Van Buren Township and Visteon have entered into a financial agreement that includes reducing the state equalized value of Visteon Village by $100 million.
And, the two parties hope the agreement will be given the stamp of approval by Visteon’s bankruptcy judge.
According to documents filed in federal court, a hearing will be held Feb. 18 in Federal Bankruptcy Court in Delaware for Judge Christopher S. Sontchi to consider a motion asking him to enter an order approving the agreement reached between VBT and Visteon Corporation.
VBT and Visteon approved the settlement agreement, which was signed by VBT Supervisor Paul White on Jan. 25 after being authorized by the township board.
Visteon is in court for a voluntary chapter 11 bankruptcy filing, seeking reorganization.
The corporation, a former subsidiary of Ford Motor Co., is a leading global supplier of climate, interiors, lighting, electronics, and other automotive system, modules, and components to original equipment
Among the hundreds of debtors being considered by Judge Sontchi, is Van Buren Township which, under the leadership of Supervisor Cindy King, entered into agreements to help Visteon build its corporate headquarters in the township.
Visteon Village, now partially vacant, stretches from Tyler to Ecorse roads, between I-275 and Hannan, and encompasses nine buildings.
The parcels are subject to property tax valuation and assessment within the township. VBT assisted Visteon in financing the construction of Visteon Village by issuing about $28 million in bonds supported by the full faith and credit of the township.
The township primarily relies on the property taxes it collects from Visteon to service the debt obligations owed on account of the township bonds.
Since petitioning for bankruptcy on May 29, 2009, Visteon has paid about $2.9 million to the township, for full payment of the summer and winter property taxes.
For purposes of computing real property taxes, the township currently values Visteon Village at about $165 million.
Visteon thinks that is too high, so in September it began negotiations with the township to reduce the assessed value of Visteon village, saying it would probably have to sue, if the assessed valuation wasn’t reduced.
So, the township hired appraisers to value the property and the parties engaged in a series of negotiations on the tax assessed value of Visteon Village.
Then there is the issue of the industrial facility tax agreements that provide tax abatements to Visteon that enticed them to locate in the township.
Visteon has been unable to meet obligations for the staffing levels at Visteon Village and so the township is entitled to revoke the tax abatements.
To solve the disputes, the agreement before Judge Sontchi states:
* Effective Dec. 31, 2009, the township shall set fair value of Visteon Village at $60 million (a reduction of more than $100 million) for real estate property tax purposes, resulting in a taxable and assessed value of Visteon Village equal to $30 million (down from $82.5 million).
* On or before the effective date of Visteon’s plan of reorganization, Visteon shall pay the township $2.2 million in cash.
* The township will file in bankruptcy court, and Visteon shall not object to, a proof of claim for a general unsecured claim in the amount of $9,831,427.66 against Visteon for remaining amounts owing to the township in connection with the tax abatement agreements, provided that Visteon shall be permitted to reduce on a dollar-for-dollar basis the amount distributed, if any, pursuant to that general unsecured claim up to the $2.2 million, described above.
* The township agrees that Visteon’s good faith inability to meet its commitments in the tax abatement agreements shall not be a basis to void or cancel the tax abatement agreements.
* To the extent that the property tax payments made with respect to Visteon Village are inadequate to permit the township to meet its payment obligations on the township bonds, Visteon agrees to negotiate with the township in good faith to determine the amount of the shortfall with respect to those bonds and make a non-tax payment, payment in-lieu-of tax (PILOT), to the township to assist the township in making timely payments on the township bonds.
Although dependant on a number of factors, Visteon expects no shortfall with respect to the township bonds to arise until, at its earliest, 2015.
In the court filing, Visteon said it believes the settlement agreement represents a fair and reasonable resolution of the parties’ disputes and is in the best interest of the debtors’ estates and their creditors.
Visteon also told the court in its filing that it expects to generate substantial future tax savings from the approximately $100 million reduction in the assessable value of Visteon Village and the maintenance of the tax abatement agreements, which savings will over time exceed the costs of the settlement agreement, the document states.
Moreover, the document states, entering into the Settlement Agreement avoids potentially protracted and costly litigation with Van Buren Township, with uncertain results.
Visteon told the court in its filing that its execution of the Settlement Agreement “makes sound business sense.”
Meanwhile, the Visteon file in federal court contains many heartfelt, personal letters from retired Visteon workers and their families appealing Judge Sontchi’s order allowing the auto parts supplier to terminate their health and life insurance benefits.
A notice of appeal was filed Feb. 4 in federal court and the case will be referred for mediation.
Visteon said the benefits for some 8,000 retirees represented a $310 million liability and a significant obstacle to successful reorganization.
In a recent letter to the editor of the Independent, Supervisor White addressed the Visteon situation:
“An agreement was negotiated in 2002 by the King Team Board of Trustees with the Visteon Corp. to sell almost $29 million in bonds to help fund building Visteon Village, (this was about three times the 2002 General Budget dollar amount), and placed the ‘Full Faith and Credit of VBT’ for payment of the bonds, which makes our township residents responsible for the payment of the bonds if Visteon cannot or will no longer be able to make tax payments in an amount adequate to cover the bond payments.
“Visteon is currently in bankruptcy. The four officials targeted [for recall] have been instrumental in negotiating an agreement with the Visteon Corp. for a payment amount adequate to cover the bond payment in the immediate future.
“A Special Tax Levy was mentioned as a possibility for our residents to pay taxes to cover the bond payment if Visteon does not make tax payments adequate to pay the bond payment, but as your Township Supervisor, I will never agree to this arrangement.
“Our residents should not bail out Visteon with our hard-earned tax dollars. Our residents cannot afford the additional taxation. We need the money to support our household budgets to keep us solvent,” he said in the letter, published Jan. 28.
On Sunday, Supervisor White responded to the Independent’s request for a statement on the agreement before the bankruptcy court.
“We are trying to correct a situation to benefit our residents in the current economic climate,” he said, adding the township chose to execute this agreement instead of letting the bankruptcy judge make the decision.
“It’s our goal to get as much money from Visteon as we can, so we’ll have money for future bond payments,” White said.
He explained that the bond payments will increase dramatically in 2016 and the township wants to be able to cover all the payments, if at all possible, and then re-evaluate the situation, possibly renegotiating the bonds.