By Mary Drier
Staff Writer
DENMARK TOWNSHIP — When paperwork to take legal action against Denmark Township for breach of a financial obligation to Tuscola County is filed later this month, it will impact nearly every township resident financially.
Because the county provided financial backing of bonds for the township’s water project; which was canceled later, at least $395,000 worth of debt has to be repaid… one way or another.
The county has two options to recoup the money. One is taking state revenue sent to the township, (like a garnishee), or levying a tax assessment on each property. Because the township doesn’t not receive enough funding from the state to cover the obligation, the county has no other choice but take legal action to cover the debt by levying a property tax.
Between the bonds, legal fees, and other costs, it is estimated Denmark Township residents could see about a 5 mill levy on their tax bill for one year to satisfy the debt. On a home valued at $100,000 that would mean $250 more in taxes.
The issue started when the county agreed to bond the project June 1, 2011. Then, amended it on Sept. 1, 2012, when the scope of the project changed. On March 28, 2011, the county was asked to assist the township in financing an extension of the water system by issuing bonds.
Such a request is standard because the county has a good credit rating which means a better interest rate. Until now, there has never been a problem with the county’s financially backing a municipal project.
The township’s plan was to extend water lines from the Reese – Blumfield Water Authority to parts of the township around the village of Reese, which added about 15 miles to water main to the system.
The original extension design estimated at $3.5 million of which $3 million was to come from the proceeds from the county issuing bonds, and covered by a special assessment of $9,000 by those benefiting from the project. However, bids came back higher making the special assessment $17,000 instead.
Because the assessment was nearly double, township officials stopped the project Feb. 25, and dissolved the special assessment district what would have gone towards paying the bond without notifying the county.
The township’s action subsequently voided all of the assessments which were to be collected to make the payment for the county against the amount of the bond.
However, the engineer’s fee and other costs incurred in the proposed project; which the county bonded to cover, still have to be repaired.
The case will be handled in Tuscola County Circuit Court. The court will determine how the township’s financial obligation to the county will be satisfied.
This is the first time, Tuscola County has had to take legal action against a municipality to satisfy a debt.
Mary Drier is a staff writer for the Tuscola County Advertiser. She can be reached at drier@tcadvertiser.com.