PIERSON TOWNSHIP — Nearly three dozen people attended a special meeting of the Pierson Township Board on Aug. 18 to hear an update about the troubled financial situation of Little Whitefish Lake’s sewer system.
Montcalm County Drain Commissioner Todd Sattler explained why he was recommending the township refinance the two sewer bonds to save money and pay off the debt on time.
However, after a question and answer session that became a bit heated at times between Sattler and township residents, the Pierson Township Board voted 4-1 to hold off on taking any action until they receive more documentation about costs and fees relating to refinancing.
The $2 million lake sewer project broke ground in 1997 and included a $1.262 million loan which would be paid off by property owners in a special assessment district over 40 years at a 5% interest rate, plus a $939,000 federal grant. A second bond was taken out in 2003 for some system updates and needed repairs.
However, the sewer fund was soon on track to have a revenue shortfall and to be depleted due to a combination of residents receiving too low of a special assessment; residents paying off their assessment earlier than some officials had anticipated; multiple vacant properties on the lake that were assumed would one day hook up to the sewer system but were never developed; both bonds being paid out of one revenue stream — and possibly other issues which are still being discovered, according to Sattler, who was appointed drain commissioner this past January after Sandy Raines resigned mid-term as drain commissioner.
The total amount of outstanding bonds is currently estimated at just under $1.3 million, according to Sattler, who said refinancing the bonds would save residents approximately $170,000, meaning the current revenue shortfall would be avoided, the township wouldn’t have to increase its rates and the bond would be paid off on time by 2036 at no increased cost to residents.
Robert “Bobby” Bendzinski, an adviser with Bendzinski & Co., a municipal finance advisory firm in Grosse Pointe, said refinancing fees won’t exceed $65,000 — including about $30,000 to Bendzinski & Co. and bond counsel Dickinson Wright in Grand Rapids and about $20,000 to Huntington Security.
Those amounts gave township board members pause.
“That’s a lot of money,” Treasurer Kathy Hyrns said. “I think before I could vote on that, I’d like to see it all in black and white.”
“I’m pretty much in agreement with Kathy,” Supervisor Bill Van Til said.
“Those fees are already being paid out of the savings,” Sattler noted. “If you are unhappy with the fees because you’d like them to be cheaper, we still have to refinance stuff. There won’t be any out of pocket by the township or the sewer district.”
“I just don’t think it’s wise to sign something until you can see it in black and white,” Hyrns responded.
“We’ve been looking for answers for over a decade,” Trustee Melanie Gould agreed. “I guess I don’t know why this has to be done tonight.”
“Is there any other options other than refinancing?” Trustee Chuck Scheuermann asked.
“I guess you could do nothing and you pay 5% interest on this until 2036 and we’ll be out of money by then so we’ll increase debt service payments,” Sattler responded.
Little Whitefish Lake Association President Brent Boden was among those in the audience.
“If we do nothing and then in 20-forever when this gets paid up and we have all this debt service, that’s a two times a year sewer payment that will come to everyone for $2,200,” he declared. “That’s rough math. I personally don’t want that.”
After more discussion, Hyrns made a motion to table taking action until the township board receives specific cost figures in writing, and then to hold another special meeting as soon as possible. The motion passed 4-1.
Clerk Sara Burkholder cast the lone opposing vote, saying that even despite new fees, the township would still save money. Burkholder said she had the township attorney review Sattler’s recommendation and the attorney saw no reason for the township board not to move forward with refinancing the bonds.
“All we’re doing is saving money,” Burkholder said. “Even if we’re paying fees, we’re still saving money.”
‘I’m sorry about what went down’
During Sattler’s question and answer session, it was apparent that many residents remain upset about how the lake sewer system was originally designed and assessed, and many residents still want Montcalm County officials held accountable for their alleged role in the situation. (See infobox belowfor a summary of ongoing legal proceedings between the township and the county.)
“We were all given the right to pay it off,” township resident Bill Grice said. “I paid mine off in 2001. I feel the county’s responsible for part of this debt. They didn’t invest the money in interest-bearing accounts. When people did pay the bond off, they didn’t apply that principle to the bond. I’m paying more for this sewer system now then when I first paid it off.”
“Those of you who paid early, that large huge volume up in front is really what started this snowball picking up steam,” Sattler noted. “I’ll be honest with you, you all should have paid more money in the beginning than you were charged. The system was drastically understated. They planned and budget for a whole bunch of lines that never came online.”
“How was that our fault?” yelled a woman from the audience.
A man in the audience said he’s called the Montcalm County Drain Commission Office before to ask about the lake sewer system debt service and was told, “That’s none of your business.”
“That’s not standard protocol when you’re calling to ask why your bill is so high,” the man wryly observed.
“I have 1,000 questions,” said township resident Debralee Fountain. “Why isn’t the engineering firm or the developer held liable for any of this?”
Sattler said he believed township officials played a larger role in the history of the sewer project than county officials did.
“I think the hard part is I think a lot of you guys’ frustrations are with the county and they really don’t land there,” he said. “Probably in the last 20 years, there should have been a whole lot more involvement about what the township wanted to do. Every year this should have been looked at and adjusted accordingly. I’m not sure why it just kept getting kicked down the road.”
“I see finger-pointing back here at our township, but what is our county’s responsibility?” Grice pressed. “They withheld this information from us. Where does the county’s obligation to come in?”
