Traverse City Record-Eagle

Archive: Sunday

July 22, 2012

Plant funding woes continue

Townships may need to buy back outstanding bonds

BY BRIAN McGILLIVARY bmcgillivary@record-eagle.com

TRAVERSE CITY — The five townships on the hook for the $7.8 million Grand Traverse County septage treatment plant may soon put millions more toward the facility.

The county Board of Public Works invited township officials to a special finance committee meeting Monday at 7 p.m. at the Garfield Township Hall. The committee wants to ask the townships for more than $2 million in reserve cash for the plant so it can buy back over $4.35 million in outstanding bonds. The townships would then own at least half the plant's debt, but at a lower interest rate.

"We've run out of other options," said Glen Lile, East Bay Township supervisor. "I don't look forward to it but there are no more ideas out there."

East Bay, Garfield, Acme, and Peninsula townships plus Leelanau County's Elmwood Township guaranteed they would cover any losses at the plant, which is projected to lose $385,000 this year. The BPW wants to institute a special assessment on septic tanks and reduce the per-gallon charge for septage treatment. The proposal would increase revenue and provide a more secure funding stream. But first it wants to lower the interest cost of the plants' debt that totals $227,900 in 2012.

The townships asked the Grand Traverse County board in June to fund the bonds with surplus money from its delinquent tax fund.

The county board, however, wants the townships to buy in and can't tie up $2 million-plus in cash, board Chairman Larry Inman said. The county board asked the townships to come back with a final plan, including how it will handle $825,000 in debt it can't buy back until 2013.

The BPW will lay out the financial options for the townships so those boards can decide if it's something they want to do, said Mike Slater, director of the county Department of Public Works.

One plan is for the county and townships to pay off the bonds with a 3.375 percent interest and self finance them over the next 20 years starting at 2 percent interest. The lower rate and longer loan period would initially save the plant about $200,000 a year in debt payments.

The interest rate would be higher than the 0.5 percent the county now earns on its cash reserves. But it comes with the risk that the plant won't make enough to cover payments, Inman said.

"I don't know if we'd ever get paid back," Inman said.

Lile said it's less risk for the townships because they are already responsible for making the payments and covering shortfalls.

"The people who co-signed the original bonds are the ones who are going to be foregoing the payments," Lile said. "I doubt any of the townships will get in an uproar about it."

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