2016-09-29 / Front Page

Suit still possible over ‘back taxes’

Bill would hit S-B school
By Eric Carlson
Of The Enterprise staff

Officials of various units of government are still trying to figure out how to deal with what they believe are unfair, inaccurate and confusing tax “chargeback” bills that include 1 percent monthly penalties from Leelanau County.

“It’s especially unfair to charge interest and penalties, for example, to a financially-stressed school district that was not delinquent in paying taxes it never owed on property it never owned,” said Richard Bahle, who serves both as president of the Suttons Bay-Bingham Fire and Rescue Authority and supervisor of Suttons Bay Township. “We may be willing to pay back the base amount we received from the county, but it would be nice to receive a clear statement from the county explaining exactly how much is owed for what reason on each parcel.”

Suttons Bay Public Schools superintendent Chris Nelson was slated to host a meeting at the school yesterday with Suttons Bay Village Manager Wally Delamater and Bahle to discuss the topic.

Officials have suggested they may need to file a “friendly lawsuit” against the county in order to have a judge untangle what has become a rat’s nest of conflicting legal guidance from attorneys on multiple sides of the complicated and unprecedented issue.

All three units of government — and several others that receive revenues from Suttons Bay taxpayers including the county Road Commission, the Bay Area Transportation Authority, and Traverse Bay Area Intermediate School District — have been presented bills from the county totaling hundreds of thousands of dollars.

The bills are “chargebacks” for revenues those units received over some eight years from the county’s Delinquent Tax Revolving Fund (DTRF) to cover taxes that were not being paid by the bankrupt developer of the BayView condominiums in the Village of Suttons Bay. When the dust finally settled on protracted bankruptcy proceedings last year, nearly $1 million in property taxes, interest and penalties remained unpaid.

Leelanau County had taken possession of the “tax parcels” through a multi-year tax forfeiture process and attempted to sell the properties at auction. Had the county been able to do so, proceeds from the sale would have been used to reimburse the DTRF.

But some of the “tax parcels” consisted of little more than the right to build condos on the second and third stories of buildings that had not yet been constructed. Multiple efforts to auction them off have failed. However, the county has not yet given up.

Leelanau County Treasurer John Gallagher came under intense pressure from the Leelanau County Board of Commissioners and other department heads in the county government after he took steps that would have “forgiven” much of the debt various units of government might have owed the DTRF. Auditors and attorneys retained by the county both opined that what Gallagher had proposed was unlawful and persuaded him to issue “chargeback” bills to the various units of government.

The amounts the county says those units owed was reduced, however, after attorneys for the school district and the village provided their own legal opinions to the county, and the county’s own attorneys subsequently issued a supplementary opinion of their own that they insisted did not contradict their earlier opinion.

Gallagher last week issued a new “chargeback” bill to the Village of Suttons Bay that Delamater said seemed to contradict a spreadsheet Gallagher had provided the week before to the Leelanau County Board of Commissioners. Delamater presented the new bill to the Village Council at its regular monthly meeting last week and was advised to let Gallagher know it would not be paid until a better accounting is provided of exactly what is owed on each parcel and for what reason.

Bahle said he believes that confusion persists at the county level over what course the county should take.

“The County Board, I think, is only starting to understand that this issue really is entirely up to the Treasurer,” Bahle said. “But the County Board sought and received a legal opinion that indicated all of us needed to pay back every penny paid out by the Delinquent Tax Revolving Fund – with interest and penalties.”

The problem with that, Bahle explained, is that Leelanau County owns the parcels and may still be able to sell them off. The school district, the village, the township and all the other units of government have never had any say about how the properties would be disposed of, or when.

Delamater also expressed frustration with the county. He said that after this week’s meeting with Nelson and Bahle, he expected there will be another meeting next week with Gallagher and other county officials to discuss the issue further.

Gallagher acknowledged that he and other county officials are in continuing discussions with Suttons Bay officials and hopes to resolve the issue soon.

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