City goes to court over TIF

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Washington City Council Thursday night approved taking two separate legal actions, both revolving around Millcraft Industries and the Crossroads Plaza project.


First, council by a vote of 3-2, made way for the filing of a lawsuit against Beau Street Associates, a subsidiary of Millcraft, to determine the legality and enforceability of a 2007 amendment to the 2004 tax increment finance agreement involving the Crossroads project.


The amendment resulted in the lowering of the assessed valuation of the property from approximately $5 million to $3.75 million. Council signed off on the amendment in December 2007. It was executed in April 2008.


Last month, council voted down another amendment to the 15-year TIF agreement that, according to Millcraft officials, would have extended the agreement to 2026, allowing the development company to refinance the building located at Beau and Franklin streets. Council’s action came after a mandated public hearing was held on the matter.


Mayor Brenda Davis said, while considering the second TIF amendment, it was discovered that no public hearing was held for the first amendment.


“The voice of the public was not heard,” she said. “I believe the people had a right to come out and voice their opinions.”


Subsequently, the city is claiming the first TIF amendment is illegal and is seeking to have the assessed valuation of the property returned to $5 million.


In addition, Davis said it was claimed that the first TIF amendment received court approval, but there is no record of it receiving such approval.


Councilmen Matt Staniszewski and Ken Westcott opposed the legal action.


Staniszewski and Westcott, however, favored the second legal action which calls for solicitor Lane Turturice to initiate all necessary legal action to appeal the Dec. 12 decision by the Washington County Board of Assessment Appeals that determined the city owed Millcraft a tax refund of $40,000.


The board found the city owes Millcraft for a clerical error that caused the company to overpay taxes from 2007 to 2011 on its Millcraft Center property at West Chestnut and North Franklin streets. The error, made by the assessment office, occurred when the city purchased a portion of Millcraft’s property for the parking garage on Franklin Street, but the company continued to pay on the land it no longer owned.


According to Davis, the city contends the value of Millcraft’s Crossroads Center building should have been increased but lost the appeal because a building receiving a TIF can’t undergo a reassessment in value.


“It was the county’s error” not the city’s, Davis said.


The original TIF was approved in 2004 by the city, Washington School District and the county, with 80 percent of the new tax revenue that was paid on the Crossroads project going toward the construction of the adjacent parking garage, while the remainder of the TIF payment was split among the taxing bodies.


The TIF paved the way for commercial development that included the $15 million office building and construction of the garage.


A TIF allows the government to borrow money for infrastructure development such as roads and storm sewers, then pay off the debt using new tax revenue created by the project.


The 160,000-square-foot Crossroads building became the headquarters for title insurer LandAmerica and 350 employees. But with the economic downturn, the company abandoned the building, leaving a mostly empty structure.


Since LandAmerica left, the city has been responsible for the cost of the parking garage, which has been underused.


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