Traverse City Record-Eagle

May 19, 2013

Townships settle 12-year-old lawsuit with Cherryland

Traverse City Record-Eagle

---- — TRAVERSE CITY — Three holdout local townships finally settled a drawn-out tax dispute with Cherryland Electric Cooperative prior to a full hearing before the Michigan Supreme Court.

The dispute centered around excess personal property taxes paid by rural electric cooperatives from 1999 through 2001. The property taxes due were computed using a flawed form issued by the Michigan Tax Commission, and Cherryland wanted a refund from Garfield, East Bay, and Blair townships worth about $125,000.

The state Supreme Court dismissed the case Friday.

Cherryland attorney Norman Shinkle said the settlement with Blair, East Bay, and Garfield townships was similar to agreements reached with 50 or 60 other townships prior to a 2012 Michigan Court of Appeals decision.

"These were the last three," Shinkle said. "All of the other cases were settled prior to the appeal; these were settled post."

Blair Township Supervisor Pat Pahl said Cherryland offered to settle for 90 percent of the refund owed them, but final details are still being worked out.

The Michigan Tax Tribunal ruled in favor of rural cooperatives in 2008, and determined the over-payment caused by the faulty form was an error of fact, which under state law entitled Cherryland to a three-year refund.

The townships argued the state tax commission changed its position on what should be considered when calculating the property tax on electrical transmission lines, making it an issue of law not subject to the refund. The appeals court sided with Cherryland, and the three townships appealed to the state Supreme Court.

"Originally, we asked for an (immediate) reversal and were hopeful the court would grant that right off the bat," said Thomas Grier, attorney for the townships.

The court hears oral arguments in March but denied the townships' request and instead scheduled the question for a full hearing, more oral arguments and more briefs.

"We were faced with a lot of extra costs and from a cost-benefit analysis the parties didn't want to pursue it," Grier said.

Blair and East Bay were in the suit by name only, Pahl said.

"We got out of it over a year ago and weren't paying any more of the legal costs," Pahl said. "The county and Garfield Township wanted to pursue it further, we wanted to put it behind us."

Grand Traverse County wasn't a party to the lawsuit, but as one of the largest beneficiaries of property taxes it supported the townships with some money.

The county board agreed to the settlement because of the cost, Chairman Herb Lemcool said.

"The difference between legal fees going forward and the cost to settle it were minuscule," Lemcool said.