Lawsuit could leave Sylvan Township residents with a whopping tax bill
Sylvan Township residents could face a one-time 18-mill tax bill as the result of lawsuits filed against the township by two developers.
Norfolk Development Corporation and Magellan Properties sued the township for breach of contract and were awarded $2.4 million by Washtenaw Circuit Court Judge Donald Shelton in September. In addition, the judge voided a special assessment the township had levied on the developers and ordered the township to repay Washtenaw County $1.2 million the county paid to cover the assessment when the developers didn't pay.
Sylvan Township has appealed the ruling, but it doesn't have the money to pay the judgments, so if the award is upheld, property owners will be stuck paying the bill, according to the appeal.
Township attorney Peter Flintoft said the township would have to levy an 18-mil tax to pay for the judgment, based on the value of taxable property in the township.
A motion for a stay of payment was filed on Nov. 9, while the township appeals the original judgment to the Court of Appeals, and that motion is expected to be heard after Jan. 1, Flintoft said.
In addition, he said, Sylvan Township filed suit Monday in Washtenaw County Circuit Court against Foster, Swift, Collins and Smith, P.C., the attorneys who represented the township in its agreements with the developers.
The suit alleges malpractice and township officials were advised by their attorney not to comment about the lawsuits or the situation.
Sylvan Township residents could be stuck paying the bill after developers sued the township and won.
File photo
The township currently levies 0.9474 mills. If the township levies 18 mills to pay the $2.4 million judgment plus $1.2 million to reimburse the county, the cost to the owner of a home with a taxable value of $100,000 would be $1,800.
The suit is a result of an agreement between a previous township administration and the developers in 2000, which established special assessment districts that were scheduled to collect $8 million to pay for new sewer and water systems for a planned development on 162 acres on Sibley Road, which was never started. Westchester Farms was to include 262 homes and 64 townhouse condominiums.
The township sold $12.5 million in bonds to finance the water and sewer systems. And although the township originally intended to construct its own sewer plant, instead it chose to connect to a sewer plant owned by Leoni Township in Jackson County. The cost of connecting ended up being significantly higher than the projected cost of building its own wastewater plant, according to the suit.
Both of the developers filed suit against the township for breach of contact and fraud in 2007. That led to the court judgment in September.
The developers' original lawsuit alleges that instead of paying $4 million for its own wastewater treatment plant, the township constructed and financed the “Grass Lake/Sylvan Township Interceptor” for $7.5 million. The township paid $5 million for the water system, which was an increase of about $1.3 million over the original cost estimate, the suit said.
The suit alleged that “the township failed and refused to properly adopt resolutions describing the scope of the new sewer project, establishing a special assessment district for same and confirming a new special assessment roll to cover the cost of the Grass Lake/ Sylvan Township Interceptor.”
The suit also alleged that the developers were being charged for more water and sewer taps than were needed for the development and that special assessment districts set up by the township are illegal.
Lisa Allmendinger is a reporter for AnnArbor.com. She can be reached at lisaallmendinger@annarbor.com. For more stories about the Chelsea area, see our Chelsea page.
Comments
ChelseaBob
Tue, Dec 21, 2010 : 10:14 a.m.
When this project was announced, I was stunned. Apparently they had a few public meetings that were given minimal announcements. Timing couldn't have been worse, just as housing went into a nose dive. I am still puzzled by the "damages" the developers suffered, since economic conditions stopped their developments. What did they lose? Seems like the judgement amount could be appealed and reduced. And township should file for bankruptcy immediately to staunch the bleeding and get control of the situation.
Melrose
Tue, Dec 14, 2010 : 2:11 p.m.
Well the first thing is that more than 6 taxpayers need to be showing up to the board meetings. The lack of attendance and questioning over the years has made the Twp Board think that it runs the show without answering to the residents. (Come and watch - you'll quickly get the picture.) The meetings are almost always on the first Tuesday of each month (only holidays or elections cause a change). The next meeting would be on January 4, 2010 at 7:00 pm promptly. I also would be happy to be part of a citizen group but maybe the first thing would be to have many more of us show up at the meeting. We could/should ask for a presentation on the lawsuit - maybe it is possible for the public to add an agenda item. Please post if you have any interest. Be prepared to raise your issue - public comment takes place at the beginning of the meeting.
brooktrout
Tue, Dec 14, 2010 : 11:13 a.m.
re: the lawsuit against Foster Swift. Yes, I think this is a good idea and stands a very substantial chance of success. The township performed various illegal actions, some of which it was subsequently sued for and lost. The township board should have done a better job, but there is no doubt in my mind that Foster Swift bears considerable liability for what happened. It was the legal firm that led the board and Mr. Dresselhouse through various illegal actions. Maybe the township board should have known better; surely the legal firm should have. As an interesting aside, the township has known about the potential liability of Foster Swift since at least early summer of 2007. I consulted with an attorney for Miller Canfield and was told at that time about Foster Swift's potential liability. I informed the township board, of which I was a member, of this, but they continued to rely on the politically convenient advice of Foster Swift, which I consistently opposed (FOIAable emails can back this assertion up). Now that the advice and performance from Foster Swift has turned out about as I suspected it would, the present township board wants to initiate litigation. No doubt they were misled and poorly served. Also no doubt that they welcomed the advice and counsel when it served their political purposes. Michael Williams Sylvan Township Supervisor, Nov 20, 2004-Nov 19, 2008
Mick52
Tue, Dec 14, 2010 : 1:52 a.m.
