Ypsilanti City Council reverses decision, revokes tax abatement from Stewart Beal company
The Ypsilanti City Council yanked a tax abatement from Go Downtown! on Tuesday night, reversing an earlier decision to let two late tax payments slide.
The council earlier voted not to revoke the abatement from the company, which local developer Stewart Beal is a partner in, but reconsidered at Tuesday's meeting.
Per city policy, developers approved for the Obsolete Property Rehabilitation Act exemption can't be late paying the city twice, or the abatement is to be revoked. Go Downtown! paid its $4,700 tax bill due in September for the building at 208 West Michigan Avenue two months late. In 2009, the company also made a payment three months late.
Council members voted 5-2 to revoke the OPRA, with Mayor Paul Schreiber and Council Member Dan Vogt voting against the revocation. That’s a change from the council’s Dec. 7 meeting, when they voted 5-2 not to pull the abatement. Only Council Members Brian Robb and Ricky Jefferson voted to revoke the abatement that time.
But Council Member Mike Bodary said Tuesday he wanted to bring the issue up for reconsideration.
"I've had a bad taste in my mouth since we passed this the first time, and it gets worse the more I talk to people and people talk to me about what we've done," he said.
"The OPRA is a great tax benefit to whoever is trying to start business," he continued. "And in these times when we are hurting for property taxes so badly, this is a lot of money. What do we say to other OPRA holders if we forgive this over and over? Do we say this is okay?"
Beal disagreed with the council's decision.
"City Council made the right decision last time, and we will work toward stopping the revocation at the state level while also asking City Council to consider this for a third time at the next council meeting," Beal said in a written statement. "Our organization will not allow this to knock us down, and we will continue upon our mission of making Ypsilanti a better place to live, work and play."
The building at 208 West Michigan has retail space on the ground level and lofts on the second and third stories. The lofts are part of a successful three-building residential project connecting 208 West Michigan with two buildings to the east owned by Maurer Management and George Fotiadis.
Go Downtown! also manages the storefront at 206 West Michigan, which Fotiadis owns, but is a separate property with a separate OPRA for which Fotiadis is responsible.
So far, the break has saved Go Downtown! roughly $83,000, and it would have saved an additional $40,000 in the final two years of the eight-year abatement.
Dave Murabito, a manager at Go Downtown!, told council that the company didn’t have enough money to cover the taxes, and funds had to be shifted in from other Beal companies to make the payments. He said revoking the tax abatement could cause a foreclosure and force up rent beyond what Ypsi Studio owner Julia Collins can afford.
Ypsi Studio's rent rate is tied to the taxes, so rent would likely go up if the taxes do. Murabito said he spoke to Collins earlier that day, and she told him higher rent would put her out of business.
"If it's revoked, you're going to drive by 208, and there’s going to be a 'For Rent' sign on the door," Murabito said.
He also said Go Downtown! is in the process of refinancing the property, and having the OPRA pulled would likely destroy that deal. If that happens, the entire building could be foreclosed on.
Ypsilanti developer Stewart Beal
Murabito apologized for being late, but said the economy is tough. He pointed out the company did pay all the late fees and interest and said they would be in a good position to make the next payment on time if they still had the OPRA.
"Things were very tight, and we had to manage it accordingly," Murabito said. "You are well aware we are in Michigan in the worst climate since 1929. I think we need to think in these terms."
Robb said he was disturbed Murabito was holding Collins' business "hostage" in his bid to keep council from revoking the OPRA. He disagreed with a Murabito comment that the council's policy was too rigid.
"We gave you one strike, is that not flexible enough?" he asked.
Bodary questioned why the company didn't more quickly draw from one of Beal's sister companies.
"(Not paying) was not an oversight, it was calculated," Bodary said. "You didn’t have the money, but you could have gotten the money."
Schreiber saw it differently.
"I am giving Mr. Beal the benefit of the doubt that this is an oversight," he said.
Vogt said he could see both sides of the argument but was taking a "pro-business stance to help downtown businesses."
Jefferson said he felt bad Collins was being used as a pawn.
"Things are put in place so that you can have some type of consistency in business," he said. "I'm not in the business of allowing things to be done erratically or letting it go."
There are eight OPRA abatements authorized throughout the city, which are intended to provide developers with an incentive to improve old structures. The building at 208 West Michigan is 123 years old. No other OPRA holders have been late twice, although others have been late once. The purpose of council's two-year-old policy is to urge developers to pay their taxes on time.
Normally, property owners pay their taxes to the Washtenaw County Treasurer’s Office, which distributes money to local municipalities. Even if a property owner is late on the taxes, the county will still pay the municipalities, except in the cases of a tax abatement like an OPRA.
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.
Council Member Pete Murdock read from part of a letter from former city planner Richard Murphy sent to several council members and Schreiber after the Dec. 7 vote.
The letter questioned why council voted against revoking the OPRA.
"The fact that we had abatement holders failing to pay their taxes on a regular basis was why came up with a policy on what should have been common sense — you should be paying your taxes in a timely fashion anyways, but if we're treating you to a few hundred thousand dollars in subsidy for your project, you *really* should be paying whatever pittance you still owe," Murphy wrote.
