Agreement between county, Sylvan Township wards off lawsuit over loan payments
For the second time in a year, the voters of Sylvan Township will be confronted with a millage proposal to pay back the county for shouldering loan payments on a water and sewer project for a development that never came through.
file photo
After the township defaulted on its loan payment for the water and sewer project in May, the county picked up the bill. This year, the county will pay out $350,000 to cover the loan payment.
The agreement means the county won't pursue a lawsuit against the township, so long should the millage win voter approval on the August ballot.
The 4.4 mill tax would be levied first on the December tax bill and continue over the next 20 years.
An estimated $780,263 would be collected in the first year. A resident with a house with a taxable value of $100,000 would pay $440 per year in taxes as a result of the millage.
The county would not begin to recoup costs until the last five years the millage is levied.
Sylvan Township voters defeated a millage in November for the same purpose - only at that time, they would be paying back their loan directly. Now, the township will be paying off the county.
“People in Sylvan Township are hurting,” said Commissioner Rob Turner, R-Chelsea.
Turner called the millage a bitter pill to swallow, but that it was a better alternative than going through a court judgment against the township.
Only 100 households have hookups to the water system that is currently causing the township so much grief, Turner said.
“To have to pay for something that you will never get any benefit from is very hurtful … This is a difficult millage,” Turner said.
Washtenaw County Administrator Verna McDaniel said the county would still be able to meet its obligations on other bond payments with the passage of the millage.
Should the voters fail to pass the millage, McDaniel said the county would pursue legal action to get a payment from the township.
Amy Biolchini covers Washtenaw County, health and environmental issues for AnnArbor.com. Reach her at (734) 623-2552, amybiolchini@annarbor.com or on Twitter.
Comments
empedocles
Sat, Jul 14, 2012 : 12:50 a.m.
A sad commentary on the state of municipal finance and the lack of oversight by elected officials in Sylvan Township and Washtenaw County. In this case both the township and the county failed to protect the taxpayer. A review of the Washtenaw County minutes reveals that all the debt incurred for this project was passed on a consent agenda, meaning there was no discussion of the pros and cons. The real culprits in this matter were the township and county lawyers, municipal financial consultants and a few elected officials that wanted to feel the power to encumber taxpayers by fulfilling developers dreams. The county commissioner for Sylvan at the time this deal was cut did not raise the fundamental questions at the board meetings to determine if the plan was financially feasible. It certainly was feasible for the bond lawyers and financial consultants involved, both county and township. Those professional fees are probably still growing in some account while the Sylvan Township taxpayers saving accounts will be hit hard to pay for this dubious development. The morale of this story is that proposed bonding for public improvements equals a lack of public attention and knowledge to the details of the liabilities being incurred by you and your property. That is less likely to happen will a voted millage. The next time you hear that your government is proposing a bond, go to the meeting and ask the important questions because your elected representatives probably will not.
Michisbest
Fri, Jul 13, 2012 : 5:46 p.m.
This is nothing but developers playing on someones greed. This is much like the Biltmore homes thing that was going on in Saline about the same time. The developers send people around with promises of huge money for land and offer options that when you read the contract you might see a nickle on the dollar before you die. Then they want you to get the zoning changed hit the township for sewer water etc on your dime. This was started in Canton township in the late 50's and there is till land tied up there in these type contracts. There was one family owned company that was quite adept at doing all this. I might mention it was a all perfectly legal.
snapshot
Sat, Jul 14, 2012 : 2:25 a.m.
These are unsophisticated politicians making decisions outside their area of expertise with immunity so their egos can run free with impunity. that has to change. Don't blame the developers for trying blame the officials for not doing their due dillegence.
brooktrout
Fri, Jul 13, 2012 : 5:07 p.m.
