Michigan town ordered to repay $30 million for water services

By Kristin Danley-Greiner | Jan 5, 2017

HIGHLAND PARK, Mich. (Legal Newsline) – City officials at Highland Park, Michigan, were shocked when they received a bill from the Great Lakes Water Authority, which was formed to take over the Detroit Water and Sewer Department.

Highland Park had supposedly fallen behind on paying for water provided by the city of Detroit, but when the Great Lakes Water Authority assumed responsibility, it discovered the debt was "massive," Calvin Grigsby, attorney for Highland Park, told Legal Newsline.

Because of that debt, all water customers who receive services from the Great Lakes Water Authority saw a 5 percent spike in the sewer portion of their water bills that took effect July 1, 2016. Of that 5 percent spike, 3.2 percent was attributed to taking care of the $30 million Highland Park debt; $4 million is to cover sewer services. 

Customers wondered how Highland Park fell behind $30 million. An investigation discovered that bills had not been sent to Highland Park water and sewer users since 2012. Highland Park officials noted that it was operating under a consent agreement with the state during that period.

The situation ended up in court, and a Wayne County Circuit Court judge ordered Highland Park to pay a three-year span totaling $20 million. Officials with the Great Lakes Water Authority had hoped that the state appeals court would attach the outstanding debt to property taxes. To help with the situation, Highland Park set out to upgrade its water meters and would begin sending out bills again.

On Nov. 30, 2016, Highland Park's attorneys filed a motion requesting the court of appeals to reconsider its Nov. 15, 2016, ruling in the water debt dispute.

Marli Blackman, press secretary for the city of Highland Park, said the motion was based on the court of appeals' "failure to rule on the primary issue in the case."

"Whether the Headlee Amendment to the Michigan Constitution (Art. IX, Sec. 31) bars imposition of ad valorem taxes for delinquent sewer fees and charges, the motion argued that sewer fees and charges, even under the guise of a court judgment, must be allocated in proportion to use--not in proportion to ad valorem property values," Blackman said in a statement. 

"The motion further noted that Headlee bars increase in ad valorem taxes for sewer fees because both the Federal Clean Water Act requiring charges proportional to use and state law prohibiting free sewer services authorize sewer fees only if charged proportionate to use."

Grigsby said Highland Park was charged 10 times more than a similar-sized community like Melvindale.

"That's one of the reasons why we filed a motion to reconsider," Grigsby told Legal Newsline.

Grigsby also said there's more to the case than meets the eye.

"This situation goes very deep and back so many years," he said. "There was a ruling years ago that we stayed in compliance with. Since then, the administration changed in 2015 with a new mayor and a whole new team working on this."

Grigsby also said that the Great Lakes Water Authority allegedly inflated its assets by capitalizing $289 million of what he said appeared to be an interest rate swap derivative operating losses.

"We're arguing our point of why we shouldn't have lost in this decision," he said.

Highland Park also was in a dispute with the Michigan Department of Transportation stating that it shouldn't have to help pay for the cost of treating run-off water that traveled into the sewers from Interstate 75 and the Davison freeways. However, other communities in this area have established cost-share agreements.

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