Source: Sherman Publications

Village wants loan, but twp. says it can’t legally give it

by CJ Carnacchio

April 30, 2014

It appears funding the fix for pothole hill has hit another roadblock – a legal roadblock.

Last week, the Oxford Village Council voted 3-2 to authorize Manager Joe Young to enter into preliminary negotiations with the township to borrow up to $500,000 for five years in order to reconstruct the badly-deteriorated, pothole-ridden stretch of W. Burdick St. between Ashley Way and S. Waterstone Dr., commonly referred to as cemetery hill.

But township Treasurer Joe Ferrari received an opinion from attorney James K. White, who’s with the Grand Rapids law firm of Mika Meyers Beckett and Jones, advising against it.

“Absent express statutory authorization for a township to lend money to a village, and I am not aware of any such enabling statute, the township should refrain from lending to the village,” wrote White in an April 24 e-mail.

On Monday, village attorney Bob Davis was researching the issue, but he wrote in a text message to this reporter that his opinion will “likely say no to the village getting a loan from the township for roads.”

Between construction and construction engineering, the estimated cost to do this project involving 1,691 feet of road is $575,358, according to village engineer Rob Lavoie, president of the Pontiac-based Nowak & Fraus. Of that total $523,050 is the construction estimate.

“This is based on average bid prices for the contract work,” he wrote in an e-mail to this reporter. “It would not surprise me to see a low bid come in up to 10 percent less than this amount. As you know, construction prices/bids are market driven and based on supply and demand within the industry.”

The project includes reconstructing the road from subbase to surface; installing concrete curb and gutter; and making drainage improvements to allow stormwater to flow off the roadway in a more effective manner.

Additionally, cemetery hill will be lowered by up to 2 feet in order to improve stopping sight distance for motorists per state standards and the road will be widened from 24 to 27 feet as measured from the backs of the new curbs.

The village is advertising for construction bids, which are due by 2 p.m. Monday, May 12. See the public notice on Page 24.

“If all went well, it could be totally reconstructed by July 1,” Young told council last week. “That’s our goal.”

“It’s a four-week project – that’s what the engineers are estimating,” Young told this reporter. “It depends on the availability of the contractor.”

Ferrari contacted White about the loan request because of an article the attorney wrote on capital improvements for the Michigan Townships Association (MTA) magazine.

During a phone conversation with White, Ferrari said the attorney raised the issue of what could potentially happen if somebody filed a suit challenging the legality of the loan.

“He said you could have a judge rule basically, that the contract’s invalid, then nobody would have to pay anybody back,” Ferrari said. “You’d just be out the money.”

Ferrari noted he also checked with the MTA and was told such a loan is not legal.

In his e-mail, White advised that the village has other avenues to fund the project.

“Instead (of borrowing the money from the township), the village should rely on the statutory powers afforded to (it such as the ability to) borrow money and issue bonds in anticipation of the village’s receipt of future distributions of Michigan Transportation Fund monies,” White wrote. “The proceeds of the bonds could then be used to repair and improve the village streets.”

White noted these “bonds do not require a vote of village electors and can be authorized and issued in a fairly expeditious manner.”

Ferrari added that “even though it’s probably not what they want to do,” council also has the ability to increase the village’s property tax rate to pay for the project. The rate is currently 10.62 mills.

“Why would you want to take a loan from us and pay interest on it, when you could just pay increased taxes and not pay any interest?” the treasurer said.

The village is still hoping to receive money for the W. Burdick St. project from the state through the Roads and Risks Reserve Fund.

Originally, it had been reported the village was seeking $378,000 (including a 10 percent match from the municipality) in state funding. The paperwork Young submitted to the state contained that figure and it was the amount he reported to council.

The $378,000 figure represented the scaled-back project which called for milling 2 inches of existing asphalt and resurfacing it with 4 inches of new pavement as opposed to reconstructing the road. In March, council decided to expand the project’s scope back to the original proposal to reconstruct the road for approximately $550,000, but at the time, Young said the state funding request would remain at $378,000.

Last week, Young told this reporter that state Rep. Brad Jacobsen had increased the request to $500,000.

But Jacobsen said when he submitted the request back in January, it was for $500,000 and he never changed the amount.

“I kept it at $500,000 because if we’re going to do that job, I want to make sure we do it right,” he said. “I’ve been asking for $500,000 right from the beginning. I’m not excited about the idea of cutting the hill down, but I want to make sure we do the right thing with the drainage, the curbs and the gutters because ever since I was a little kid, that hill’s been a pain.”

As for whether Oxford’s request will be granted by the state, on April 24, Jacobsen said, “I have not heard anything about it.”

“When I checked about 10 days ago, (Michigan Senate Majority Leader Randy) Richardville had not signed off on which (projects) he wanted,” he said, “It’s between Richardville and (Michigan House Speaker Jase) Bolger – they’ve got to agree on who’s getting how much.”

So far, the village hasn’t had much luck receiving funding for this project. In February, Oxford was turned down for federal funding for the fourth consecutive year. Last fall, it was rejected for state funding.

Young noted the village has $172,000 in its major street fund that’s available for the project. “We don’t want to use it all, of course,” he said.

Because 516 feet of the project is located within the township, the village is expecting the township to share in the cost, however, there is no agreed-upon amount.