22 Aug 2014
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White Lake to Pay Sewer Debt With General Fund Money

The White Lake Township board approved a loan of $740,000 from the general fund to the sewer debt fund in order to pay back bonds.

White Lake to Pay Sewer Debt With General Fund Money

The White Lake Township Board of Trustees approved a loan of general fund dollars to the township's sewer debt fund in order to save the township from defaulting on bonds related to a decade old sewer project.

The township will loan $740,000 to the sewer debt fund to pay off, in full, an outstanding bond from Oakland County and to make a payment, due in March, on another bond owed by the sewer project.

Supervisor Greg Baroni said the money from the general fund was set aside last year for this purpose, and because it's budgeted, will not impact other township expenditures.

The township board now must figure out how the sewer debt will repay the loan to the township.

There are several options on the table, but trustee Rik Kowall said it will be "a cold day in hell" before he and others on the board vote to reassess sewer users that have already paid for their sewers in full.

Clerk Terry Lilley said the ongoing issue dates back to the 1990s, and that some of the decisions made in the 1990s by previous administrations have tied the hands of the current administration and put the township in the situation it’s in now.

“That is why it is so important for us to go back, look at the decisions that were made, and see where things went wrong,” Lilley said. “Those mistakes can help us now so we don’t make the same mistakes in the future.”

Part of the problem, Lilley said, is that the township was bringing in money in the late 1990s and early 2000s from the Phase 1 project, but the board at that time decided to use those funds to subsidize the sewer project along Pontiac Lake, instead of keeping it to pay for the first phase of the township’s sewer line.

“As a result, the debt grew because money was taken from one project to pay for the other instead of letting that project pay for itself through the collection of fees," Lilley said. "There were project overages as time went on, and those funds that were taken from phase one were never paid back, putting that project further in debt.”

Another issue, according to Lilley, is the projection that initial direct and indirect sewer hookup funds would have paid the debt through 2014, and earned interest at a steady 4 percent. Instead, the fund is earning only .4 percent interest.

Late last year, Lilley presented the township with four options for resolving the issue.

Those options include:

  • Unscrambling the current accounting issues. This would mean that Pontiac Lake property owners would have to be assessed for any and all deficiencies related to its project funding, Lilley said, and also means holding reassessment hearings for all 432 parcels within the sewer district at $1,900 per parcel.
  • Allowing the Pontiac Lake sewer fund to collect indirect fees to meet its requirements for bond repayment. If there are any remaining funds after debt is paid, those would be returned to Phase 1. This would mean that Phase 1 will never benefit from whatever indirect fees it was shorted, creating shortfall in customers and cash flow prior to bonds being fully paid in 2018.
  • Loaning improvement revolving funds to meet principal and interest demands on Phase 1 bonds each year through 2018.
  • Increasing the debt service charge and connection fees to make up some of the potential deficit.

Trustee Carol Burkard was the only trustee to vote against the resolution, saying she wanted the resolution to inlcude how the money would be paid back, and at what interest rate.

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