Sen Bert Johnson,D-Highland Park, took issue with the review team's finding that the city had $19.5 million in unpaid bills as of Oct. 31. The tab includes an $18.2 million outstanding bill from the Detroit Water and Sewerage Department for costs that remain in dispute. (Dale G. Young / The Detroit News)
Lansing— Officials from Highland Park and Royal Oak Township pushed back Tuesday against state reviews that concluded both municipalities face financial emergencies requiring state intervention.
In separate hearings before state Treasurer Kevin Clinton, leaders of the two Metro Detroit communities argued they should continue governing their cities without state intervention, such as an emergency manager or a consent decree.
Highland Park’s financial review team found the city has run up annual deficits in its water and sewer fund and failed to comply with a five-year deficit elimination plan it adopted in 2009, when it previously was under emergency management. The enclave surrounded by Detroit has been subject to state oversight since 1996.
But Highland Park leaders took issue with the review team’s finding that the city had $19.5 million in unpaid bills as of Oct. 31. The tab includes an $18.2 million outstanding bill from the Detroit Water and Sewerage Department for costs that remain in dispute, said state Sen. Bert Johnson, D-Highland Park.
“The city of Detroit just can’t demonstrate the relationship that would justify these bills,” said Johnson, who added he personally has a 17-month $5,800 water and sewer bill in dispute.
According to the review team’s report, other unpaid bills include $311,380 owed to DTE Energy; $142,265 to Wayne County for property assessing; $125,370 Wayne County for prisoner maintenance; $105,667 to Hamtramck for municipal income tax collection and administration; and $101,284 owed to the state for principal and interest on past emergency loans.
As of last June, Highland Park also had $93.3 million in long-term debts, including $44.8 million in pension and retiree health insurance liabilities. Since 2007, the city has been making pension payments with the proceeds of a bond, which have been serviced by a 20-mill property tax assessment.
Frederick Headen, legal adviser to the state treasurer, has served on 21 financial review teams for cities and school districts since 1996. He said the latest review of Highland Park’s finances was his fourth and the most “compelling case based upon the evidence” to date.
“It may be in fact that the financial emergency within the city has not been resolved to this point because it’s simply unresolvable,” Headen said.
Mayor DeAndre Windom and other officials countered the city’s general fund is projected to be $4 million by year’s end.
“The information I’ve looked at speaks very loudly to me that this city is in position to handler her finances,” Johnson said.
Headen said the general fund balance is healthy because “city officials haven’t been paying all of the bills as they come due.”
Under Michigan’s emergency manager law, the hearings were held to allow local leaders to contest Gov. Rick Snyder’s financial emergency declaration for both communities.
Unless Clinton determines the review teams erred in any way, Snyder will likely confirm the financial emergencies exist and negotiations will begin between the communities and the Treasury Department over whether to appoint an emergency manager, forge a financial consent agreement, use neutral mediators with creditors or declare bankruptcy.
Windom said the city hopes to use the mediation option to negotiate with its creditors outside bankruptcy.
During a hearing on Royal Oak Township’s fate, officials from the tiny half-square-mile township nestled along Eight Mile between Oak Park and Ferndale did not dispute their state review team’s findings, but blamed the township’s shrinking tax base and decisions by past officials for its financial woes.
Royal Oak Township’s finances came under state scrutiny last year after the Oakland County Sheriff’s Office terminated its policing services in November when the township failed to pay its bills. The township remains $362,000 in arrears to Oakland County and it is unlikely to pay off the debt with existing tax revenues in the near future, Headen said.
Township Supervisor Donna Squalls and a financial adviser downplayed the significance of the unpaid policing bill.
“We’ve been meeting all of our other obligations,” Squalls said.