CHICAGO -- Standard & Poor's Corp. on Friday affirmed ratings for debt issued by the city and township of Ypsilanti, Mich., and removed the ratings from CreditWatch, where they were placed with negative implications following the announced closing of an automotive plant there.
The agency affirmed the A rating on $850,000 of Ypsilanti Township Building Authority unlimited tax general obligation debt, the A-minus rating on the authority's $690,000 of limited tax GO debt, and the BBB-plus rating on $1.7 million of Ypsilanti Community Utilities Authority debt.
The ratings were placed on CreditWatch with negative implications in March 1992 after General Motors Corp. said it would shut its Willow Run assembly plant in Ypsilanti Township in September 1993 as part of a consolidation plan.
Standard & Poor's gave a stable outlook to all three debt issues even though its not certain whether the plant will remain open or be closed.
Joe O'Keefe, a director at Standard & Poor's, said that while the plant closing would be a "big economic shock to the area," the effects would not be immediately felt, giving the governments time to make budgetary adjustments.
In April 1992, the township filed suit against General Motors, charging that it cannot shut the plant because the township granted tax abatements for the facility. A Washtenaw County Circuit Court judge ruled in favor of the township in February and issued an injunction prohibiting the automaker from closing the plant.
General Motors, which called the ruling unprecedented, had argued that it had no formal or informal contract with the township to retain 4,900 jobs at the plant in exchange for a 50% tax abatement. Pete Ternes, a spokesman for General Motors, said the decision was appealed to the Michigan Supreme Court, which ordered the state appeals court in April to expedite its review of the case. He added that a ruling should be issued " any day. "
Wesley Prater, Ypsilanti Township's supervisor, said the township will fight the issue in the state Supreme Court if the appeals court overturns the lower court decision. In the meantime, he said the township has put together a plan to handle the $450,000 to $500,000 a year in tax revenues it will lose should the plant close.
"We've put our financial house in order so even if it does close we can continue to operate and provide services and meet debt requirements in a manner that is responsible," Prater said.
Shannon Stumbo, assistant city manager of Ypsilanti, said the city had argued that the Willow Run plant, would not have a direct effect on its finances. The Community Utilities Authority bonds are secured by the city's limited tax GO pledge.
Jon Reichert, a director at Standard & Poor's, said the Ypsilanti School District debt was not affected by the planned plant closing because its debt is secured through the state of Michigan's school bond loan fund. The district plans to sell $4 million of tax anticipation notes this week.