Tom Perkins is a freelance writer for AnnArbor.com. Reach the news desk at news@annarbor.com or 734-623-2530.
Comments
joe golder
Sat, Jan 1, 2011 : 2:30 p.m.
Lets be honest...Past mayor and council, dug a hole so deep even michigan ladder can't help the city get out of. Its very painful to see the current city officials, workers struggle to keep the city going. They are way under resourced. The current mayor and council are way over their heads. It's even harder to see the good people (business and residents) sticking it out and struggle to keep going. I ask the question..Are the components there to fix the many problems that plague this community? NO!!! The people caught up in the mess created over the past decade have every right to be negative and beyond angry. They deserve much more than the same old politics. Be angry but don't give up!!!!! Maybe it is time to dissolve the charter. Just like many homeowners the city is under water too.
delorean
Fri, Dec 24, 2010 : 12:21 p.m.
First and very fore-most...THIS ISN'T ABOUT THE THOMPSON BLOCK - STOP THROWING IT IN AT EVERY CURVE! Secondly - the city council clearly has no idea what they want to do or what they think they might want to possibly not do. Yes, the taxes should have been paid on time considering the "twice you're late, you're out" rule. The article clearly states "no one has ever been late twice" well obviously if you force the business owner into foreclosure when they are late, then there wouldn't be an option to be late twice. Now with Savoy and 13 foreclosed on - should we all just pack up and leave? Are we supposed to just call it quits in this town? Would the City and its residents REALLY rather lose businesses and have more foreclosed properties sitting vacant than get their taxes late - EVEN THOUGH THEY WERE PAID IN FULL?!?!?! This is so saddening, if the people who run the city don't care - why would we expect anyone else to? @ShadowManager - 98% of the other comments have intelligent thought put into them - including the "anti-Beal" ones; and then there are yours. I would be very eager to know what basis you have for saying Beal doesn't take very good care of his properties? In case you weren't listening (which, based on your anti-Ypsilanti comments, you weren't) people WANT the Ypsi Studio to stay open. The lofts that dwell above it are luxury lofts - Im sure 100% nicer than anything you could "dream up". You literally hate on every single thing Ypsilanti is doing - Negative or Positive! If you are going to hate on something at least do it intelligently...stop hiding behind some kitten that says I HATE EVERYTHING.
ShadowManager
Thu, Dec 23, 2010 : 2:51 p.m.
Stewart Beal is just a micro-me version of Detroit's Matty Maroun. He owns too many properties, doesn't take very good care of them, and then expects civic support for every little project he dreams up...all the while playing a sort of economic blackmail with the city government.
newsboy
Thu, Dec 23, 2010 : 11:28 a.m.
Too many charities, not enough taxes!
Chase Ingersoll
Thu, Dec 23, 2010 : 11:17 a.m.
All of you who are commenting that the letter of the law be applied to Beal, what was your position on the GM bailout? The taxes in Ypsilanti are as high as you will find in the state outside of Detroit.....because the voters, for at least a generation, have elected city councils that are in their majority, incompetent and/or corrupt. Now they are going to try and show how incorruptible and competent they are by applying the letter of the law to a business person who has somehow managed to not already go broke in this economic downturn. Great guys....let's see what happens.....the property is in a corporation....Beal can let it go into foreclosure and no longer have the hassle.....and you can watch the fair market value of the property drop while during the duration of the process, along with the domino effect it will have on the fair market value of other properties. When many investors have already walked away from properties in your city, due in no small part because the property tax payments exceed the interest payments, SMART MONEY is just going to stay out of your city and the best you will have to fill the void is is more "not-for-profits" that won't pay real estate taxes, or corporate giants like Walgreens.
Mr. Burns
Thu, Dec 23, 2010 : 9:02 a.m.
The Ypsilanti City Council was wrong to let Mr. Beal slide on this in the first place. Government policy is policy. Why waste the time to put any into place if each offender of each policy is evaluated on a case-by-case basis? I think that the Ypsilanti City Council began to hear from residence after the first story was published and they realized that this time they have to not only be fair to the city, but the must follow the policies already set in place, and I applaud them for that. Lately, it seems to me that an overwhelming number of Ypsilanti business owners want to have big gold Martyr Medal pinned to their chests because they "took the risk" to invest in Ypsilanti. Taking a risk seems to have replaced "being prepared" for these business owners. So I went back and read nearly all the Beal stories, and I must say that he seems to think that because the economy is bad he should be given every break possible by the City Council, The Planning Commission, the Historic District, and the Building Department. In these stories he talks about the poor economy over and over again. But after reading about him it looks like Mr. Beal bought his 30+ homes when the economy was already in a tale spin. It is how he could afford to buy so many. If he did not have a planned budget for each investment which included a budget for all taxes, emergency repairs, utilities, (i.e. the Savoy), and possible fire/major damage(Thompson Block), then that is just poor business planning. I am sure the city was thrilled when he bought the buildings, but if the city can't collect the taxes and pay enough firemen to save the buildings...then it's all up in smoke anyway.
jondhall
Thu, Dec 23, 2010 : 7:41 a.m.
