EVART -- The Evart City Council continued discussions on the possible annexation of Evart Township property at its recent meeting.

The property annexation has been requested by Evart Industrial Properties, Inc., for the purpose of expanding a marijuana grow facility in the Evart Industrial Park owned by Lume Cannabis Company.

Council members are considering two main options for the annexation - a mutual annexation agreement between the city and the township, or an Act 425 agreement.

An Act 425 agreement allows two municipalities to conditionally transfer jurisdiction over a property from one municipality to another for the purpose of economic development. It involves negotiation between the two entities to determine jurisdiction, revenue sharing and the duration of the agreement.

Council member Dan Elliott said he was not in favor of the 425 agreement because of the restrictions it can place on the city with respect to future development.

"A mutual annexation is by far the cleanest and most effective way to do this," Elliott said. "The key provision would be that the property is annexed immediately and there would be no doubt in the future which jurisdiction has it from the beginning."

"It is possible you might be able to do that with a 425 agreement, but it is cloudy," he added. "I want us to be in the position where if we have to annex beyond that property, we are not barred by having to go back to the township and renegotiate the 425 agreement."

Some council members questioned whether Evart Township officials would be willing to consider any proposal other than the 425 agreement.

Council member Mark Hildebrand told the council after attending the Evart Township Board of Trustees meeting July 7, he came away believing that the 425 agreement was the only thing they would consider.

"It is explicitly what their lawyer is prompting them to do," Hildebrand said. "He told them that was their best move going forward, and I got the distinct impression that if they were going to play ball with us at all, it would be in that direction, and that they weren't interested in any other annexation options."

Council member Sandra Szeliga concurred saying, "I got the impression that none of these options were appealing to them at all, but the 425 agreement was the one they would consider."

Attorney Eric Williams has recommended the township negotiate with the city for a 425 agreement.

"I would say the 425 agreement is your primary option because it offers more protections and negotiations for the township to achieve some financial return," Williams said at the July 7 meeting. "In a 425 agreement, any tax revenue losses would be a negotiating point. The tax revenue should be earmarked to go back to the township so that they are held harmless to the loss of revenue. In addition, you could negotiate for a portion of any increased tax revenue that may result from the expansion."

Elliott said if the 425 agreement could be written such that the city gets immediate possession of the property and has jurisdiction over the property from the beginning, rather than at the end of the 20 year agreement, and if it allowed for annexation of additional parcels in the future, he would be in favor of going that route.

Hildebrand suggested that if the city is only going to negotiate from their strongest point without meeting the township half-way, they are not negotiating in good faith and the township may not be willing to move forward with a deal.

"We need to come to the table and negotiate in good faith, I agree with you on that," Mayor John Joyce said. "But on the other hand, we are city officials and not township officials, and we have to look at what is best for the city.

"The way I see it, is we need to decide what kind of agreement we want to propose, what kind of a time frame or length of that agreement we want, a monetary value for that agreement and how quickly we would like to see the agreement adopted, negotiated or voted up or down," he continued. "I'm ready to start hashing out what we should offer the township. Time is of the essence. We have a developer that wants to bring over 100 jobs to our city. I want him here yesterday."

Some of the negotiating points council considered for the 425 agreement included an annual cash payment of a designated amount back to the township, along with a share of the tax revenue generated from the property.

Dvoracek told the council the city's attorney, Jessica Woods, advised them not to tie the 425 agreement to any agreement the city may have with the developer, but that it should rather be tied to the tax millage imposed on the property.

"Right now, they have a current millage they get from the property that comes to roughly $160," Joyce said. "Once developed, it will be worth more."

Joyce suggested they make the offer that the city take possession of the property immediately and continue to give the township their current millage from the property, so that as the value grows their revenue grows, plus an annual cash amount for the length of the agreement.

"If they want to make a counter offer, then I would like to see that done quickly so we can get the vote done at their next monthly meeting," he said.

No decision was made on the annexation proposal during the meeting. Council agreed to consult further with the city attorney in order to answer some lingering questions about the 425 agreement and meet again for a workshop session where they can discuss each council members ideas on a proposal to the township.

In other business, the council voted to approve a rate increase of three percent for water and five percent for sewer for the next year.

"We, as a council, adopted this yearly increase for five years in 2018, but it was not done by resolution," Joyce said. "It should have been put in place where we don't have to revisit it every year. I would like to see it become automatic if we are going to adopt it."

Dvoracek told the council if they voted not to approve the rate increase, they would have to find a way to cut around $65,000 from the city budget.

The motion to adopt the rate increase was approved by a vote of 4-1, with Hildebrand voting no.

The council also approved a motion to extend the waiver of fees and interest penalties on late utility payments until Gov. Gretchen Whitmer's executive order not to turn off water service for late payments expires, which was extended until Dec. 31.

"In April, we waived all interest and penalties," Dvoracek said. "That was a loss of $3,000 for water and $5,000 for sewer, which I have made adjustments for in the budget. If we continue the waiver, I will need to make additional adjustments."

Joyce suggested they follow the governor's guidelines and waive the interest and penalties until December.

Council voted unanimously to approve the motion.

The city council will hold a workshop session at 7:30 p.m., July 20, at the Depot. The session will be outside and social distancing will be required.