2016-10-13 / Views

On back taxes, adults should find solution

our opinion

Someone — or some people, such as commissioners, the county treasurer and the county administrator — needs to take control of the BayView back taxes issue before it escalates into a civil war.

Or a civil lawsuit, which is being threatened.

That’s disappointing, as even during an election year with Dems and the GOP at each other’s throats, a simple solution seems well within reach. However, as the months have rolled by after the amount of money at stake was revealed, the issue has floundered.

Conflicting attorney opinions haven’t helped, and neither did the efforts of commissioners and some in the county building to make political hay. But such bravado should be long past.

It’s time to work out a solution.

Here’s the background. The original BayView development had its problems, leading to bankruptcy. Much of its plat map was a jumbled mess that included what has been referred to as “air condos” — essentially second-story space reserved for condominium units that were never built.

The air condos were not part of the waterfront BayView condos that are up and running and contributing to the community.

Even years after tax bills for the unbuilt condos had gone unpaid, local governments kept charging taxes. Eventually, the county condemned them to own their hollow deeds, which is akin to being given stock in Lehman Brothers.

Rather than take a hit on their books, local governments were reimbursed for the back taxes through the county Delinquent Tax Revolving Fund. The county, meanwhile, tried to collect the back taxes by selling the condos at auction. Predictably, there were no bids.

Meanwhile, the county continued assessing abhorrent interest rates — 1 percent per month — along with penalties and fees.

Charging interest, penalties and fees on back taxes has been an extremely successful system for the lucrative DTRF, which contributed $4 million toward construction of the county Government Center and millions more to move the county retirement fund closer to solvency.

The house of cards fell apart this spring when county Treasurer John A. Gallagher III sought to forgive and forget by taking the back taxes, interest and penalties off the books. Auditors hooted out loud, the county attorney opined that state law clearly disagreed, and some commissioners used the moment to grandstand a bit.

But county officials went too far in asserting that the state of Michigan required that everything, including interest and penalties, must be paid by local governments to the county. We wrote editorially that the best scenario was for the county DTRF to eat the loss if legal, or at least the county should eliminate all interest and fees.

County administrator Chet Janik wrote a memo to commissioners after our editorial stating that, among other thoughts, the county could not retroactively lower interest rates. He was following the lead from the county attorney.

Well, it turns out other governments can hire lawyers too. Those representing Suttons Bay Village and other governments hold different opinions.

Then the county attorney “tweaked” his thoughts on the subject as well.

So it would seem that a compromise is readily available. Leelanau County — through its county board and the county treasurer, as this has become a political issue — should forgive the local governments of all penalties and interest.

That would represent a substantial part of the total tax bill, which is approaching $1 million and growing. For instance, the last figures we saw showed that Suttons Bay Public School was being tapped for $78,000. Of that total, some $31,000 — about 40 percent — was due in interest and penalties.

Most local governments would reluctantly pay back the original taxes. But they shouldn’t be charged interest and penalties to further profit the DTF.

We thought there was momentum for such a compromise until this week, when Suttons Bay Township treasurer Cathy Hartesvelt floated a memo suggesting that affected local governments should band together to file a lawsuit against the county treasurer. Maybe that would move things along — or turn the issue into a legal abyss.

As requests for updated figures from elected officials such as Suttons Bay Township supervisor Rich Bahle have gone unanswered it’s time for all the adults involved to take a deep breath, sit at the same table, and work out a solution.

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