Highland Park, the enclave of Detroit, is considering bankruptcy to wipe out $20 million in debt

Kevin Huston scans the street in Michigan, where his renovations and older homes bridge the gaps between vacant, overgrown lots and the abandoned, clapboard houses, boarded-up businesses, and pothole-strewn streets of Highland Park.

But no one would mistake the neighborhood for a park.

“It’s not a bad place to live,” Houston said. “Not the best.”

The community, just under 3 square miles (7.8 square kilometers) and almost surrounded by Detroit, is a shell of its auto baron past when manufacturing boomed and the money flowed. In 1930, over 50,000 people lived there. The homes – elegant and spacious – rival some of those built in Detroit.

Fewer than 9,000 now call it home. The car companies are long gone, leaving shopping malls and retail stores to shore up the city’s dwindling business tax base.

And owing about $20 million to a regional water utility, Highland Park is considering municipal bankruptcy — a strategy that a decade ago allowed Detroit to wipe out or restructure $7 billion in debt — to keep its financial future afloat.

Troubled cities like Highland Park are the hardest cases in America to figure out how to fix because they have so few assets to build on, said Alan Mallach, author of the forthcoming book, “Smaller Cities in a Shrinking World: Learning to Thrive Without Growth.”

“They have appalling levels of poverty and abandonment,” Malach said. “A city like Highland Park probably can’t turn itself around. They just don’t have the resources.”

Highland Park and communities like it are fading as jobs dry up and families move away, but before the decline began, the auto and manufacturing industries helped build some of these inner-ring suburbs.

In 1907, Henry Ford purchased 160 acres of land for his Highland Park Ford plant. The first moving assembly line started a few years later at the plant. Immigrants and other workers looking to earn $5 a day flock to the area.

A building boom ensued that included thousands of homes on tree-lined streets.

“Highland Park was truly a shining city on a hill. It really was the place to live,” said Jeff Horner, a professor of urban studies at Wayne State University in Detroit. Horner credits Ford with turning the city into an important and successful suburb run by his political friends.

In the 1920s, Ford would move its manufacturing operations to nearby Dearborn. The automaker will keep a tractor plant in Highland Park, and Chrysler, now Stellantis, is headquartered in the city. But they both moved in the 1990s.

Like Detroit and other large urban cities, white residents began fleeing Highland Park in the 1950s for the suburbs. Jobs followed. About 85% of Highland Park residents are black. The median household income is about $25,000, and about 40 percent of the population lives in poverty, according to the U.S. Census.

Neighborhood malaise and neglect are prevalent in some parts of the city. In a rat-infested vacant apartment building in early February, authorities discovered the bodies of three aspiring rappers. The trio was scheduled to perform a concert on January 21 at a club in Detroit when they disappeared.

“There’s very little left in terms of the tax base that built this city,” Horner said. “Anytime you’re a small inner-ring suburb that can’t grow into land, you have to introduce a tax base. You need to bring more residents.

Highland Park said property taxes in fiscal year 2022 were about $9.6 million. Estimated revenue for the next fiscal year is expected to be about $12.6 million, according to Mayor Glenda McDonald’s proposed 2023-24 budget.

Income and property taxes will account for $4.7 million and $2.6 million in revenue, respectively. Another $3.5 million would come from state revenue, according to the proposed budget.

MacDonald declined to comment because of the ongoing court-ordered mediation regarding the water debt with the Great Lakes Water Authority.

The debt to the Great Lakes Water Authority dates back to at least the 1990s, when the water system was operated by the Detroit Water and Sewerage Department.

In 2014, the state determined that Highland Park was in financial crisis and appointed a governor. In 2015, a court awarded the water department $19 million against Highland Park. Continued mediation is expected to result in a debt repayment plan.

Highland Park has not made any sewer service payments since April 2021 and has paid less than 1 percent of its water charges since 2012, according to the water authority.

Water officials say other communities in the system have incurred fees because of Highland Park’s failure to pay. Once the judgment is paid, those communities will be reimbursed, the authority said.

And those communities have “no sympathy” for Highland Park, said Eric Lufer, president of the Michigan Council for Civic Research.

“They don’t want to sell the city anymore, pay off their debt until the city figures this out,” Luffer said. “They want the best for Highland Park, but they don’t want to pay Highland Park.”

Democratic Gov. Gretchen Whitmer’s office said the water authority and Highland Park must find a solution that doesn’t increase costs for homeowners or businesses.

In April, Highland Park’s council voted 3-2 to ask Whitmer to move quickly into municipal bankruptcy.

The state treasurer’s office is reviewing the city’s request for a financial review.

Bankruptcy would only be “flattering” for Highland Park, Malach said.

“It’s not just the water debt,” Malach said. “The city is unable to generate enough revenue to provide adequate services or reverse the downward spiral of its properties. Any benefits from bankruptcy are likely to disappear over the next five years.”

Still, Houston, a 40-year resident who remembers a time when every house in Highland Park had a family, said he couldn’t disagree with the bankruptcy option.

“If that’s the best way to get out of it, you’ve got to do what you’ve got to do,” he said.

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