Sylvan Township attorney says fallout from lawsuits could be worse on taxpayers than expected
This story was updated at 10:15 a.m. Saturday with information from County Treasurer Catherine McClary.
Representatives from Sylvan Township, Chelsea and Washtenaw County met Friday to discuss options in the tangled mess of lawsuits and future water and sewer bond payments that could mean whopping tax bills for Sylvan residents.
The township's attorney also revealed at the meeting Friday that residents may be on the hook for even more than originally expected if a pair of judgments are upheld. The financial mess stems from Sylvan Township owing $9.775 million for water and sewer debt service bond payments, and about $4 million in judgments from the courts following a lawsuit by two developers.
Township officials said last week the judgment alone could mean a one-time, 18-mill tax levy for township residents.
But township attorney Peter Flintoft said Friday if the township can't find additional revenue to pay off the bonds and the judgments are upheld, residents could see a potential 60-mill tax levy.
No decisions were made at Friday's meeting, but officials discussed such options as selling the township's water plant to raise money. County Treasurer Catherine McClary said in an e-mail Saturday that the county owns that water plant because it financed the bonds, and it's unclear whether selling it would even be an option before the bonds mature and the bondholders are paid.
The city and township have met several times over the last few years to discuss the possibility of shared ownership or a transfer of ownership of the township’s water plant to the city. But those talks never progressed.
Since then, Norfolk Development Corporation and Magellan Properties sued the township for breach of contract and were awarded $2.4 million. The township is appealing and has filed a motion for a stay of payment until the appeal is heard — expected to be after Jan. 1.
"We inherited this dilemma from a previous administration, and we are working very hard to resolve it in the best interests of the township residents," Supervisor Bob Lange said.
In addition, the township has filed a malpractice suit 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 lawsuits resulted from an agreement between a previous township administration and the developers in 2000. The agreement established special assessment districts that were scheduled to collect $8 million to pay for new sewer and water systems for a planned development that never started on 162 acres on Sibley Road. Westchester Farms was to include 262 homes and 64 townhouse condominiums.
Washtenaw County sold $12.5 million in bonds to finance the township's water and sewer systems. McClary said Sylvan Township has a contract with the county obligating the township to pay the county for the interest and principle on the bonds.
Washtenaw County Circuit Judge Donald Shelton, who ruled in favor of the developers, also voided a special assessment the township had levied on the developers. And the Washtenaw County Treasurer’s Office has billed the township for $1.2 million the county paid to cover the assessment when the developers didn't pay.
Chelsea City Manager John Hanifan said today if the city were to assume the $4 million in debt for the water plant, “to keep our residents held harmless, the city would need between $30-$35 million in taxable value from the township.”
That means a good portion of the township would end up annexed into the city of Chelsea. The township has about $200 million in total taxable value and currently levies 0.9474 mills.
“We realize this is a significant portion of the township, but that’s the financial reality of the situation that they’re in,” Hanifan said of the neighboring township.
Property owners annexed into the city would face a steep rise in their tax bills. The city currently charges 11 mills for operations, while the township charges less than 1 mill.
If the township is forced to levy 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.
County officials plan to meet with the city and the township separately, then come up with compromise options for both municipalities to discuss and potentially agree upon.
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
maverik
Mon, Mar 21, 2011 : 12:39 a.m.
it seems like this comment board, which also is a means to talk to residents of the township don't want ot post any comments that would help to tell the truth about this sewer "thing" or to help the residents not to have to pay for someone elses wrong doings,. My comments, which only spoke of the truth, did not attack anyone, were not put on and then when i mentioned this , that comment was also taken off, where is freedom of speech?
ts673335
Mon, Jan 24, 2011 : 5:46 p.m.
Developers were being charged for more Sewer taps then were needed, and SPECIAL ASSESMENTS were set up by the TOWNSHIP ARE ILLEGAL......???? Sylan TOWNSHIP OWES $9.775 Million for water and sewer debt service bond payments and $4 million in judgments...????? No wonder my water and sewer bill cost more than my electric bill. ???? I like to see fair accounting practices and management by the city. So that the tax payers of Chelsea should have a chance to be proud of there city/village? signed DISSAPROVED CITIZEN
Vivienne Armentrout
Wed, Dec 22, 2010 : 12:24 p.m.