In reply to the questioner above as to the reluctance to do tests. I am speculating, since I did not participate in those decisions, but I would conjecture that most of the reason was financial. First, there was the cost of doing the tests, and the township had (and still has) a very small user base from which to generate revenues. And, as long as the plant was not operational, it could be considered still under construction, which meant its operation could be subsidized with any left over construction bond money instead of the meager operational cash flows. Once the plant became operational legally (passing the MDEA mandated tests), funds for its operation could no longer come from construction funding. Penny wise, pound foolish, and we are all paying mightily.
snapshot
Sat, Jul 14, 2012 : 2:22 a.m.
Speculation? We shouldn't be speculating. this deal should have been competely transparent and subject to independent reviews and electorate approval.
brooktrout
Fri, Jul 13, 2012 : 3:16 p.m.
Since I have posted this as a reply already twice, I guess it needs to join the main thread. There is no default by builders. There are precious few liens left on which to try to collect were events to unfold in that direction. The court lowered the number of REUs that had been initially assessed because they were, as the documents plainly showed, fictitious. It then recomputed the amortizations schedules to see what was due and gave credit for past payments. This turns particularly nasty for the taxpayer left holding the bag for two reasons: Overpayments (since the developers were paying on a lower number of REUs) were converted to additional principal, which lowered the next payment, etc. on down the line. Probably more damaging financially was the court's ruling that the initial three or so years of payments on the water assessment were contractually not due at all, so not only was the number of units lowered, all initial payments for the water assessment for the period in question were converted to principal. So because of the township's reluctance to do the tests necessary to get the plant certified, the developers have ended up paying a much lower amount of dollars to clear their property of the special assessment lien than was ever contemplated. Hence the very large bag we are now holding.
Rod Branham
Sat, Jul 14, 2012 : 8:59 a.m.
Snapshot, it is NOT the taxpayers of Washtenaw County on the hook for this debt but ONLY the taxpayers of Sylvan Township!
snapshot
Sat, Jul 14, 2012 : 2:21 a.m.
This is great detail brooktrout but the fact is property owners are now on the hook without a vote, Washtenaw county taxpayers are on the hook, these details don't mean anything. The taxpayers should not be placed in this position, no matter what the reason, without a vote. these officials should not have that kind of spending power when they don't have the expertise to navigate their way through such a transaction.
foobar417
Fri, Jul 13, 2012 : 3:36 p.m.
Why was there reluctance to do the tests?
snapshot
Fri, Jul 13, 2012 : 2:42 p.m.
These "creative and secretly negotiated" finance deals by government officials who have complete "immunity" from their incompetance or corrupt practices is becoming the plaque of municipalities across the nation. The blame rests solely on our county commissions and Sylvan township officials. We need to start holding these officials "criminally negligent" when they so blatantly shirk their fiduciary responsibilities when entering into financial arrangements and these special deals at taxpayer expense without taxpayer approval. It should be considered fraud. I wonder if any official had a relationship with the builder who defaulted.
snapshot
Sat, Jul 14, 2012 : 2:16 a.m.
washtenaw county commissioners committed tax dollars and co signed for the Sylvan Township bond issue therebye committing taxpayers without a vote. Not a good thing for them to have this kind of power to bankrupt a city or put property owners on the hook for a court owrdered tax increase. These officials are out of control with their free spending. We need to restrict their spending and subject it to serious scrutiny.
maverik
Fri, Jul 13, 2012 : 10:04 p.m.
who was the township officials during 2005, all, not just a few?
xmo
Fri, Jul 13, 2012 : 1:51 p.m.
Why does everybody have to pay when "Only 100 households have hookups to the water system that is currently causing the township so much grief, Turner said." Sounds like there is more to the story. Normally, the county or bank would put a lien on those property's that owe the money and eventually sell the property to recoup the money.
brooktrout
Fri, Jul 13, 2012 : 3:03 p.m.
