Sylvan Township attorney says fallout from lawsuits could be worse on taxpayers than expected

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.