Shelby-Utica Annexation Battle: Utica Makes Final Large Property Tax Payment
Utica and Shelby Township get along now, but it wasn't always that way. The two neighboring towns were involved in a bitter legal battle for decades over a portion of annexed land.
The City of Utica will be reaping the benefits from here on out on a portion of land the city annexed from its neighbor Shelby Township in the 1990s.
Utica will no longer have to pay Shelby Township a portion of the taxes collected on about 300 acres of land extending from Hall Road at M-53 east to Schoenherr Road.
As part of an intergovernmental agreement called Act 425, which Shelby Township and Utica entered into on June 26, 1996, Utica was ordered to pay Shelby Township three mills of its taxable value of the property within that district for 15 years.
Last month Utica cut the final large-sum check of $213,382, finalizing more than $3 million Utica has paid Shelby Township for the loss of revenue.
There were many implications from Shelby Township and Utica’s tumultuous legal battle for the land, including a dispute that was settled in the Michigan Supreme Court, Shelby’s decision to become a charter township, an intergovernmental agreement between the two towns to share services, and water and sewer foundations laid.
However, arguably the most significant impact of the annexation was that it helped carry Utica through Michigan’s recession in the 2000s, according to city officials.
“Honestly, I don’t believe the city as we know it would have continued to exist if that agreement was not made,” said Utica Treasurer Phil Paternoster. “Utica would not have survived.”
Paternoster told Patch the portion of land that was annexed, which includes major retailers such as Sam’s Club, Home Depot and Target to several hotels and even condominium complexes makes up 47 percent of Utica’s current taxable value.
“It used to be a smaller percentage, but because residential has taken such a hit in the past three years, this has become such a more significant portion of our tax base,” said Paternoster.
425 Agreement Ends 20 years of Litigation Between Shelby Township and Utica
In the 1970s, when Shelby Township was still mostly farmland, a group of landowners petitioned for Utica to incorporate their land—Hall Road from where M-53 lies (which wasn’t yet built) to Schoenherr Road—into its boundaries so they could have access to Utica’s services such as water and sewer.
Once the Michigan Boundary Commission obliged the landowner’s request, a complex legal battle involving appellate courts, the Michigan Supreme Court, detachment threats and backdoor deals with Sterling Heights ensued.
Mayor Jacqueline Noonan, who was voted into office in 1988, said she inherited the legal battle, dealt with detachment threats made by Shelby Township and helped the two neighbors come to a final 30-year agreement in June 1996.
In 1994 retired former Macomb County Circuit Court Chief Judge Robert Chrzanowski was appointed to work with the two towns to finalize a deal.
Terms of the Intergovernmental Agreement
- Utica and Shelby enter into a 425 Agreement, which means two local units of government agree to share tax revenues resulting from new or expanding development in the areas of their jurisdiction.
- Utica agrees to pay Shelby Township three mills of taxes from the annexed property for 15 years.
- The 425 Agreement expires in 2026, but there is an option to extend the agreement for another 50 years.
- Utica provides the annexed land with police, fire, and a portion of water services.
- Shelby is rebated for its portion of water and sewer services.
- Shelby receives franchise fees for cable.
- Utica gives Shelby its SMART credits, which allows Shelby to provide senior transportation for older citizens.
- Utica and Shelby agree to share Parks and Recreations services
- Shelby was ordered to pay Utica a sum of $200,055 over a seven-year period plus $26,103 every year for the first 15 years beginning in 1997 to reimburse Utica for capital charges, which are expenses the city incurred in defending the court cases, totaling more than $600,000.
“We shook hands and the agreement settled the last circuit court issues, and the two communities have gotten along in spite of this battle as good neighbors ever since," said Noonan.
This is the first in a series of articles chronicling the battle between Shelby Township and Utica for a portion of lucrative land along Hall Road.