Among the topics the Chelsea City Council will discuss at its meeting on Monday, March 17 are a lawsuit brought by Sylvan Township and setting a public hearing for an about $4.448 million tax abatement request from Hayes Sumner, LLC, a sister company of Chelsea Milling Company.
Although the litigation discussion will take place in closed session, here’s an overview of the situation.
On March 7, Sylvan Township filed a suit against the city seeking payment for a portion of the township’s share of the $12.5 million bond issued by the county for the township’s sewer and water systems.
The complaint is for declaratory relief and was assigned to Circuit Court Judge Donald Shelton, and the city has 21 days following the summons filing to respond.
Here’s the history.
In October 2012, the previous Township Board voted 3-2 to send a letter to the city requesting that it pay “approximating 41 cents of every dollar the township would otherwise have to pay the county from its millage” because, according to the letter from township attorney Warner Norcross and Judd LLP, after Sylvan secured the bonds, portions of township were incorporated into the new boundary of the City of Chelsea.
“Under Section 14 of the Home Rule City Act, “[w]henever a new city shall be incorporated, the personal property of the township from which it is taken shall be divided and its liabilities assumed between such city and the portion of the township remaining after such incorporation,” the 2012 letter stated.
“Based on the assessment rolls from 2004, it appears that the City took 40.915 percent of the township’s assessed value (reducing the taxable value of the township by 43.5 percent),” the letter stated. “And the city, correspondingly, assumed approximately 41 percent of the township’s general liability under the bond contracts.”
Sylvan Township entered into “bond contracts” with Washtenaw County in July 2001, under Public Act No. 185 of 1957, for the purpose of financing sewer and water improvements.
In September of 2001, the county sold bonds worth $12.5 million to finance the sewer and water projects. Construction of the project was completed in the latter half of 2002.
According to the letter, by the time the city incorporated in 2004, the township was generally liable for any principal, interest, and other expenses on $12.5 million in bonds not paid through special assessments.
And, the special assessments did not cover the bond payments, so township residents were taxed 4.4 mils to cover the shortfall to make good on its pledge of the township’s full faith and credit.
The township requested a response to the original October letter within 21 days, then in November 2012, township voters elected a new board that included just one member of the original board.
Earlier this year, the board requested that the city sign “a tolling agreement,” and on March 3, the council went into closed session to discuss the township’s request.
By definition, a tolling agreement “is an agreement to waive a right to claim that litigation should be dismissed due to the expiration of a statute of limitations. Its purpose is typically to allow a party additional time to assess and determine the legitimacy and viability of their claims and/or the amount of their damages without the necessity of filing an action. During this period, the parties waive any defense by way of any statute of limitations which would otherwise arise during such period.”
The council came out of closed session and voted to send a letter to the township denying its tolling agreement request and to “continue discussion on mutually beneficial regional planning and economic issues,” according to the meeting minutes.
The council plans a closed session at the end of the meeting to discuss the suit.
Before then, the council is expected to discuss setting a public hearing for Monday, April 21 for a request by Hayes Sumner, LLC, for an industrial facilities tax exemption for about $3.7 million in real property and about $732,000 in personal property for a total of about $4.448 million.
Hayes Sumner bought the warehouse and property at 140 Buchanon St. from the city in August, 2012 for $175,000. The company, a sister company of Chelsea Milling Company, plans to use the 72,000-square-foot warehouse on the property as a temperature controlled warehouse space to store ingredients for the milling company.
Also on the agenda are discussions of the annual electric department’s annual transfer in lieu of taxes, a policy that states the city property assessment information, and the renewal of the city employee’s wellness plan.
