On June 29, Van Buren Township announced that a mutual settlement agreement has been reached with Visteon Corporation to settle litigation regarding a contract signed during Visteon’s 2009 bankruptcy.
The contract reduced Visteon’s property tax payments, making it possible there would be insufficient tax revenue to pay back bonds used for public infrastructure at Grace Lake Corporate Center, formerly known as Visteon Village.
The settlement calls for Visteon Corporation to pay Van Buren Township $12 million over a one-year period and releases Visteon Corporation of all liability.
“We are happy to have reached an agreement and can put this behind us,” said Van Buren Township Supervisor Kevin McNamara. “This litigation has been a rock on our back, and we are excited to move forward.”
Supervisor McNamara said the township and Visteon engaged in mediation with one of the most respected mediators in the nation, retired Federal Judge Gerald Rosen, who was the judge that saved Detroit and the Detroit Institute of Arts through negotiations with Detroit’s creditors.
The negotiations went all day and into the night without a break, McNamara said. He said the township was represented by himself, Board Trustee Bryon Kelley and Local District Financing Authority board member Doug Peters. Both Kelley and Peters are attorneys.
Van Buren also had a team of lawyers from the firms of Butzel Long and Miller Canfield. They were led by Butzel Long’s Rick Berg, who was lead counsel for the City of Flint in the Flint water case.
McNamara said the Van Buren Township case has a history dating back 14 years to the bankruptcy of Visteon. The case has been in and out of court in one form or another for over ten years, including a hearing by the Michigan Supreme Court.
McNamara said the case has driven discussions in government economic development as to the manner of funding public infrastructure through promises of greater tax revenue, because if that additional revenue does not occur, townships can be forced to bear the burden of the future costs, leading to Emergency Manager status and service cuts, such as in Allen Park.
It has also led to the Michigan Township Association and the Michigan Municipal League to issue statements warning cities and townships of these perils, McNamara said.
The mediation was an effort to find common ground and avoid three more years of litigation, an unpredictable outcome, and legal costs anticipated for each side to surpass a million dollars, he said.
The two sides have negotiated that Visteon will pay $12 million through two payments of $6 million each and the matter will be closed. The first check was due on July 3 and the second check in a year.
“Van Buren, which has been paying the bonds, will now be able to provide services to its community with the funds that otherwise would have been used to service the bond obligation,” McNamara said. “It comes at a good time, with Van Buren opening its new Community/Senior Center next year.”
McNamara explained that the township bonds require an additional $18 million (net present value dollars) to pay the remainder of the bonds to completion.
He said the township established a long-term debt fund six years ago to plan for a worst-case scenario in the Visteon case. With the inclusion of the Visteon pay out to Van Buren, this fund has enough money to complete the bond payments to their conclusion, he said.
The township board, the LDFA and Visteon all have approved the settlement.
McNamara said he called former supervisors Cindy King and Paul White to tell them about the settlement because, “They lived through this nightmare, too.” He said he tried to contact former supervisor Linda Combs, but was unable to find her.
The township’s LDFA was formed to finance and construct eligible public improvements for the Visteon Village project which was completed in 2004. In order to complete the public improvements, the LDFA established a development plan and tax increment financing plan which identified the improvements, estimated the costs of the improvements and estimated the amount of tax revenue the authority would capture based on the proposed improvements.
In order to finance the construction of the public improvements, the LDFA issued bonds to cover the costs of the improvements and those bonds were guaranteed by the township’s ability to tax.
The primary focus of the LDFA now is the payment of the debt obligations as a result of those public improvements.
Following Visteon’s bankruptcy the LDFA found it would not capture sufficient tax revenue to cover scheduled debt service and due to the shortfall, which occurred on Oct. 1, 2019, the LDFA initially was loaned $700,000 on Sept. 4, 2019 by the township to assist with bond payment. The loans continued as necessary.
As of Dec. 31, the township had loaned the LDFA $6,175,000 and accrued $100,058.85 in interest. It would have added up to more than $8 million in October.
More money coming for township
On June 29, McNamara said this has been a very good week for the township finances.
He said besides the Visteon settlement, the state budget, signed by Governor Gretchen Whitmer, contains the promised $1.8 million for Van Buren Township’s Iron Belle Trail and $10 million for rebuilding of the Denton Road Bridge.
The federal Community Development Block Grant fund, administered by Wayne County, approve $300,000 toward the township’s planned sidewalks along Tyler Road and the township’s Downtown Development Authority received a $40,000 grant for traffic studies.