Bond Repayment Contract OK’d with Sylvan

At its Oct. 5, 2011 meeting, the Washtenaw County board of commissioners gave initial approval to a contract with Sylvan Township related to the township’s bond repayment schedule. The township has been struggling to make payments on $12.5 million in bonds issued in 2001 to build a water and wastewater treatment plant intended to serve future development. The township expected that connection fees would cover the bond payments, but the development never materialized.

Now Sylvan Township – located west of Ann Arbor, near Chelsea – is facing default on its bond payment in May 2012, which the county will need to cover. The township board voted to put a proposal for a 4.75 mill, 20-year tax on the November 2011 ballot for township residents, with proceeds to repay the cost of the bond payments that would be made by the county.

The millage proceeds alone would not be sufficient to cover the entire cost of the bond payments, however, and the county would need to tap its capital reserves as well. After the bond is repaid, the millage proceeds would continue to be used to repay the county to cover the amount used from its capital reserves, as well as interest. The millage proceeds would also be used to repay the county treasurer’s office, which advanced about $1.2 million to the township in 2007 and 2008 related to this project.

The contract between the county and township is contingent on voters passing the 4.75 mill tax. If the millage fails and the township defaults, the county could file suit against the township for breach of contract in failing to meet its debt repayment obligation, according to a staff memo. The county would also need to make the bond payments, to avoid having its bond rating negatively affected.

The board is expected to take a final vote at its Oct. 19 meeting. This brief was filed from the boardroom of the county administration building, 220 N. Main St. in Ann Arbor. A more detailed report will follow: [link]