In 2000 and 2001, Sylvan Township undertook a water/sewer project to support planned residential developments adjacent to the City (then Village) of Chelsea. The cost of the infrastructure would be paid by special assessments on the development. This did not happen, leaving the Township facing several lawsuits and substantial local debt a decade later.

In August 2012, Township voters approved a 20-year, 4.4 mill property tax to pay off the debt. For reference, as of 2012, Sylvan Township's total budget was $463,500, with a total taxable value of $183 million, and a local property tax rate of 0.97 mills.

The project & financing

In 2000, the Township signed development agreements with two developers, Magellan Properties (Rene Papo) and Warren Hamill (who later sold an interest to Norfolk Development Corporation), committing to providing new water and sewer service to new residential developments in the Township.

The new water system would include 2 new wells and water treatment plant with a planned capacity of 620,000 gallons per day, and a new, 500,000 gallon water tower, at a total cost of $5 million. The wastewater system would collect sewage from two pump stations in the Township and pipe it to Leoni Township wastewater treatment plant, just west of Sylvan in Jackson County, at a cost of $7.5 million. The systems were sized to serve a total of 1000 "residential equivalent units".

The Township then, in 2001, entered a contract with Washtenaw County, under which the county issued $12.5 million worth of general obligation bonds to pay for the construction of the new infrastructure, and the Township pledged its full faith and credit to cover the bond payments. This arrangement appears to have been made on the belief that the County could receive a better rate on the bonds than the Township, bringing down the total financing cost of the project.

The new systems were substantially completed in 2002.

Complications

Sylvan's new water and sewer systems faced several challenges, almost as soon as they were completed. The water treatment plant did not initially work properly, with the water softening unit offline for the first few years. The planned-for developments did not occur, and the developers did not make payments to the Township for the special assessments. Meanwhile, additional development that had been expected outside of the special assessment district, which was expected to offset some of the developers' assessment charges via connection fees, also did not occur.

In 2007, Norfolk and Magellan sued the Township, claiming breach of the development agreements. Washtenaw County Circuit Court ruled for the developers in 2010; the Michigan Court of Appeals partially vacated this ruling in 2011. (Note: find primary sources for these court records?)

While this drama played out, the Washtenaw County Treasurer "advanced" the Township taxes from year to year in order to cover the early bond payments, in an amount of $1.2 million.

Fallout

By late 2010, the Township's situation looked bleak. In September of 2010, the Circuit Court ruled in favor of the developers' claim of breach of contract, and awarded $2.4 million in damages. Additionally, the Court ordered Sylvan to repay the $1.2 million advanced by the County Treasurer. The Township appealed this ruled, noting that the only way it could cover the judgement would be through a one-time judgement levy of approximately 18 mills. (The lawsuit by the developers was settled in late 2011, removing at least the $2.4 million judgement and providing updated approvals for Norfolk to develop homes in the future.)

The Township's options by the end of 2010 included increasing local taxes to cover the costs of the bonds; offering a significant portion of the township (likely including the Chrysler Proving Grounds) to the City of Chelsea for annexation, in exchange for assumption or some or all of the debt; or, in the absence of any solution, a one-time 60 mill judgement levy to cover their default.

In October 2011, the Township and County developed a repayment contract that required the Township to pass a 20-year, 4.75 mill debt retirement levy. The Township placed this tax on the November 2011 ballot, but it was defeated by a 328-475 vote, leaving the payments in limbo.

In May 2012, Washtenaw County made a $175,000 payment on the bonds--one of two interest-only payments due in 2012--and declared the 2011 contract with the Township void. On May 9, the Township Board voted to place a second millage attempt, 4.4 mills for 20 years (through 2032), on the August 2012 ballot. The millage was approved by a 7-vote margin; a recount upheld this result.

Primary sources

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