I am wondering about the wisdom of suing the attorneys that the township relied on during this development. That suit could also put a hefty price tag on this mess if it is not a clearly winning case.
Peter Stone
Mon, Dec 13, 2010 : 1:35 p.m.
Does anyone know when or if the Township Board plans to share any of this information with the public with potential ramifications? It may be time for a Sylvan Township Tea Party and flat out refuse to pay the taxes. I am tired of paying for "dumb" government...
Peter Stone
Mon, Dec 13, 2010 : 1:33 p.m.
Does anyone know when or if the Township Board plans to share any of this information with the public with potential ramifications? It may be time for a Sylvan Township Tea Party and flat out refuse to pay the taxes. I am tired of paying for "dumb" government...
black canoe
Sun, Dec 12, 2010 : 7:04 p.m.
brooktrout, you sound very knowledgeable, thank you for your input. I just moved back to sylvan twp this past summer, in hopes to retire here. This may not be an option for, oh, a long time. There must be options.
boobear
Sat, Dec 11, 2010 : 2:34 p.m.
its only money. were all flush.
brooktrout
Sat, Dec 11, 2010 : 10:47 a.m.
The headline and article provide a great deal of obfuscation to the central facts of the story: lawsuit or no, these bonds were always in trouble, as an examination of the first development agreement among the parties revealed. The county, which had failed to look at the document closely when it first received it, eventually made the township renegotiate the contract with the developers. When one of the developers balked at doing so, the township unilaterally rescinded the agreement, the breach of contract referred to in the lawsuit. The judgment and its severe financial consequences for the township (I'm thinking the bill for all this is already in the $15M range) could have been avoided as late as the spring and summer of 2008, but the township board, even when presented with a set of facts that would make any neutral observer pale, continued to stonewall all demands for settlement, persisting in a willful misjudgment that had its roots in political convenience, for what administration could be expected to continue in office once this rot and all its dire effects were known. And so the township continued to dither, refusing to face its situation. Rewrite history, stonewall the present, obfuscate the future. Such have been the actions of those in charge of township government for the past decade. So what now? Any of a series of events will trigger request for payment that will not be able to be satisfied. The county, for example, could ask for its tax fund to be repaid for the monies it fronted to the township. One understands the reluctance of the county to trigger a crisis (and oh, this reluctance goes back way further than this tax fund issue...), but the net effect of such patience has been to leave township governance in the hands of those who were, and still are, driving it to ruin. If misjudgments and errors of both commission and omission have landed the township in its present predicament, which they surely have, how can we expect these same officials to be the ones to lead us out of this morass? So what happens now? Mr. Steklac, earlier in the comment train, has it about right,I suspect. A judgment levy will be imposed on the real property of the township (that's what it means when the bonds are backed by "the full faith and credit of the township") once there is a demand for payment that cannot be met. This may be caused by the county, the developer asking for its damages, or the inability to meet a bond payment (by my calculations the township may finds things dicey even with three years of interest only payments and not be able to meet even those). Since things are still somewhat in flux (and hence my ongoing concern about the quality of leadership in the township), no one can say for sure when the levy will hit or what its size will be. But an informed speculation would suggest it's not going to be pretty, multiple mils over multiple years. Should anyone have any factual questions that they would like to post, I will do my best to answer them.
Patti Sonntag
Sat, Dec 11, 2010 : 7:58 a.m.
I am wondering what it cost the developers to pay Architects, Engineers, Lawyers, etc to develop a plan to build high quality homes which adds to the township? What costs they have to pay for permits to the township for the right to build? An agreement was made regarding how water and sewer would be handled and it is not too presumptuous to believe that they prepared and possibly have contracts to sell homes to the prospective buyers based on what was agreed to? Is this a call to voters to make sure you make it to the polls? Yes. Check your candidates for qualifications to do the job.
black canoe
Fri, Dec 10, 2010 : 11:05 p.m.
I am flabbergasted by this. I just moved back to Sylvan Twp. I will begin attending Twp. meetings and be happy to join any citizen interest group.
MorKor
Fri, Dec 10, 2010 : 9:49 p.m.
1. Township should have some sort of liability insurance to cover these sort of law suits. 2. The developers should pay Sylvan Township for for all the tax dollars that didn't end up in the township coffers and for all the time and effort wasted on a project that didn't materialize! 3. I don't see how the developers were wronged or out any money. This Don Shelton award should make a nice profit for the developers who didn't have to develop the project to make money. With the economy in a nose dive the developers should be grateful they didn't start the development. Think of all the money the township saved them.