Mr. Williams, if I recall correctly, David Solo was elected after the project was first initiated. He and Mr. Brooks were presumably at public meetings concerning later fixes to the agreements, etc. In the last year (2004) that I was on the BOC and BPW, there was a BPW meeting regarding some changes and there were some township officials (not Mr. Solo, and I don't remember who else; the BPW minutes are not online) present. I don't recall the substance of the decisions being made but I remember that the atmosphere was very tense. Recall that the project was first approved by the BOC on July 18, 2001. I checked the minutes and there was no citizen participation. Unfortunately the online minutes for the Ways and Means Committee meeting of June 20 are missing (replaced by the BOC minutes for that date) so I can't verify that there was no citizen comment on that date.
Rod in Chelsea
Tue, Dec 21, 2010 : 4:32 p.m.
Wow Jack...............I grew up with him and you have never spoke greater truth!! He was crooked as a kid!
brooktrout
Tue, Dec 21, 2010 : 11:58 a.m.
Re: Ms. Armentrout's desire for outside group participation. I think if she examines the records, she will find that at least some of the meetings that she refers to did include participation from Sylvan citizens not associated with township government. Specifically, I know that David Solo, David Brooks (the real hero of this story, if there is one), and I were in attendance at county meetings on this. In addition, the Sylvan Sentinel, which was mailed to the home of every registered voter in the township, discussed this issue ad nauseum during its days in 2002-2004. There's a lot of revisionist history being tossed around by all concerned, probably myself included. Disaster may often appear an orphan, but it usually has, as in this case, many fathers (and mothers. Oh, let's not forget the mothers....) Michael Williams Sylvan Township Supervisor, November 20, 2004 - November 20, 2008
brooktrout
Tue, Dec 21, 2010 : 11:48 a.m.
It is my impression that the county's share in this mess began in the Department of Public Works. It was my understanding that this is the office that initially reviewed the Development Agreement under question; when I questioned these documents, I was told by Clerk Koch that they had been reviewed by this office and found "okay" by the county, so how could I object to them. It was only after the disastrous clause 1.G. got into operation that the county had alarm bells going off. It was they who then forced Sylvan into redoing the original documents (an illegal act in itself, since the roll the establishes the surety for the bondholders cannot be changed once it is established, for rather obvious reasons), a step which greased the slippery slope the township had perched upon. Michael Williams Sylvan Township Supervisor, November 20, 2004 - November 20, 2008
Jack
Tue, Dec 21, 2010 : 7:09 a.m.
This whole situation makes me think one dirty word: Papo.
sec10
Mon, Dec 20, 2010 : 2:43 p.m.
BOC Armentrout and Gunn, it would appear that although the county was merely allowing the TWP to utilize it's borrowing capacity as an assist to sell Bonds the county also passed an ordinance requiring all lake users to have their septics certified for sale thus forcing the lakes into a separate $14,500 toll for sewers around the lakes. Had the Board of Commissioners asked the simple question of WHEN will the building begin and required that a shovel be place in the dirt within a specific timetable we wouldn't be chatting. The TWP is also out the monthly water payments from the developers because the TWP built it and they did NOT come.
Knick
Mon, Dec 20, 2010 : 12:52 p.m.
I love all the comments. Those who live in Chelsea and pay 11 mills annually should not be patting themselves on the back - that is outrageous government taxing abuse of the highest order. As for the County, it is as responsible as anyone. Sylvan residents are also residents of Washtenaw County and the County allowed neophyte fools from Sylvan to dictate things and use the County's good credit? Take responsibilty please as the only one in the transaction with any experience with such things. You knew Sylvan Twp officials had no clue and Dresselhouse knew next to nothing himself but his crass and abusive delivery must have won points over at the County. I have read some of the pleadings in the lawsuit b/w Sylvan and the Developers and the County attorney admitted in sworn testimony that he never even asked for or saw a copy of the Development Agreement - the linch-pin document to the entire water and sewer development that put this train wreck in motion. He releid on what the TWP attorney told him!!! Quite simply, had the County examined the Development Agreement - as it should have - there would have been no water tower w/o major changes that would have prevented the lawsuit and judgment in Developer's favor and quite likely the water tower. Sewers pay for themselves through $14,300 per home special assessments and it is the sewer users out on the rural lakes who have been paying - illegally I might add - a major portion of the operating costs for the water tower for many years now. The Twp had to get the money from somewhere was its answer. The TWP attorney who was hired specifically to help the TWP through the weeds here blew it and the County blew it. Blame the residents all you want for electing these people and I do as well - I have one vote and never voted for any of those who destroyed the TWP. Some of them are still on the Board so don't fall for this prior administration non-sense.