“I’ll be honest, the county’s obligation really stops, they are just the assurance that the bond is getting paid, that’s how the township got the bond,” Sattler responded. “Realistically, more conversations should have been taking place between township residents and the township board. Ultimately this decision is the township’s. That’s where the decisions get made.
“At the end of the day, it doesn’t seem like there were any legal wrongdoings, it was just a whole bunch of small things compounded all over the place,” he added. “If you budget for a bunch of lots to come online and they never do, the people who are there have to carry the burden. There are a lot of things that went wrong with this.
“I will stand here until the end of the night to tell you I’m sorry about what went down,” Sattler declared.
“Even Sandy Raines told us ‘yes, I made a mistake. I don’t have the money to pay for the county’s mistake,’” township resident Kay Gravelyn said.
“I’m sorry you don’t know what’s going on, you’re new,” Gravelyn told Sattler. “It’s a simple, simple thing. You guys are bringing up so much financial stuff when it’s very simple. You get a bill, you pay it, and that’s what we did.”
“I know that you think it’s that simple …” Sattler began.
“It is that simple,” Gravelyn declared.
“It really isn’t,” Sattler protested.
“You’re like any other politician, it’s like the more you talk, the more you think you can make us tired and make us go away,” said Gravelyn with frustration.
“We’re not here to point fingers and try to find blame,” Bendzinski interjected. “The township handles the special assessment for savings and sets the special assessment rate. The township is responsible for it. They presented a schedule that showed there was sufficient revenues. There was no municipal adviser involved. Why there wasn’t one, I don’t know the answer. They should have had one.”
“So it was doomed to fail from the very beginning,” a man in the audience observed. “So what’s the bottom line?”
“The bottom line is this is great deal,” said Sattler of his recommendation to refinance. “It’s not going to save you any more money, but it’s going to prevent you from taking this on the chin in 2036.”
Pierson Township vs. Montcalm County
In January 2019, the Pierson Township Board voted to follow an attorney’s recommendation to begin a dispute resolution process with Montcalm County and the Drain Commission Office on behalf of Little Whitefish Lake residents and a troubled sewer system financing project.
In August 2019, the Pierson Township Board voted to accept a letter of engagement from Bauckham, Sparks, Thall, Seeber & Kaufman in Portage for legal assistance with the sewer issue.
In February 2020, Pierson Township filed a lawsuit against Montcalm County alleging the county failed to respond to a Freedom Of Information Act (FOIA) request within the required five business days and wrongfully withheld and/or failed to produce requested public documents regarding the sewer situation. Bob Clingenpeel — who had been absent from work since Jan. 30 with no reason given — resigned as Montcalm County’s controller-administrator two days after the township filed the lawsuit.
The township’s lawsuit states that Pierson Township Clerk Sara Burkholder made a FOIA request on Dec. 5, 2019, to Montcalm County asking for documents from Feb. 1, 1997, to the present regarding the sewer project. Clingenpeel responded to the FOIA request on Dec. 17, writing that he had received the request on Dec. 6. The township’s lawsuit claims that this response violated FOIA because the county did not respond within five business days.
On Dec. 30, 2019, Clingenpeel granted some of the documents and but did not provide others, according to the lawsuit, saying that records before 2004 do not exist and other records were held by then-Drain Commissioner Sandy Raines and have not been provided. Raines resigned as drain commissioner Jan. 31, 2020, as part of a previously planned midterm retirement.
The lawsuit states the county’s response should be considered a “willful denial” of the township’s request, as according to MCL 15.235(5) if denying a request, a public body must provide an explanation and notice of the requesting party’s right to appeal or seek judicial review of the denial, as well as notice of the right to receive attorney fees and damages.
The state of Michigan’s general schedule 36 specifies requirements for the retention and disposal of drain and water records held by public entities and financial records related to bonds must be retained at least until the expiration of the bond, according to the lawsuit.
The township requested a court find Montcalm County in violation of FOIA and penalize the county for unlawful destruction of records, as well as pay for the township’s legal fees.
On July 2, the township’s law firm filed its trial witness list in Montcalm County Circuit Court — listing Burkholder, Clingenpeel and Montcalm County Chief Financial Officer Brenda Taeter, who was recently hired as the county’s new controller-administrator. Judge Suzanne Kreeger is overseeing the case. No court hearings have been scheduled yet.
The Pierson Township Board went into closed session during its July 21 meeting to discuss the township’s FOIA lawsuit against the county. After returning to open session, Burkholder provided the Daily News with this statement from the township’s law firm: “While initial receipt of requested FOIA documents were not provided and litigation ensued, the county is working in a mutually cooperative manner to provide requested documentation so that the township can achieve a full picture of the county’s administration of the Little Whitefish Lake sewer district. We are hopeful that the FOIA suit results in an amicable resolution.”
Pierson Township has spent $6,727 in legal fees on the case from July 2019 to July 2020.
Montcalm County is having its insurance company, Michigan Municipal Risk Management Authority (MMRMA) handle the lawsuit with all fees being taken out of the county’s retention fund, according to Taeter. MMRMA has hired Cummings, McClorey, Davis & Acho in Grand Rapids to handle the lawsuit. The county has not yet been billed for any services thus far, according to Taeter.