MichGirl
Fri, Dec 10, 2010 : 8:50 p.m.
I almost moved into Sylvan Twp. and am now so glad I didn't as this "surprise" would not be possible to pay. I am so sorry for those it affects. But also wondering, how would an unsuspecting buyer every learn about such a possibility? Really, this could happen to any of us. clearly it speaks volumes about "vetting" those we put in office who make these decisions, but again, I can't imagine the average voter being aware and on top of these types of issues. Everyone is so busy and this stuff takes so much time to understand all the nuances. Sheesh. Depressing. But good luck to those affected.
Michigan Reader
Fri, Dec 10, 2010 : 6:58 p.m.
@Eep--I'm not a lawyer, but I don't see how the Township could levy any kind of tax, regardless of what kind, a judgement levy or otherwise, on former residents. I don't believe a tax can be imposed retroactively. So, the Township doesn't have jurisdiction over former residents. And, it's the Township's debt as of the date of the entering of the order. You weren't party to the suit.
FoxviewFarm
Fri, Dec 10, 2010 : 5:38 p.m.
ah yes, miserable and another piece of bad news. We have a house we have been trying to sell, and this will make it all the harder to sell given the taxes. Fun times. BUT- the same sort of thing happened in Sharon Township this past year- and I am pretty sure that has not made the news yet. It's about time it does. Sharon is a small, ag community for this most part, and one of past "leaders" has cost us plenty with a "deal gone bad". I am not sure how much exactly but know that we will be paying (and not 100% sure on this) about 100/month for- yes, 15 or 20 years or so I was told. No discussion and I only found out at the voting place. Never mentioned or voted on. I have been looking for the A2 news to cover it, but nothing has happened. Shameful what has happened, esp in these times when we are all struggling to get by. Sheesh, we pay our taxes, and get this for it???
MJSteklac
Fri, Dec 10, 2010 : 5:30 p.m.
@ChelseaBob It appears that the award is to be paid with a judgment levy. A judgment levy is not a special assessment and does not have to go through the same process that is required to establish a special assessment district. Also, a judgment levy is outside of any Headlee or maximum millage restrictions.
russellr
Fri, Dec 10, 2010 : 4:51 p.m.
First of all I am very sorry the residents of Chelsea have to pay for the township officials mistakes. I am so sick of them acting like they are so high and mighty. If you are a builder wanting to bring something nice to the community they make you jump through hoop after hoop than change there mind. I know this is off the article but Scio Township has had multiple projects that were fantastic. They turn them down because they want what they want. Also how do you get 7-8 people on the board to agree on anything? Look out Scio you could be next. These are hard times and builders are not begging you to come to your township. Look at there agenda no business due to lack of business. Wake up Scio you need taxes to survive and we need jobs to survive.
Lisa Allmendinger
Fri, Dec 10, 2010 : 4:23 p.m.
If township residents plan to get together, I hope you'll let me know when and where. My e-mail address is at the bottom of the story. I'd like to hear your thoughts since I live in Sylvan Township. Should this happen, it would cost me $2,093. I'm also compiling your questions to try and get answers for you.
Atticus F.
Fri, Dec 10, 2010 : 4 p.m.
Eep, to answer your question, yes. Also, I wonder if the township officials could be held criminally liable?
Linda
Fri, Dec 10, 2010 : 3:53 p.m.
Bankruptcy sounds like a plan. Let's all decide where to meet.
Forever27
Fri, Dec 10, 2010 : 3:45 p.m.
well then linda, you might want to make sure that your township officials are doing their job properly. Either way at this stage, you're going to have to pay higher taxes or watch your township fall into bankruptcy.
Linda
Fri, Dec 10, 2010 : 3:35 p.m.
Well, where would all you Sylvan Township people like to meet up to discuss this because it will be a cold day in hell before I'm paying more in taxes.
jcj
Fri, Dec 10, 2010 : 3:24 p.m.
"The cost of connecting ended up being significantly higher than the projected cost of building its own wastewater plant, according to the suit." This is exactly WHY we have to question elected officials when they make some of the ridiculous decisions they make. Without I might add much input from the citizens!
ChelseaBob
Fri, Dec 10, 2010 : 3:24 p.m.
Does the township have the legal authority to impose a special assessment? I'm guessing no, and bankruptcy is a more likely option. Even if they paid this settlement, the township will still be unable to cover it's debt service on the system.
ChelseaBob
Fri, Dec 10, 2010 : 3:20 p.m.
Does the township have the legal authority to impose a special assessment? I'm guessing no, and bankruptcy is a more likely option. Even if they paid this settlement, the township will still be unable to cover it's debt service on the system.
Eep
Fri, Dec 10, 2010 : 2:53 p.m.
Does anyone know if this would affect property owners on the west side of Chelsea, whose land was in the Township prior to Chelsea switching from Village to City? They aren't part of the Township now, but they were part of the Township when most of these events occurred.