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Meyers Wins Real Estate Tax Appeal
By ALAN MILLER • Lansing Community Newspapers • From Grand Ledge Independent
GRAND LEDGE — When the Meijer store emerged from farmland at the corner of Saginaw Highway and M-100 in about 2007, a boost in tax revenue for the city's Downtown Development Authority was anticipated.
While that has proven to be the case, the expected yearly amount has been reduced with a state Tax Tribunal order to reduce the property taxes to be paid by the Meijer store to less than one third of the prior amount.
Additionally, an assessor's error at the time the property was converted from farmland to commercial property has further reduced potential tax revenue for the property.
Tax Appeal Refund
Tentative calculations by city officials show the corporation will receive a refund of approximately $750,000 of the taxes paid over the past three years, plus interest on that amount, which may be more than $50,000.
The refunds will be paid by the Grand Ledge Downtown Development Authority, the Grand Ledge Public Schools and the Eaton Intermediate School District.
Mayor Kalmin Smith said the city council met in closed session on Dec. 8 and authorized the city attorney to negotiate a settlement of the case, which had been in court previously.
Win Property Tax Appeal - Settlement
"We felt the settlement was in the best interest of the community or we wouldn't have done it," said Grand Ledge city attorney Richard Robinson.
Key to the case was Meijer's argument of functional obsolescence, Robinson said. In essence, he said, the store was built particularly for Meijer and would be of little value to another buyer.
"The recent re-valuation of the Meijer building in Grand Ledge was based on the understanding, by both Meijer and the City of Grand Ledge, that the building was not accurately valued, due primarily to the obsolescence factor," said Frank J. Guglielmi, director of public relations for Meijer. "We were pleased to be able to find common ground and reach a mutually agreeable settlement with the City of Grand Ledge."
Real Estate Tax Appeal
The loss of taxable value represents more than 10 percent of the DDA's tax base. Its annual budget of approximately $1 million will be reduced by more than $100,000 per year, according to development director Mark Sullivan.
The DDA will be able to repay its share of the refund from its $537,000 fund balance, said Sullivan, but the reduced annual income will impact the authority's plans for future projects.
"Payback isn't the issue," Sullivan said. "We have enough in our fund balance. It was set aside for a project. We were excited about projects, and we had plenty of money for it. Now we have to watch our pennies again."
Tom Murray, chair of the DDA said the board will need to revise its budget for the final six months of the current year, and review all of the authority's planned projects.
Sullivan said the authority had been about to bid out the engineering work for the planned parking lot north of Front Street and west of Bridge Street, behind Preston's. That will have to be put on hold, Sullivan said, until the authority is certain they will have enough income to be able to make payments on the approximately $1 million in bonds they need to sell for construction of the parking lot.
Other DDA projects being planned include assisting the city of Grand Ledge to construct a new city hall and building a new parking lot on the site of the former G and W Appliance store on Bridge Street south of Jefferson.
School cost
For the long term, the Grand Ledge school district's operating funds will be reimbursed from the state school aid fund, which makes up the difference between local property tax collections and the amount due to the school district based on its per pupil foundation allowance of approximately $7,300 per pupil.
However, school finance director Tom Goodwin said the repayment often takes as much as six months to process, and the estimated $220,000 payment will cause a cash flow problem for the district.
"I might have to choose between making payroll, paying this tax refund or going to the banks for a loan," Goodwin said. "And we will not miss a payroll," he added.
Value change
The value of the Grand Ledge Meijer store, which opened in the spring of 2007, had been determined by assessing officials to be more than $10.6 million, based primarily on construction costs.
The revised value, for tax purposes, is less than $4.5 million, based on the estimated price the building could be sold for, according to City Administrator Jon Bayless, and taxes are calculated using one half of that amount.
Meijer initially filed a protest with the state Tax Tribunal over its 2006 property taxes, levied when the building was still under construction. The taxes to be refunded reflect tax years 2006, 2007 and 2008.
Before the Grand Ledge case was settled, a similar claim resulted in substantial reductions to the taxable value of Meijer's store in Berlin Township, near Ionia, according to Grand Ledge city attorney Richard Robinson.
According to records on the state Tax Tribunal's Web site, 70 tax appeals are currently pending with Meijer as the plaintiff. That number includes more than one case against some municipalities.
"This could have a devastating effect across the state," Smith said.
Assessing error
In the course of investigating the case before the tax tribunal, the city of Grand Ledge learned of an error in the tax assessment dating back to the time Meijer purchased the property.
The purchase price, according to Smith, was approximately $4 million, and the taxable value for the land should have been set at approximately $2 million.
However, the tax assessor failed to adjust the taxable value, which remains at the former amount of approximately $25,000.
State law does not allow the city to go back and make a correction.
"One of the complications of this case is that a significant chunk of that property was on the books for a very small value, because it had been farm property, and our assessor did not uncap it," Smith said. "The way proposal A works, if the government charges you too much you can ask for a reduction. If the government charges you too little, too bad. You are never going to get out from under it until the property changes hands.
"That part I am very unhappy about."
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