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Detroit suburbs pursue new ways to stop paying for Highland Park's water debt

Metro Detroit communities are considering new ways to fight paying for Highland Park's $54 million water debt, including changing debt payment rules with the regional water authority and pursuing a state bailout.

The Great Lakes Water Authority has been charging its 84 member communities for Highland Park's refusal to make payments for water and sewer services. But when GLWA officials highlighted in February the specific amounts that communities have been paying for Highland Park's arrears, many Macomb County and Wayne County municipalities mutinied and voted to put their payments in escrow until the issue is settled.

With no resolution in sight, the Wayne County Commission last month approved a resolution to consider "alternative options," including "a possible amendment to the Articles of Incorporation of Great Lakes Water Authority." The goal is to prohibit the water authority from charging other communities for another member community's nonpayments.

"We're going to see if this can be prevented in the future," said Commissioner Terry Marecki, R-Livonia, adding the commission wants to prevent GLWA from penalizing other communities when another one fails to make its payments.

Changing the articles of incorporation is a good idea, but a long shot to succeed politically, said Macomb County Executive Mark Hackel, who organized the rebellion against paying off Highland Park's debt. 

"We would be more than willing to open" the articles of incorporation to help stop the subsidizing of Highland Park's debt, Hackel said. But communities "haven't had much luck" moving GLWA on the issue, he said.

On the push to amend GLWA's articles, authority interim CEO Suzanne Coffey told The Detroit News that "it would be premature to comment at this time."

Coffey's statement added that "our understanding of the goal of the communities proposing to withhold funds is to drive engagement by the state, with other responsible parties, to the table in order to resolve this matter that continues to impact the region."

Another proposal would require the state to pay off Highland Park's water debt and reimburse the communities that already paid toward retiring it. The state government forced Highland Park in 2012 to stop operating its own water system and "requested" that the Detroit water system, GLWA's predecessor, add it on an emergency basis. 

State Rep. Kevin Hertel, D-St. Clair Shores, has introduced legislation requiring a special $50 million appropriation to the GLWA by September 2026 "to reimburse customers that paid increased sewer and water service charges" resulting from Highland Park's "bad debt."

If the $50 million doesn't cover the full debt owed, the money should be prorated, or reimbursed in the proportion paid in, according to the legislation. It faces an uncertain future in the Republican-controlled Legislature.

The proposal was made before Gov. Gretchen Whitmer last week urged the water authority to "pause the portion of the rate increase that it has attributed to Highland Park" and is set take effect July 1. In February, the Great Lakes Water Authority board approved a 3.7% hike in wholesale water rates and a 2.4% increase in sewer rates for the upcoming fiscal year — with almost half or about 1.15% of the 2.4% sewage rate hike owing to Highland Park's debt.

While Whitmer said she wasn't taking sides, she wrote in a letter to the GLWA that the "very existence of the debt remains a subject of controversy" and suggested an "independent audit to clarify what amounts may be owed."

Whitmer noted that Michigan had appropriated $25 million in federal stimulus funds to GLWA to promote access to drinking water. But Plymouth Township Supervisor Kurt Heise, while welcoming Whitmer's call for the delayed rate hikes, noted federal stimulus money usually can't be used to pay down debts or judgments.

Coffey said she would consult her board after conducting the delay and asked for a meeting.

Highland Park City Administrator Cathy Square said she sees Hertel's bill as "a way to a fresh start" for both the city and the water authority.  

"It would be a new beginning," Square added.

But Heise, a Republican former state lawmaker, argued the bill faces long odds in Lansing.

"I just don't see that going anywhere," Heise said. "It's a bill coming out of the minority party, involving a large amount of money, late in the budget process."

More: Whitmer to Great Lakes Water Authority: Delay Highland Park debt-related price hikes

A 'mini Grand Bargain'

Another idea being pushed by a Wayne County official and former state lawmaker is to go into federal court and seek a smaller version of the "Grand Bargain" — an infusion of hundreds of millions of dollars by philanthropic groups and state government that helped pave Detroit's exit from municipal bankruptcy in 2014. 

More: 2015: DIA says it has reached $100M ‘grand bargain’ goal

"This is going to require, I think, extraordinary intervention by the federal court, along the lines of a mini-Grand Bargain for Highland Park," Plymouth Township Supervisor Kurt Heise told The News.

"And I think what this is going to involve is a multi-layered effort whereby the state of Michigan is going to have to provide funding to make the GLWA whole on this debt, and make the communities whole for all the money that we've already been paying toward this judgment."

Heise was a Republican lawmaker who joined other legislators in approving a $195 million payment by the state in the Detroit case in addition to $816 million donated by foundations across the country, including the Ford and Kresge foundations. 

