With county support in hand, Lansing Township to vote on a debt-elimination plan

(This story has been updated to include information not originally provided to City Pulse. The previous story said a deal had been reached between successors to developers Mike Eyde and the township overpayments due to the successors. The story has been updated to say the deal is pending. Also, the earlier version of the story said the township still needs to repay $3 million in overcharged taxes, but Treasurer Kathy Rogers said those reimbursements have been made.)

MONDAY, Dec. 5 — With $2.5 million in past-due lease payments for The Heights dragging the Lansing Township budget into a significant deficit, the Board of Trustees will consider a debt elimination strategy tomorrow night that could “right the ship” and avert a financial collapse of the township, according to the township supervisor.

The proposal includes a tax-sharing agreement with Ingham County. An earlier agreement, called a Tax Increment Finance Authority, or TIFA, expired years ago. Under the old agreement, Lansing Township was able to capture 80 percent of the property taxes levied by the county in the Eastwood Towne Center area. That money was also limited to infrastructure investments such as streets, gutters and sidewalks. The amount of money the township could capture was capped.

On Nov. 22, the Ingham County Board of Commissioners unanimously approved a new tax-sharing agreement with the township. Under this new agreement, the township stands to gather 60 percent of the money raised in property taxes in the Eastwood Towne Center area. The money from the agreement can only be used to pay off infrastructure-related bonds for the township.

“That will be enough to pay for all our bond obligations,” said township Supervisor Maggie Sanders.

Sanders and Treasurer Kathy Rogers said the township had been battered by unexpected financial issues, leaving it in the lurch in covering expenses. Among those issues were the housing crash in 2008. While property values have recovered, and in some instances exceeded, values in 2008, a constitutional amendment prevents the township and other governments from capturing the full taxable value.

The tax-sharing agreement is one of three moves the township has made or is preparing to make to shore up its financial standing and eliminate its budget holes. The debt was accrued over years of what Ingham County Commissioner Mark Grebner described as poor decision-making.

“The township has been terribly run,” he said. “They made terrible decisions. We have always backed away and said ‘no, no.’ The DDA [Downtown Development Authority] thing didn't seem legal to us. Nobody asked us if we should sign this complicated lease agreement with the Eyde's.”

A co-development agreement for The Heights included a parking ramp and retail space failed to garner the occupancy that had originally been projected. Under the deal, the late developer Mike Eyde owned the land the project was built on and assisted the township’s Downtown Development Authority in building the new buildings. The township leased the land on which the building was erected. But the Downtown Development Authority and the township have been unable to meet those lease payments, leaving the township with a $2.5 million deficit in past-due lease payments.

Eyde’s successors are in mediation with the township.

In a letter to state treasury officials, Sanders said mediation is expected to result in a deal with Eyde’s successors by the end of the year. Pending agreement, the DDA and township would sign over their equity interests in the parking ramp and other building assets in exchange for being forgiven $2.5 million in past due lease payments.

“With that resolution, the DDA General Fund deficit will be eliminated,” wrote Sanders.

Rogers said that the township and DDA had three separate independent financial studies conducted on the development plan. Each study found the retail space could expect at least 70 percent occupancy upon opening. But occupancy at the Heights failed to reach more than 30 percent of the retail spaces, leaving the project underwater. The rents for the retail spaces at 70 percent or higher occupancy were expected to cover the bond payments.

“I think that their liability, if you assume it continues not to be occupied, is way overshadowed by eight figures,” Grebner said of the Heights development. “Townships in general should not get involved in real estate deals. It's not a good idea.”

On top of this housing bubble crash of 2008, the township was hit with Tax Tribunal rulings that large box store developments like Walmart and Sam’s Club are actually obsolete buildings, purposely built for only their current usage. That has resulted in a finding that those businesses were overtaxed by $3 million, which Treasurer Rogers said has been reimbursed.

Last year, the township Board approved a public safety special assessment to maintain fire and police service at its current level. That special assessment is expected to be renewed for years to come, according to the tax-sharing agreement with the county and the letter to state treasury officials. Public safety expenses represent 70 percent of the township’s budget.

Grebner said the township is not bankrupt in a “technical sense,” but if the developers with their back-due lease payments and all the big box stores owed refunds demanded payment, “the money isn’t there.”

“If they demanded payment now, they would force the township into bankruptcy,” he said. “They are better off waiting for the tax sharing agreement. In a bankruptcy they would only get pennies on the dollar.”

He chastised the residents of the township and previous leadership for locking the government into this current crisis.

“At this point they are playing a very bad hand. I am not saying I could play their hand any better,” Grebner said. “They shouldn't have been putting themselves in this position in the first place.”

The commission approved the tax sharing agreement in part, Grebner said, because a Lansing Township bankruptcy would have significant impacts across the region. A bankruptcy would leave any government entity in the county with the name Lansing in it struggling to convince bond buyers that they are not Lansing Township.

“It's a bad idea to push them officially into bankruptcy,” Grebner said, “because they have the name Lansing right in their name. LCC, Lansing schools, the city of Lansing — they will all have trouble borrowing money.”