REED CITY -- Reed City and Richmond Township officials continued discussions to iron out their differences regarding economic development at a meeting Jan. 31.

"It was a good meeting," Reed City city manager Ron Howell said. "Both sides expressed their concerns."

The differences stem from an Act 425 agreement from 1986 that restricts the township's ability to install new sewer mains.

Under Act 425, property outside city limits may be transferred to the city for the purpose of economic development, and tax revenue from the property is then shared between the township and the city. Act 425 states that the property which is transferred is under the jurisdiction of the local unit to which the property is transferred.

The 425 agreement between Reed City and Richmond Township specifies that while the township cannot create new mains that connect to larger infrastructure, they may hook up one water line and one sewer line per business that comes into the transferred area, Howell said.

Richmond Township Supervisor Maynard Bluhm said the township would like to expand its sewer and water lines to other areas to allow for future development in the area.

"To do that would require amending the 425 agreement," Bluhm said. "That's where the discussions are now. I thought we had a very good meeting (on Jan. 31). It was an opportunity to enlighten everyone with the facts concerning the 425 agreement and get everyone on the same page."

Under the current arrangement, Reed City is responsible for building and maintaining the sewer and water infrastructure at their expense, and Richmond Township is allowed to hook up to the city's water mains in the designated area only.

"220th Avenue is currently covered under a 425 agreement, and it is the only area the township can connect to the city water and sewer lines," Bluhm said. "The township wants the right to run water and sewer mains off of 220th Avenue and to expand to other areas running east and west lines in order to spur future development."

According to Howell, the current 425 agreement is in place for the Spectrum Health property on 220th Avenue and additional property on the west side of U.S.-131, but the city would like to amend the agreement to include additional property along 220th Avenue and U.S.-10, to promote economic development in the area.

A dispute between the two entities in 1999, resulted in a circuit court order specifying the township had ownership of the water and sewer lines in the designated area on 220th Avenue, but the city was responsible for maintaining them. The court order also specified that the township could only put in single user lines and could not branch off of that with additional mains, city treasurer Barbara Westerburg said.

"The city would like to work with the township on developing an ordinance that would replace the court order," Howell said. "Under the new agreement, the city would collect taxes an any new development and then share that revenue with the township."

The township is resistant to amend the agreement to include any additional property because of a loss of Downtown Development Authroity revenue, Howell said.

"The Township DDA currently captures city and other millages on those properties, and to use the 425 agreement would result in less revenue for the township than what they currently capture through their DDA," Howell said.

Howell said the township would like to be able to connect to the city water and sewer wherever they like for growth, but under that arrangement, the city would not benefit from any economic development.

Ongoing negotiations

In August 2019, Bluhm sent an email to Reed City Mayor Trevor Guiles outlining what the township would agree to in amending the 425 agreement.

The items included five stipulations from the township:

• The township will release municipal jurisdiction to the parcels including: Reed City Fields, the County Building, Michigan Primary Care Partners, an office building owned by Dr. Howard Mahabeer, the Spectrum Health Office, the five residential properties on 220th Avenue and two vacant lots owned by DeShano Development for the length of the contract.

• The city will pay 40% of the real and personal taxes levied on the parcels listed for the term of the contract.

• The township will have the right to construct water and sewer mains in any direction.

• The township will have the right to connect water and sewer mains to the city water and sewer mains at any and all locations as required for future economic development.

• The city will retain municipal jurisdiction over parcel listed in the 1986 425 agreement and will maintain the township water and sewer system at city expense.

At a city council meeting in November 2019, council members discussed the terms presented by the township, concluding that they could not agree to those stipulations. The latest meeting between the two entities was an attempt to come to some agreement that would be mutually satisfactory for both.

"We want the right to run water and sewer mains off of 220th Avenue, rather than just single user lines," Bluhm said. "That way, a parcel wanting more than one business could run a main and hook up several lines to that main."

Bluhm said they have not reached any kind of agreement on what the city would require to make that happen, but they will continue to negotiate at future meetings.

Bill Terryn, of Gerber Construction, said the dispute needs to end for the city and the township to grow and for new economic development to happen. Until they can work out some kind of agreement, he said, nothing can move forward.

Howell said the meeting was a very significant step forward.

"I think everybody left with a better understanding of each other's concerns, and though no immediate date has been set, they plan to meet again for further discussions," he said.

Reed City Mayor Trevor Guiles said although nothing was decided at the meeting, the conversation is not over.

"The city council will be discussing a proposal for moving forward at its meeting on Feb. 17," Guiles said.