Developer Stewart Beal sues City of Ypsilanti again -- this time, for dispute surrounding tax benefit
The newest legal dispute between the city and the Ann Arbor-based developer stems from a December decision by the City Council to revoke a tax benefit granted to the Beal-owned development and management company Go Downtown!
Beal alleges that the city revoking the break constitutes a violation of his civil rights under the 14th Amendment and recently filed suit for damages in U.S. District Court.
The Obsolete Property Rehabilitation Act exemption was approved for the renovation of a 123-year-old building at 208 W. Michigan Ave. in 2004. It saved Go Downtown! $83,000 to date and would have saved another $40,000 through the 8-year exemption’s life. The building has been turned into residential lofts and commercial space.
Per city policy established in 2008, council can vote to revoke an OPRA if an OPRA holder is late paying taxes twice.
Go Downtown! paid a $4,700 tax bill due in September two months late, in November. In 2009, the company also made a payment three months late. It is the first time one of the city’s eight OPRA holders has been late twice on tax payments, city staff said.
But the city must petition the Michigan State Tax Commission to revoke the OPRA. The commission is the body that grants and can officially revoke an OPRA. A Michigan Department of Treasury spokesperson said revocation of the Go Downtown! OPRA was on the three-person panel’s April 21 agenda, but it was removed after Beal filed the suit on April 20.
The state approved the OPRA legislation in 2003. It works by freezing a building’s taxable value at the time an abatement is passed. The freeze lasts for up to 12 years. Developers are exempt from paying certain millages, which provides an incentive to rehabilitate old buildings.
Because of the OPRA, the city must collect taxes directly from the property, and if payment is late, the city must go to court or employ a collection agency to get the funds.
Beal and the city disagree over whether wording in the OPRA legislation allows a city to revoke the break over late tax payments.
A section of the OPRA states “the legislative body of the qualified local governmental unit may, by resolution, revoke the obsolete property rehabilitation exemption certificate of a facility if it finds the holder of the obsolete property exemption certificate has not proceeded in good faith with the operation of the rehabilitated facility in a manner consistent with the purposes of this act ”
Beal contended that the act is in place to encourage renovation of historic buildings, and he has done so in good faith.
“The purpose of the act is very specifically not to make people pay taxes by the due date,” he said. Beal added that the City Council's voting against revoking the OPRA, then reversing that decision at the next meeting further muddied the situation.
He said the council approved a 2008 policy allowing the city to revoke an OPRA without consulting the state commission, therefore making the policy “unlawful.” He also said the city never filed a certificate of nonpayment with the Washtenaw County Register of Deeds. Therefore, Beal said, there's no county record that shows his taxes were paid late.
City attorney John Barr said he didn’t believe revoking a tax break constituted a civil rights violation. He said he disagreed with Beal’s argument of “I have a right not to pay my taxes.”
“The OPRA is a special deal where the recipient gets a tax break, and to receive that they have to agree to do certain things,” Barr said. “If they don’t do those things, then there are consequences.
“Essentially, council giveth, and council can taketh away.”
He said Beal has not “proceeded in good faith” as stated in the act, and therefore the city has a right to revoke the OPRA.
Because Beal is seeking damages in civil court, the file has been forwarded to the city’s insurance agency, which Barr said is reviewing the case.
Ypsilanti Mayor Paul Schreiber, along with Council Member Dan Vogt, voted against revoking the OPRA at the Dec. 21 meeting. Schreiber said he was against revocation because the late taxes were eventually paid, and with a penalty.
No court date has been scheduled, and Barr said the city has yet to be served.
The council will also soon after to consider renewing an OPRA at the Beal-owned Thompson Block building.
Beal said he didn’t want to go to court, but had no other options.
“I never imagined in my wildest dreams that investing 10 million dollars and 10 years of my life into the City of Ypsilanti would result in me suing the city twice in one year,” he said.
“Unfortunately the citizens of Ypsilanti voted for City Council members that do not consider real estate law when making decisions and casting their votes. It is hard to believe that City Council and its legal counsel ever thought revoking the OPRA would be possible based on even the most simplest review of the OPRA act and associated State of Michigan real estate law.
“I look forward to winning again and then putting this dark chapter in my business career behind me and continuing to invest and work in the community in which I live.” Tom Perkins is a freelance reporter for AnnArbor.com. Reach the news desk at firstname.lastname@example.org or 734-623-2530.