Alas, would that could be done. See my reply above to comment #1; the assessments on these properties are being paid; much of the property indeed is free and clear of any lien. I cannot stress this enough. The court merely set the number of REU's (Residential Equivalent Units) to match the facts on the ground. It then computed amounts that had been paid in to re-figure the amortization of the proper amount instead of the inflated REU number. This turned out to be particularly nasty for the township tax payers when they court ruled that the developers had been making payments on the water assessment before they were due, because the water plant was not yet MDEQ certified and hence not legally operational (although it was certainly shipping water), and so no payments were due under the contracts. The reluctance of township officials to run the tests necessary to certify the plant has ended up costing taxpayers a lot of money (low seven figures certainly; with our opaque township government it's difficult to get all the details), as interest payments were converted to principal payments by the court, lowering the principal dramatically and costing the township a great deal of interest income, money we taxpayers now have to make up. Smooth move, ladies and gentlemen. Michael Williams sylvan township supervisor nov 20,2004 - nov 20, 2008
Patrick Zieske
Fri, Jul 13, 2012 : 1:23 p.m.
In 2001, they pledged the full faith and credit of the township for the projects of private developers. They did this without even asking the voters' approval because, as one of the board members recently opined, they were advised that there was no legal requirement to do so. So it doesn't matter whether anyone foresaw the collapse. The question was never raised in the first place. Since then they have dug the hole deeper, one shovelful at a time. How? That's a laundry list of misdeeds that doesn't fit into a little comment here. But please understand that we started with $12.5 million in bond debt in 2001. Now in 2012, after making some payments already and spending more on legal fees arising from these misdeeds, the taxpayers are being asked to shell out an estimated $15.2 million over 20 years. One correction to the article: The proposed millage agreement for August is virtually identical to the proposal from last November. In both cases, we would be paying the County directly based on a contract between the Township and the County. The only significant different is the change in the proposed millage rate from 4.75 to 4.40.
Rod Branham
Fri, Jul 13, 2012 : 12:50 p.m.
There is a web site Alex called freesylvan dot org Alex where you can find ALL documents pertaining to this mess.
Rod Branham
Fri, Jul 13, 2012 : 12:08 p.m.
Not true Alex. The REU (Residential Equivalent Unit) was reported to the county at 1,000 units. Never ever were there 1,000 units. It was an artificially inflated number to the county to ensure approval of the funds. So in fact, it NEVER would have been OK.
Alex Brown
Fri, Jul 13, 2012 : 11:56 a.m.
It is a very difficult pill to swallow. They took the word of a developer (with very little "Skin in the game"). If his projections for build out had happened there would not be this problem. However no one foresaw the collapse. This just goes to show there needs to be a new model for financing infrastructure.
brooktrout
Fri, Jul 13, 2012 : 2:47 p.m.
In fact, the number of REUs that was reported as 1000 to the county (and about which the county failed to exercise due diligence) has turned out to be somewhere around 650 to 660, meaning that the original information given to the county and hence the bondholders overstated the capacity of the property by 50%. So yes, this would have taken miracles for everything to be "all right." The word of the township was taken by the county; the developers knew the 1000 was a sham figure and entered into contracts with the township meant to close the difference between the artificial number and the facts on the ground (see clause I.G. of the original development agreements on the freesylvan website). This has been general knowledge for some time now, and still the press reports, as above, the cause of this is a development that never came through. In fact, the developments in question have been and are being paid for, unbuilt or not, since they were special assessments on the land and were due whether or not house 1 ever got built there. The court merely set their number to more or less match the facts on the ground. Michael Williams sylvan township supervisor, november 20, 2004 - november 20, 2008
snapshot
Fri, Jul 13, 2012 : 2:34 p.m.
Place the blame where it belongs.....government officials who did not execute their fiduciary duties in a proper manner and who have complete immunity from either their incompetance or corrupt practices.
clownfish
Fri, Jul 13, 2012 : 12:31 p.m.
A few of us saw the collapse coming. All we had to do was compare wage growth to housing price increases to see that there was no good ending.