2014-10-09 / Local News

Bay View bankruptcy leaves governments owed $350,000

By Eric Carlson
Of The Enterprise staff

After nearly four years, a federal court’s bankruptcy decision involving what was once billed as the largest single development project in Leelanau County has left cashstrapped Suttons Bay Public School owed a sizable amount in taxes.

Condominium homeowners in the massive BayView development on the Suttons Bay waterfront just north of M-204 along M-22 in the Village of Suttons Bay are breathing much easier these days after the settlement.

However, there’s still a $350,000 problem that the bankruptcy proceedings didn’t solve. The bankrupt developer of BayView, a corporation known as Suttons Pointe Development, L.L.C., headed by Marcus Yono, failed to pay personal property taxes on leased Lake Michigan bottomland underneath the development’s marina on Suttons Bay.

A corporate entity known as Flathead Michigan I, L.L.C., acquired mortgages on the unfinished BayView Development in 2010 when Suttons Pointe defaulted. Flathead subsequently became the “successor developer” of BayView and last year reached a deal with Suttons Bay Township to pay off the delinquent personal property taxes in installments.

According to Suttons Bay Township treasurer Catherine Hartesvelt, Flathead has defaulted on that agreement. Accumulated taxes due plus interest is currently around $350,000, she said. The township itself is owed only about $4,700 of that amount.

The largest amount, $109,471, is owed to cash-strapped Suttons Bay Public Schools.

Leelanau County, BATA, Traverse Bay Area Intermediate School District, Leelanau County Senior Services, Suttons Bay Village and the county Road Commission are also owed a portion of the taxes.

Unlike delinquent real estate taxes, delinquent personal property taxes are collected by township treasurers, not by the county. When real estate taxes are delinquent, the county reimburses local governments with its “delinquent tax revolving fund” the amount that would have otherwise been paid by property owners.

Collection of delinquent personal property taxes is the responsibility of township treasurers, who lack a reserve fund to make local governments “whole.”

“This particular delinquency is unusually large and is hurting quite a few local units of government far more than we’d usually see,” Hartesvelt said, “That’s why I’d like to get some input from those units of government and have as many of them as we can sit down with our attorney to discuss what steps we might take next.”

Representatives of all seven affected units of government have been invited to attend a meeting next Thursday, Oct. 16, at 9 a.m. with Hartesvelt and township attorney Bryan Graham at the township office to discuss a strategy for collecting tax money owed.

Flathead has placed the marina on the real estate market for sale for $550,000. If someone buys it for that amount, Suttons Bay Township and the other units of government owed personal property taxes will be covered because of a tax lien Hartesvelt has already filed on the marina.

All of this is being watched very carefully by the BayView condominium homeowners association, according to its president Bob MacEachran. Ironically, MacEachran is a former superintendent of Suttons Bay Public Schools.

MacEachran purchased one of the condos at BayView last year shortly after the bankruptcy case was far enough along that the units were put back on the market.

“The good news is that all of the existing condo units at BayView have been sold and they’re all back on tax rolls with taxes being paid by private owners,” MacEachran said. “Just 15 months or so ago, more than half of the condo units were unsold and the taxes unpaid – it’s been a pretty amazing turnaround in just the past year.”

In addition to the condos sold, the condo homeowners also own the development’s “common areas” including tennis courts and a clubhouse with an indoor pool.

“The grounds have been cleaned up and professionally landscaped; a lot of projects were finally completed, such as the final paving of Dockside Circle; and the place is looking great,” MacEachran said.

The marina, however, is another story. MacEachran said condo homeowners are taking a “wait and see” approach before considering what they might do next. The association has “first right of refusal” to purchase the marina from Flathead. If the condo owners do purchase the marina, they will be required to pay off the delinquent personal property taxes.

In addition to the marina, Flathead also owns four condo units located above the two mixed-use commercial buildings fronting St. Joseph Avenue (M-22) in the development. In addition, several vacant site condo lots on the west side of M-22 are still owned by Flathead.

Hartesvelt said she has had no luck receiving a response to her inquiries from anyone at Flathead lately. Similarly, an Enterprise reporter was unable to contact a Flathead representative for comment on this story.

Originally, plans for BayView included a second through fourth phase known as the Leelanau Hills development that included property located west of M-22 north of M-204 up Scott Hill Road. Almost all of the nearly 200 acres in that part of the original development remains vacant. Much of it now belongs to the family of Bob Kuras, developer of The Homestead resort in Glen Arbor. No plans have yet been announced for development of the former Leelanau Hills property.

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