The Michigan Supreme Court on Friday denied a Detroit suburb’s request to appeal a lower court ruling in favor of Visteon Corp. in a case that pitted it against the automotive electronics supplier.
The suit, originally filed in Wayne County Circuit Court in August 2015, alleged the automotive cockpit technology specialist breached its contract over bonds tied to the construction of Visteon’s 263-acre campus in Van Buren Township, Mich. The township claims Visteon is legally obligated to cover the projected shortfall between bond payments and tax revenue from its corporate headquarters.
At that time, the shortfall was projected at $29 million by 2019 and city services and residential taxes are at stake, Linda Combs, township supervisor, told Crain’s Detroit Business, an affiliate of Automotive News. The township restructured its bond agreement to shrink the shortfall and is working to reduce the impact further, according to the appeals court ruling.
Visteon contended it isn’t obligated to cover the shortfall.
A circuit judge dismissed the case in February 2016, saying the township cannot sue for an injury, or shortfall, it has not yet realized. The appeals court and now the Supreme Court agreed.
Chief Justice Pro Tem David Viviano wrote the dissenting opinion for the high court, arguing the case should be retried in the lower courts.
Van Buren Township still can refile the complaint when, in fact, a shortfall occurs, both courts ruled.
The Visteon development opened in 2004.
When the Visteon Village campus was envisioned, it wasn’t known that Visteon would ultimately end up in bankruptcy court or that the commercial real estate market would deteriorate after the national financial meltdown.
Visteon was a hot commodity for local economic development managers following its spinoff from parent company Ford Motor Co. in 2000. Communities were eager to lure the automotive supplier and its headquarters in hopes of securing a windfall in property taxes.
Van Buren Township agreed to pay $22 million toward the project using proceeds from 30-year tax increment financing bonds. The total bonds issued for the project were $29 million.
On its end, Visteon agreed to spend $270 million toward the Visteon Village build-out. The company initially expected Visteon Village to be home to more than 4,000 employees. Visteon currently employs fewer than 1,000 at the site after several divestitures of company business units.
The township projected the assessed value of the property to be $300 million with a taxable value of $150 million. But by 2006, tax revenue from the property was already failing to meet bond payments.
Further complicating the matter, Visteon sold its headquarters in 2012 to the New York real estate firm Sovereign Partners LLC for $81.1 million. Visteon remains a tenant at the site.
In September 2013, Van Buren Township asked Visteon to begin negotiations toward a shortfall payment. The shortfall payment, the payment-in-lieu-of-tax the company ultimately offered, was just $6,125.06. Further negotiations failed to produce an agreement, ultimately leading to the 2015 lawsuit.
In 2018, Visteon reported net income of $162 million on revenue of $3 billion.