Peter Stone
Sun, Dec 19, 2010 : 2:18 p.m.
Are copies of the lawsuits and associated proceedings & findings available on the internet for the citizens to review?
brooktrout
Sun, Dec 19, 2010 : 10:21 a.m.
Please refer to my comment on the earlier article. The claim by Mr. Lange that this dilemma was inherited from a previous administration is a half truth at best. In fact, the same small group of people have been in charge in Sylvan Township since 1992. Three of the present board members were also members of the 2000 - 2004 board who approved all of the actions and agreements for which the township was held liable. These same individuals were central to the stonewalling that got the township in this predicament--the developers had very reasonable settlement claims that were rejected outright by the board majority. So please, Mr. Lange, spare us the half truths and the circumvention of facts on the ground. Another slight inaccuracy in the article: in fact, the talks with the city of Chelsea for their purchase of an interest in the water plant in 2008 did progress to the point where I had what I would call an agreement in concept in my venture capital days (broad agreement had been reached on price and governance issues). Again, the board majority would not go forward with the proposal, preferring to live in the land where they never did anything wrong and so never had to be accountable for their actions. Michael Williams Sylvan Township Supervisor, Nov 20, 2004 - Nov 20, 2008
snapshot
Sat, Dec 18, 2010 : 10:14 p.m.
Bad deal for Sylvan Township homeowners.......lots of that going around these days due to a shortage of long term financial planning and wisdom. Might it be a "bad" deal for the entire county of homeowners? Is there any possibility of an increased county millage to cover these costs and bond issues? What would such an increase in taxes do for real estate values? Would tax foreclosures increase the possibility of folks losing their homes? What about mortgage defaults? Could it be feasable that the increased tax rate would motivate homeowners already upside down to walk away? Is a county wide vote needed or can the county commissioners just raise the property taxes on a court order? Are some of the same folks who voted in favor of these Sylvan township bonds now participating in other bond issues in other townships and cities?
Vivienne Armentrout
Sat, Dec 18, 2010 : 8:03 p.m.
Mr. Ingersoll, Yes, I fought against it and then voted for it in the end. You will find this is common in many legislative circumstances. I was actually quite annoying and difficult for months and made the Board of Public Works hold onto it for some time. But ultimately all my questions were answered, at least to the level that I was able to insist. (Note, I had no vote on the Board of Public Works.) I don't recall the entire history but I am sure that I delayed its consideration on the BOC for some weeks also. Ultimately however, it is not feasible for a single commissioner to deny a decision based on personal views. It is one thing to be able to point out to flaws in a process or data that contravene a decision and another to stop something because you personally don't like it. The BOC has a tradition of unanimous votes and I very rarely was a single vote against something once a consensus had been arrived at. There were times that a sizeable minority voted against an action and I was sometimes part of those. I understand your frustration and applaud your earlier comment that voters/citizens should inform themselves and get involved early. It takes time and paying attention. It is much easier to let the people in charge take care of things, and complain later. Let's suppose as a thought experiment that a block of Sylvan Township voters had turned up at the Ways and Means meeting in June 2001. (Or at a prior Board of Public Works meeting, or at the July Board of Commissioners meeting.) Even just one or two could have said that they were concerned about this project and what it might mean for the future finances of the township. It might have caused commissioners to think twice. But we only heard over and over again from the same township officials who said that this was the will of the township. In answer to a different question, when a special assessment district is formed, it only refers to the area to be assessed for an improvement. It does not assign liability for payment of bonds, which remains with the entire municipality. There have been other cases of such problems where the assessment district was inadequate for full payment but I won't drag them into the discussion.
Justice4all
Sat, Dec 18, 2010 : 7:53 p.m.
At least we get to hear about the lawsuit in Sylvan. What of the lawsuit in Ypsilanti Township that have been swept out of sight of the public? Can we get a story on that one?
Chase Ingersoll
Sat, Dec 18, 2010 : 7:18 p.m.
Leah Gunn: In no way does your statement regarding a smaller govt entity using the higher rating of the County's "full faith and credit" but the County then not being obligated to then provide that "full faith and credit" in the instance of default make any sense to me. So you are telling us that the township as a "not so qualified borrower" gets to pimp a ride on the credit rating of the county, but the full faith and credit of the county tax payers are not liable? Huh? Or am I mis-reading your statement? Press? Isn't someone getting paid to ask these questions?
Chase Ingersoll
Sat, Dec 18, 2010 : 7:08 p.m.
