White Lake Township Mulls Sewer Debt Options

The White Lake Township Board of Trustees continues to wrestle with the potential funding shortfall in the township's sewer fund. Township Supervisor Greg Baroni says the township has enough money for the 2012 debt repayment, but that the board needs to make some decisions so the fund will continue to bring in enough money to pay back the debt owed from the township’s sewer project that started in the 1990s.

Clerk Terry Lilley said the presentation on the history of the project, and the subsequent sewer fund discussion, was necessary because it had been brought up during the campaign in August, and several people running for office at the time had inaccurate information.

At a board meeting Tuesday, Supervisor Baroni explained, “There were times at township meetings when candidates said there was no money in the fund, and that the township wouldn’t be able to repay its debt. That simply isn’t true. But, we do need to look at the fund and make some changes so that we don’t run into problems in the future. It’s something that’s been kicked down the road from one administration to the next, now we need to take some action.”

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.

Lilley presented the township board with four possible solutions to keep the sewer fund in the black. None of the options were discussed at length Tuesday, but they will be in the coming months, with the new board taking over in November, Baroni said.

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.

The Numbers

*Interest earned from 1995 Through 1998 on bond money received and prior to being disbursed.

*REU stands for Resident Equivalency Units, this is the measurement used for sewer systems.

Phase 1 Revenues and Debt Service:

Inception Through Year End 2012