In May of 2012, the county had picked up a $175,000 interest payment that the township couldn’t afford to make, related to $12.5 million in bonds that were issued 11 years ago – and backed by the county’s full faith and credit – to build a water and wastewater treatment plant in the township. The treatment plant in Sylvan Township that was intended for future development. Under a previous contract with the county, the township was obligated to make the bond payments. [.pdf of June 20, 2001 county board resolution authorizing the bonds] The township expected that connection fees from developers would cover those payments, but the development never materialized and the township has been struggling to make payments.

Township officials put a millage proposal on the November 2011 ballot to levy a 4.75 mill, 20-year tax that would fund the bond payments. But Sylvan Township residents rejected the millage by a vote of 475 to 328. As soon as the millage failed, it became clear that Sylvan Township – located west of Ann Arbor, near Chelsea – would not be able to make its payment in May of 2012. Because the county had backed the bonds with its full faith and credit, it is ultimately responsible for making the payments, even if it isn’t reimbursed for those payments by the township.  The county has an interest in making the bond payments to avoid having its AA+ bond rating negatively affected.

Even if the millage had passed, proceeds alone would not have been sufficient to cover the entire cost of the bond payments, however – forcing the county to tap its capital reserves as well. The millage proceeds were also intended to repay the county to cover any amount used from the county’s capital reserves, as well as interest. The proceeds would also have been 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.

At their Oct. 19, 2011 meeting, county commissioners gave final approval to a contract with Sylvan Township related to the township’s bond repayment schedule. However, the contract was contingent on voters passing the 4.75 mill tax, so the contract was nullified in the wake of the November 2011 vote. A staff memo accompanying the October 2011 contract resolution indicated that if the millage failed, the county could file suit against the township for breach of contract in failing to meet its debt repayment obligation. Such legal action could result in a court-ordered assessment on township residents. According to a staff memo for the July 11 resolution, the county is still pursuing “legal remedies” to the situation, but hopes to find other ways to resolve the issue.

Currently $9.7 million in principal is owed, plus interest – another $175,000 in November and two payments totaling $350,000 in 2013 – and the $1.2 million that was advanced by the county treasurer. In total, $11.425 million is owed.

The contract authorized by the board on July 11 is nearly identical to the one it approved in October of 2011. It’s contingent on township voters approving a 4.4 mill tax for 20 years that will be on the Aug. 7 ballot. The county will use its capital reserves to make the bond debt payments, and the township will repay the county with proceeds from the millage. The township’s repayments will continue for seven years past the debt repayment schedule, to cover interest as well as the repayment of $1.2 million advanced by the county treasurer.

This brief was filed from the boardroom of the county administration building at 220 N. Main in Ann Arbor. A more detailed report will follow: [link]

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]