Vivienne A.: I'm trying to understand your statements. "you were against it", "but voted for it"; "Calls for the county to pay for part of the mess are not called for", "It did not seem to me that it was prudent to form a special assessment....and to risk the county's full faith and credit on this." "..no county money was to be involved) by using its full faith and credit..." I go back to looking at this on the mortgage analogy and the City of Ypsilanti's bad real estate deals. There the City Taxpayer was the ill informed and/or ill represented co-signor. Here you are telling us it is the County Tax Payers in effect co-signors to what you are now saying you thought was a bad deal but voted in favor of anyway?! Please clarify my confusion. Press? Press? Press? Where are you in asking these sort of questions of the last 10 years of public officials?
Leah Gunn
Sat, Dec 18, 2010 : 6:29 p.m.
Former Cmsr. Armentrout's account of this process is accurate. What needs to be clarified is that various units of government request the county's "full faith and credit" in order to be able to sell bonds at a lower interest rate, because the county's bond rating is more favorable than another smaller unit of government. In no way does this obligate the county to be responsible for the debt payments of these bonds. What it does, at the time of sale, is to save money for the unit of government selling the bonds.
mbill
Sat, Dec 18, 2010 : 5:42 p.m.
A similar thing happened in Sharon Township (south of Sylvan)the township board and the supervisor Gary Blades made decisions and ended up with the township in court and loosing one million. We have a 15 year millage that costs us an extra $100 a year. Almost no one was going to the township meetings until things broke. The township supervisor quit and remains in hiding. We may need to spend a couple hours a month, participate in our Local Governments and stop some of these people.
Patrick Zieske
Sat, Dec 18, 2010 : 5:12 p.m.
I live in Sylvan Township. I had previously been under the impression that there was a special water/sewer district created within the township to be responsible for the bonds. The district would then go bankrupt in a case like this. But this story suggests otherwise -- that the county or the township (and hence the taxpayers) are left holding the bag. Which is true?
Vivienne Armentrout
Sat, Dec 18, 2010 : 4:20 p.m.
I have followed this story with intense interest because I strenuously argued against this project when it was first proposed. I was the liaison from the Board of Commissioners to the Board of Public Works and I caused several months of delay while the engineers and the township officials (especially Mr. Dresselhouse) answered questions. In the end it was approved unanimously by the BOC (including my vote) on July 18, 2001: see http://www.ewashtenaw.org/government/boc/agenda/wm/year_2001/2001-06-20wm/bc_01-6-20wm5.pdf. (The date on the document is the previous month's Ways and Means meeting and I recall that it was my interference that kept it from being approved on the same night at the Board of Commissioners.) It did not seem to me that it was prudent to form a special assessment district consisting only of property to be developed in the future and to risk the county's full faith and credit on this. It also did not seem beneficial for the county to be promoting rural development (I first wrote "subsidizing" but no county money was to be involved) by using its full faith and credit. But ultimately, what were we to do? The township officials (Mr. Dresselhouse was supervisor at the time and was very enthusiastic) were firm in their support for the project. They asked the county to provide support in making its bonding ability available. The engineers answered many queries at successive meetings of the Board of Public Works. Our own professional staff were confident that it was a sound proposal from an engineering viewpoint. The township secured the cooperation of a neighboring county. The bond counsel reviewed the finances and pronounced them sound (from a payment viewpoint). The commissioner representing that area (Cmr. Joe Yekulis) was extremely supportive of the project. In addition, the county had already assisted a couple of other townships in instituting or upgrading water utilities, and there was a positive precedent. So I think that the only thing the BOC could have done at that point would have been to tell the township that their judgment was bad and that they were striking a bad bargain. Is that really the way citizens of the county want the BOC to handle things? Calls for the county to pay for part of the mess are not called for and would simply harm other county programs, which are already stressed. There is no easy "save" here.
Soothslayer
Sat, Dec 18, 2010 : 2:01 p.m.
I like how folks think they should only pay for services they themselves personally have used. Do you have a problem with the federal budget deficit? Wars and other projects funded by this debt? State & City deficits? "Safety net" programs? Obamacare? How about all forms of insurance, police, fire and public education services? Reality check please, this is how things run. Looks like Sylvan Township gambled, made some possibly poor choices and now has to pay the piper. End of story.
Peter Stone
Sat, Dec 18, 2010 : 1:54 p.m.
