When Traverse City failed to adjust tax assessments for the Radio Centre building during the recent economic downturn, the property owners appealed to the state and won. Now, the city and Grand Traverse County have to fork over $180,000 in back taxes.
That's not all. More than $1 million in state grants and tax credits — all taxpayer dollars — were poured into the Radio Centre project during construction. The state awarded a brownfield grant of $661,800 in 1999 that helped spur development of the city's adjacent $8.3 million Larry C. Hardy parking deck; and Radio Centre developers got $491,000 in credit over 10 years toward the now-defunct Michigan Business Tax.
Property taxes generated by Radio Centre that are captured by the county and the Downtown Development Authority are used to help pay parking deck bonds. The lower Radio Centre assessment means the DDA ($90,000) and the county will have to refund more than $180,000. The county also won't be able to pay the parking deck fund an estimated $115,000 this year.
Officials said public incentives aren't factored in when property assessments are determined. But the city has taken steps to block developers from seeking reduced assessments on projects tied to city and county development agreements.
The Hagerty insurance building expansion and the planned Hotel Indigo in the downtown's Warehouse District both include provisions to prevent property owners from seeking assessment reductions. The same thing should have been done with the Radio Centre project.
Without such a clause in place, Radio Centre owner Ross Biederman was certainly within his rights to seek a tax refund. More disappointing, perhaps, is that the city's own estimate of Radio Centre's taxable value differed so much from the state's, which ultimately led to the big payback.
The city put the building's value at more than $3.88 million three years ago and increased it to nearly $3.98 million for this year; but city Assessor Deb Chavez, city Attorney Lauren Trible-Laucht and city Manager Ben Bifoss didn't contest the state's lower figures. An agreement signed off on by the Tax Tribunal and the city dropped the taxable value from $3 million in 2009 to $2,567,500 this year. That puts the property's estimated true cash value at $6 million for 2009 and $5.2 million this year.
If city officials believed their valuations, why didn't they fight? They later agreed to new numbers, but not until it got to the Tax Tribunal.
There are almost certainly more such appeals to come from other property owners; the question is how will the city deal with them?