But Heise said any such bargain should make Highland Park a full-fledged member of GLWA and end its plan to return to water independence. The city currently isn't a member.

MORE: Highland Park wants its own water plant again for $90M. Critics have doubts

"They cannot have a standalone water system," Heise said of Highland Park. "It would be an undue financial burden on their community."

Without a bailout, the only leverage some communities see is withholding part of their payments to GLWA representing Highland Park's debt. Hackel and then-Oakland County Executive L. Brooks Patterson complained about the emerging Highland Park debt in 2014 before they bowed to pressure and signed a memorandum of understanding to join the GLWA. 

More: Macomb County joins GLWA mutiny over disputed Highland Park debt

"That's what upset me is that we were going to be taking on bad debt for others," Hackel said. "It wasn't resolved, and it needed to be resolved."

More: 2014: Detroit, suburban officials reach deal on Great Lakes Water Authority

Macomb County communities have paid $13.5 million toward Highland Park's debt and the tab is set to grow to $15 million next year.

Hackel has admitted that having Macomb communities withhold portions of their GLWA payments would "put pressure on Great Lakes Water Authority and their ability to function."

"But when you have an entire community that says 'we're not going to pay,' well, that's a problem," Hackel said. "That's just unacceptable."

Frustration grows in Highland Park

Highland Park says it has no debt and is instead owed money. It cites a February 2021 Wayne County Circuit Court ruling that its $21 million of debt to GLWA was "subsumed" under a ruling that granted it $1 million.

Highland Park's Square said she sees the continued legal fights as sour grapes. 

Highland Park's lawyers met six times with GLWA in settlement conferences, spanning from September 2014 to January 2021, a month before the circuit court ruling, she said. Highland Park has long attempted to settle, she said, but no deal was ever reached. 

"They didn't want to make a deal until they lost," Square said. 

Meanwhile, there is growing frustration in Highland Park's neighborhoods. But the angst among the 9,000 residents has more to do with the cost of water service than the refusal by city officials to pay into the GLWA.

Shawn Bady, 51, is so worried about the possibility of water shutoffs at his Highland Park home that he orders several jugs of Absopure water, every month, to be prepared just in case.

In 2015 or 2016, after not receiving a water bill for a long time, Shawn and his wife Marlene Harris-Bady, 52, said they got a monthly water bill of about $6,000 — and a one-month deadline to pay it. Bady and Harris-Bady have worked from home for years on a food business, Custom Cakes By Ms. Marlene.

They've since made payment arrangements, but Bady remains worried about the amount of the arrearage and the possibility of a shutoff.

Water quality is another concern, they said, to the point that they use Absopure when they cook, bake or need to drink water. 

Despite cutting back on their home use, water bills regularly come in at $300 a month, the couple said.

Harris-Bady has a theory: The Highland Park residents who pay their water bills are covering those who do not, including vacant homes.

"There's so many vacant houses," Harris-Bady said. "Some of them you go to, and the water is just running."

Their up-the-street neighbor on Massachusetts, Marilyn Sanders, 39, also complained about high water bills. 

"It's extremely high," Sanders said of her water bill. "And every time I try to get somebody to come check the meter, I never hear back."

An engineering firm conducted a "units of service study" to determine Highland Park's water rates, Coffey told The News.

"For the emergency water services, temporary metering was put into place and GLWA has made periodic adjustments based on the volume of water used by Highland Park," she said. 

Hazel Park 'reserves right' to opt out

One of the obstacles to changing the GLWA's articles of incorporation has been the lack of a larger revolt against the Highland Park debt in Oakland County. Changing the articles requires unanimous approval among the communities.

According to Article 19 of the Great Lakes Water Authority's articles of incorporation, amendments can be made "at any time" — if approved by the legislative body of each municipality that incorporated it. That means such a proposed change would require the approval of Detroit City Council and the commissions of Macomb, Oakland and Wayne counties to take effect.

Hazel Park last month became the first Oakland County community to vote to opt out of paying its portion of Highland Park's alleged $54 million debt, but it probably won't.

The city is only "reserving the right" to withhold the bad debt payments, said Luke Londo, a Hazel Park City Council member.  

"They're not just going to listen to Hazel Park," said Mike McFall, another Hazel Park City Council member and mayor pro tem. "We're the little guy on the block."

While acknowledging that "we don't have any plan to actually withhold the funds at this point," McFall said he hoped the Hazel Park resolution and the others throughout Metro Detroit would get the state to take notice.

Oakland County Water Resources Commissioner Jim Nash said the problem with withholding payments is "all that would do is limit the amount of money you have to spend."

Correction: The population of Highland Park has been corrected to 9,000 residents, according to U.S. Census data.