If they want to annex property in to the city as part of a deal it should be the land south of I-94 and up to the boundaries of the proposed development. Let the Farmers who created this mess (Grau, Heller, Dresselhouse, Lesser, Koch) pay the tab. Since 3/5 of them are still on the township board a recall election should be started before they do any more damage. Also where was Washtenaw Counties due diligence in this mess? They signed off on the bonds and should have reviewed the development agreement as they were backed by the full faith and credit of Washtenaw County. The bottom line is Washtenaw County is not without fault in this disaster and needs to share in the financial burden.
foobar417
Sat, Dec 18, 2010 : 1:39 p.m.
What is the chronology of this story? What did the $12.5 million get spent on? Why did the developer not build the development? What did the township do that resulted in the judgement against it?
Ralph
Sat, Dec 18, 2010 : 12:38 p.m.
This all happened because Sylvan Township did not want to let Chelsea annex property. Sure backfired!
Leah Gunn
Sat, Dec 18, 2010 : 12:04 p.m.
@ Linda Peck - Sylvan Township is west and south of the city of Chelsea (which stradles two townships - Sylvan and Lima), and includes Cavanaugh Lake. If you google it, you can see a map.
Emma
Sat, Dec 18, 2010 : 11:41 a.m.
My house is in Sylvan Township, I don't have water or sewer and, didn't live there in 2000. Why should I be expected to pay for this disaster?
Basic Bob
Sat, Dec 18, 2010 : 11:14 a.m.
Chase Ingersoll is right. The property owners are liable for the incompetence of the past and present township administration, whether they vote or not. Sylvan township residents who want to hire more lawyers will ultimately be responsible for paying the additional legal fees of all involved. But that is their right.
Linda Peck
Sat, Dec 18, 2010 : 11:01 a.m.
Where is Sylvan Township?
Chase Ingersoll
Sat, Dec 18, 2010 : 8:36 a.m.
Sylvan Township and the City of Ypsilanti are two of the ever increasing examples of local political entities where THE VOTERS have institutionalized incompetence and self dealing. THE FIRST STEP IS FOR THE VOTERS TO ACCEPT RESPONSIBILITY for decisions they made. Then they have to decide if they are going to put the time in to be a responsible and informed voter, or are they just going to turn off their brains and vote for the candidate of either party who says "Just let me take care of that for you." Every election the deciding votes are cast by people who couldn't carry on an informed discussion about any of the top 5 fiscal issues that will face the person ultimately holding the contested office. There is little difference here from people who signed mortgages without reading or understanding them, because all they wanted was to get that hot little "re-fi and cash out" check in their hands. But allowing this sort of behavior...there are some things we can do and other limits on people that are not practical....but what we cannot do is bail them out. Sylvan Township voters need to face the $1800.00 and not make the sames mistake again or fine, face the dictates of a bankruptcy court. That's reality. Chelsea residents should really think twice about annexing voters who were this foolish/naive or inattentive into their village. I know some people out there who I would like to see comment here at AnnArbor.com and will contact them about this article. Also.....please give Judge Shelton a break. The man didn't go out and hustle this case. He was just sitting there on his bench in a black robe, when one or more of the parties refused to settle the case and sent it to trial. Judge Shelton was then compelled by the facts and law to make a decision that was probably one that he would like about as much as having to send his own kid off to jail. He knew damn well the fallout, and probably personally knows people who are going to be stuck for $1,800.00. That's why I suspect that the case will not be overturned on appeal - it is completely adverse to a local Judges' natural constituency - tax payers.
black canoe
Sat, Dec 18, 2010 : 8:24 a.m.
Rod, yes we should attend the meetings and I plan to do so starting January. This is a horrific burden for tax payers.
Rod in Chelsea
Sat, Dec 18, 2010 : 8:13 a.m.
As a person living in Sylvan township, I feel that we should all get together and sue the pants off of the last regime that created this mess in the first place. We didn't do it nor did we create it. This is what happens when the people do not go to the board meetings and allow them to run wild without them being held liable for their actions.
Michisbest
Sat, Dec 18, 2010 : 7:54 a.m.
Judge Shelton "rules in favor of developers" sounds like some of the nonsense that went on in the City of Saline when he was Mayor.
ChelseaBob
Sat, Dec 18, 2010 : 7:24 a.m.
What was the basis for the lawsuit? Sounds like the developers got rid of the special assessment, so why does township owe them $$? How about some more details. Can the township simply impose that millage, or does it need taxpayer approval? Maybe bankruptcy is the end game here?