2008 Project Suspension: Benzonia and Lake Township, Benzie Co. MI State of Michigan Strategic Water Quality Initiative Funding Program [SWQIF]: Timeline

State of Michigan Department of Environmental Quality Clean Water Revolving Funds:
Strategic Water Quality Initiative Fund (SWQIF).
Benzonia and Lake Townships, Benzie County: Wastewater systems replacement and management project.

NEWS AND UPDATES: The Project Timeline has been suspended.

February 22, 2008
Benzonia and Lake Township Wastewater System Replacement Project

In an effort to keep all those informed concerning the progress of the wastewater system replacement project, we are providing this synopsis of where things currently stand. On November 9, 2007 Supervisor Sheets, County Planner David Neiger, Benzie Leelanau DHD Director Bill Crawford and Onsite Wastewater Executive Director Dendra Best traveled to Lansing to meet with MDEQ supervisory staff Division Chief Amy Butler, Wendy Jansma and Chip Heckathorn. (MDEQ Project manager Mike Cox was seriously injured in a traffic accident in October and did not return to work until late last month.)

The purpose of that meeting was to discuss the administrative appeal of the denial, pending review, of funding for community systems as part of the SWQIF (Strategic Water Quality Initiative Fund) application. Expenditure of remaining funds in the S2 grant for further study and mapping of community ‘clustered’ systems was approved in support of that review.

Pending completion of site surveys and provisional agreement to proceed, funding was approved up to $1.2m for individual systems. Currently 34 system sites have opted to move forward for a total project cost of @$685,000.

However: Upon contacting Dickinson Wright, Benzonia Township’s Bond Counsel, a serious impediment to implementation has become apparent.

The Michigan Municipal Bond Authority requires an investment grade for issuance of bonds to cover any SWQIF loan.
There is a 1% fee in addition to the 2.5% SWQIF loan.
Each individual system loan will require 2 approval hearings which would constitute a considerable administrative burden on both Onsite Wastewater and the Township.
Each Township would have to proceed as a separate entity regardless of forming an Interlocal Government Agreement.
MDEQ and the MMBA have set a timetable which makes meeting these deadlines almost impossible.

But the most serious issue to surface is that of all the statutes listed as being applicable for MMBA bond issuance - only PA188 Revenue Act - could conceivably be used to give legal statutory authority.

Even then, use of PA 188 use would require issuance of a legal authorizing opinion, or an amendment of state law, as Townships are forbidden by virtue of the State Constitution from lending their credit to a private purpose - which is what SWQIF is designed to do.

In addition, after further review, MDEQ has now determined they will not support use of SWQIF funds or any low interest assistance to privately owned community/cluster systems.

Both Townships are considering their options for further appeal either by legal or legislative means, or possibly via an alternative financing mechanism.

This outcome could not have been foreseen. The lack of any legal basis for providing financing for SWQIF is an issue which needs to be addressed by all those parties charged with framing and administering the program.

However, it is our considered opinion that 'fixing' the SWQIF statutory language is not the solution.

To date the tremendous cost in time and finances has been undertaken as a Onsite Wastewater pilot project by virtue of an allocation from our grant funding. The intent has been to work through a SWQIF project application to assess it as a means to provide wastewater replacement funding for those communities and governments where large scale central sewer infrastructure is either economically, geographically, or politically unacceptable.

Not until it came time to begin the process for actual funding of the approved systems did anyone become aware of the leagl/regulatory impediment.

Though we support state funding to enable small communities to develop wastewater management/responsible entity service area plans - the expense of financing individual or small community system replacements, via a local government bond funded program, with the same level of bureaucracy as required for a full blown SRF project, is excessive. The reasons SWQIF has never been used for the purpose it was created, to accomplish exactly this, are now obvious. It also explains why all SWQIF funds allocated to date have gone to large municipalities who have used this program to alleviate central sewer infiltration issues. (This also required a statutory amendment.)

This process is simply unaffordable for most rural Townships.

As a consequence we are recommending development of a simpler, direct loan program administered via a block grant to an area financial institution to enable local governments to administer and finance their own system replacement projects on a case by case basis.

Because we appreciate the economic hardship this will cause to those individuals who expected to be commencing construction this summer, we are committed to working with you to seek alternative financing.

However, no blame should attach either to Benzonia and Lake Township who have done everything as instructed to address sensible wastewater options for their residents. As the law is not clear that they can legally access and be held accountable for redistributing SWQIF funds, their hands are tied.

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