In a housekeeping measure, the Chelsea City Council unanimously approved the transfer of $212,958 from six city funds into a judgment fund as it prepares to start paying a $3 million lawsuit brought against it by an investment group over a housing development.

The city is not raising taxes to pay off the judgment, rather, it’s using a combination of fund balance and judgment bonds.

The first bond payment is due in November and the next in May.

Earlier this year, the city approved $2 million in bonds for up to 10 years, with the additional $1 million to be funded by the general fund as well as the electric, water, wastewater, solid waste and stormwater funds.

Chelsea Investment Group LLC sued the city and former City Manager Mike Steklac in 2006 claiming breach of contract when problems with the city’s sewer and water system halted the building of additional phases of the Heritage Pointe subdivision along Dexter-Chelsea Road.

In September 2008, Circuit Court Judge David Swartz awarded the investment group about $2.8 million in damages plus interest and taxes. Swartz also ruled that Steklac was entitled to governmental immunity on the claim of gross negligence.

Council member Frank Hammer was absent from the meeting. Lisa Allmendinger is a regional reporter for AnnArbor.com. She can be reached at lisaallmendinger@annarbor.com. For more Chelsea stories, visit our Chelsea page.