, pending the outcome of the current settlement negotiations.
Highland Park is at a point “where they definitely don’t have many options,” Scorsone said. The City Council passed a resolution in April to explore bankruptcy. But Scorsone suggested such a move was “political theater” in order to compel lawmakers to intervene.
Part of the challenge is that such a legal dispute is extraordinarily unusual in the state, according to Gerald Fisher, an emeritus professor at Western Michigan University’s Cooley Law School.
Fisher, a former city attorney for Novi, told Circle of Blue that it’s not clear how the $24 million judgment would be distributed. He said it would probably be assessed according to the value of the property – more valuable properties would pay more. “The hard part comes in when someone doesn’t pay,” Fisher said. “Then it’s like not paying your mortgage.” That would trigger a lien against the property that could result in foreclosure.
Scorsone said a state bailout for Highland Park would be a bandage, eliminating the debt but not healing the underlying financial wounds. Even with the debt removed, Highland Park and GLWA need to determine a payment structure for water and sewer service. “Can the city actually afford whatever charges are legitimate?” Scorsone said. “Can they actually afford the payments?”
Those are key questions not only for Highland Park’s financial viability but for other cities confronting the legacies of 20th century development under today’s economic constraints.
“I think there is recognition that this problem is growing, and will create more problems like this, if we don’t come up with bigger solutions,” Scorsone said.