Sylvan Township’s water tower looms over I-94. It looks impressive, but it’s a huge white elephant. Designed to serve 1,000 customers, the township water plant currently supplies fewer than 100.
While Sylvan has too much water, Chelsea has an unquenchable thirst. For several years the city was experiencing technical problems at its water plant, sometimes causing tap water shortages. City manager John Hanifan says everything is working fine now at the plant, but “there is always a need for additional water.”
In neighboring Sylvan, the need is for additional cash—quick. The water tower and plant were part of an overambitious and controversial sewer and water scheme that has left the tiny township with a $6 million bond debt—and two lawsuits from developers that could add millions more in costs. In addition, the underutilized water plant has been operating at a $225,000 annual loss.
Michael Williams, the Sylvan Township supervisor, predicts the township will run out of money to pay the debt service on the water and sewer bonds by late 2009 or early 2010—which, he says, is “like tomorrow when you’re talking about governments.”
Williams, a retired venture capitalist, sees only one realistic chance for the township to remain solvent: selling water to Chelsea. Since last fall, township and city officials have held talks on how to fashion a regional water deal that would send some of Sylvan’s excess water into Chelsea’s pipes. Hanifan is reluctant to talk about the details, saying only that “everything is still open for debate.”
Williams is more openly enthusiastic. “The buzzword these days is ‘regional cooperation,'” he says. “This is exactly that. It’s a win-win situation.”
Williams says he has been trying to alert citizens to the prospect that the township may end up facing a deficit of more than $9 million—eighteen times Sylvan’s annual budget.
“I’ve been running around with my hair on fire,” says Williams.
With fewer than 100 households hooked into the water system, Sylvan has less than a tenth of the customers originally projected. The recession is partly to blame: fewer people than envisioned have moved into the Sylvan Crossings manufactured-homes park and Rene Papo’s Chelsea Springs subdivision.
A third development that was supposed to hook into the sewer and water systems hasn’t even broken ground. It’s the subject of a breach-of-contract lawsuit filed last year by Norfolk Development Corporation, which took over the 180-acre parcel from the original developers in 2004. In court papers, Norfolk has charged that the township, among other things, unilaterally changed the terms of the original development agreements and then tried to get Norfolk to pay for water and sewer service to hundreds more units than it had agreed to build. Papo has filed a similar suit.
If the Norfolk case goes to trial, a judge could end up scuttling the entire development agreement and giving Norfolk the upper hand in new negotiations. But if the township prevails, no homes at all may be built.
“I’m not sure what a win is,” says Fred Lucas, the township’s attorney. “If you’re not able to solve the problem for the developer in a way that works out financially, then they could just walk away from the project. I could win the court proceedings, and it would still be a loss for the community.”
The alternatives are grim. Lucas mentions “redoing the bond,” but Williams believes that would put off the day of reckoning only a little while. A judge might impose a special assessment to pay off the bond debt, or residents could be asked to approve higher property taxes. It’s even possible the township could go into receivership.
Williams is hoping a deal with Chelsea will bail out the township, but it’s not clear whether other township officials, with whom he frequently clashes, will get on board. And Chelsea is wary about buying a pig in a poke.
“We don’t want to assume a long-term liability,” says Hanifan. “We’re not going to overpay for a system. If we enter into an agreement, it would have to be for Chelsea.”
