The Ecorse Building Authority was established to construct
the municipal offices through a debt issue and then, fund the operations and
debt service from reimbursements and lease payments received from the, General
Fund. At June 30, 1986, the Building Authority had $255,000 in equity which was
comprised of cash, investments and a delinquent receivable of $210,000 due from
the General Fund. Ecorse had failed to pay the Building Authority the required
$70,000 lease payments due on June 1, 1985, December 1, 1985 and June 1, 1986.
The suspension of the lease payments violated the bond
covenants, but had not affected the Building Authority's debt service
responsibilities. The Building Authority had sufficient cash on
hand to fund the January 1, 1987 interest payment, but
would not have been able to pay the July 1, 1987 principal and interest payment
absent the payment of the deliquent lease payments.
Ecorse's 1986 audited financial statements erroneously
excluded the $1.1 million in outstanding Building Authority debt.