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Township hall funding revisited

Voters could have voice in bond effort

January 26, 2011 - Voters might get a chance to weigh in on the new township hall, two years after it was purchased and moved into.

If Independence Township files an application with the state to issue bonds, residents would have 45 days to file a petition to put the issue to a vote.

"If that 45-day period elapses, then there is probably another three months until the bonds are issued," said Paul Wyzgoski, of Dickenson Wright, bond council for Independence Township. "The biggest time consuming item would be to get approval from the Department of Treasury to issue the bonds."

The township is considering use of bonds, borrowing money from investors, to repay a $2.7 million "loan" from the water and sewer fund. The board used the loan to pay for a new township hall in 2008.

Michigan Department of Treasury considers the loan to be an internal service fund deficit, and requests a "deficit elimination plan."

"It's not unusual a municipality would issue bonds and use some of the proceeds to reimburse itself," Wyzgoski said.

Trustee Neil Wallace asked Township auditor representative Les Pulver of Plante Moran where the previous township board went wrong when creating the deficit.

Pulver said the state "might have fine tuned their interpretation as to what constitutes a deficit."

Trustee David Lohmeier asked Pulver if the refinancing using bonds was Plante Moran's idea. Pulver said it was a "roundtable discussion" of a "variety of options" between Plante Moran, the township Finance Director Susan Hendricks, Treasurer Curt Carson, and Supervisor Dave Wagner.

Issuing bonds is one of only option for satisfying state requirements, Pulver said.

"Not many other units (municipalities) would have used this technique to borrow money from the DPW (Department of Public Works) funds," he said.

Wyzgoski agreed it was "very uncommon."

According to a Sept. 4, 2008 letter to the township, Plante Moran said using the "internal service fund" approach to borrow money from the DPW funds could have "a minor undesirable impact," which "would likely result in an 'unrestricted net assets deficit' in the internal service fund, and would necessitate the filing of a deficit elimination plan to the State Department of Treasury."

Lohmeier said the entire issue could have been avoided had the township bonded from the very beginning when they first bought the hall.

"At some point somebody is going to write a book on this as a case study of where to go wrong when making a purchase, one of the chapters is going to be incremental responsibility," he said. "Nobody did everything wrong, but everybody did a little something wrong."

Carson said he wasn't going to "second guess" the previous board's actions.

"I hate playing the blame game here," he said. "We got a situation in front of us, the state has sent us a letter and they've made a request and now we have to address it."

Wallace said it's their "obligation to second guess the previous board."

"We do not want to be making those same kinds of mistakes," Wallace said.

Wagner said the township was paying about $170,000 a year for the building, as well as $120,000-$130,000 to repay the sewer and water fund.

"Now we have an opportunity if we bond to not have that second payment, which would indeed help the general fund out immensely," he said.

Wyzgoski said the township does not meet federal regulations for the bonds to be tax exempt, which will result in a higher interest rate.

"There are rules against using bond proceeds to reimburse a municipality for expenditures for a project," he said.

Trustee Mark Petterson was concerned it was going to be difficult to issue municipal bonds because according to Wyzgoski, they would have to either be preapproved by the state Department of Treasury, earning "qualified status," or submit an application with the state.

Since 2004, the state denied all of the board's qualified statements. The board can still issue bonds. It's just a "different process," Wyzgoski said.

"You have to submit the bond authorizing resolution and an application for treasury approval," he said. "It's not uncommon because there are a lot of municipalities in the state that don't have qualified status."

The process to get the bonds would start with a public notice of intent to issue bonds, approved by township board by resolution.

The notice includes the maximum amount of bonds to be issued, and purpose of the bonds.

Residents have 45 days to file a petition to put the issue to a vote, requiring signatures of 10 percent of registered voters.

The township board voted 5-1 to authorize Pulver along with Deputy Supervisor Rick Yaeger to contact the state "to explore with the state other potential options for eliminating or fixing this particular problem (the deficit)" and report back to the board as promptly as possible. Carson voted "No."

Trevor graduated with degrees in English and communications from Rochester College. He wrote for his college and LA View newspapers before joining The Clarkston News in May 2007.
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