Flip Flop, flip flop, reminds me of the past Presidential Candidate "John Kerry". I suppose we all know about the discerning mistakes that city council continues to make. How is that River Street Project working out these days after the business were all bought out at ridiculous prices? The highest taxes in the state of Michigan, that's what I heard about the City of Ypsilanti. Sounds like if he does not get the tax break the deal is done, I say give it to him let him pay the late penalty. I do believe MR Beal likes the attention he gets, constantly in the news for something. However as for the piece of building on River and Cross Street in my opinion it will never be anything other than torn down. There is an accounting term that comes to mind GIGO.
ShadowManager
Wed, Dec 22, 2010 : 10:33 p.m.
Maybe they finally realized Stewart Beal is constantly taking them for a ride. Kudos to the Ypsi C.C.
Bill French
Wed, Dec 22, 2010 : 7:49 p.m.
Stewart Beal's tax abatement reversal by Ypsilanti's City Council is disconcerting because it appears the Council's action reflects a lack of diligence and understanding of the pressure the business community is experiencing during the worst economic times since the Great Depression. If certain council members were unsure or lacked information when they voted, the Council should have tabled the vote until they were informed and confident in the wisdom of their vote. This vote has the potential to be disastrous to this particular businessman and a negative impact to our downtown business community, and it deserved a thoughtful and deliberate council vote. This is not the first time our council has made a rash and impulsive decision that has negatively impacted our city's over-stretched budget and the well being of our business community. It may be time for Council to pause and reflect on their pinball decisions. During hard times, we need confidence in our council's decision process. I encourage the council to reconsider their vote to deny Mr. Beal's tax abatement because of the potential negative impact to our downtown business community. Bill French
Angela Barbash
Wed, Dec 22, 2010 : 6:45 p.m.
Man... and I just started working out at Ypsi Studio. Julia's a great gal and it pains me to think that good business owners are at the mercy of decisions like these. I'm sure she pays her rent on time every month. I agree with the idea here that higher fees should be assessed, as well as lower taxes. The taxes kill us on Washington St. and we've more than a few times discussed how much cheaper it would be to move our office from downtown Ypsilanti... except we can't sell the building. :/
Soothslayer
Wed, Dec 22, 2010 : 6:14 p.m.
Instead of some crazy all or nothing deal what about a fair tiered late payment fee? How again does this decision help the overall goal of encouraging developers to bring stustainable businesses to Ypsi? These are tough times folks and Stewart should be applauded for trying to make a go of it under these conditions. Changing your mind and overturning this based on opinion sets the wrong example. The 3rd time's the charm and will help you save face, and the project. Do another vote and make the right decision which was your first instinct to begin with (to support the developer) then ammend the conditions on these breaks to assess reasonable fees of 10% + interest on late taxes for the loan you needed to take out to make up for these funds. Remember the old saying: A Beal in hand is worth more than two in the bush.
MorningGirl
Wed, Dec 22, 2010 : 5:14 p.m.
Why on earth can't Council members change their minds? That's why there are two votes. A countil member is supposed to represent his constituents. Perhaps after hearing from a number of them and thinking through the issue more carefully, some of them changed their minds. They're human. That said, I disagree with the second decision simply because a vacant building downtown is never good. Yes, he paid late, but he paid; if he vacates the building, who pays then? How is this good for Ypsilanti in any way? It might teach Beal a lesson, but the City is not in that business.
Steven Hill
Wed, Dec 22, 2010 : 5:07 p.m.
Somewhat Concerned are you really at the point of calling the guy a deadbeat? I read an article on AnnArbor.com that says he bought and renovated 30 properties in the City of Ypsilanti in 1 year. Kind of unprecedented and hardly a deadbeat.
Somewhat Concerned
Wed, Dec 22, 2010 : 5 p.m.
The guy just won't pay his taxes on time. Why should he get a special break on tax reductions and on paying late. Guys who repeatedly don't pay on time deserve no special treatment. Deadbeats are deadbeats.
Jonathan Ames
Wed, Dec 22, 2010 : 4:55 p.m.
I have done business with Stewart Beal several times in the past and we are working on something now. He is really good to work with and has helped me out several times over the years. I wish City Council would support the real estate investors in this community.
Chase Ingersoll
Wed, Dec 22, 2010 : 4:45 p.m.
Wow! This is just cutting off one's nose to spite one's face on so many levels. What are going to be the attorney's fees suffered by the City to defend their decision on appeal?
AndyYpsilanti
Wed, Dec 22, 2010 : 4:35 p.m.
Well, folks I hope you know what you're doing on this one. Because if your efforts to teach Mr. Beal a lesson do result in Ypsi Studio being forced out or the entire building to be foreclosed on, who have we taught a lesson? Maybe people considering opening a business here? Maybe the voters, come 2012? And looks like we need to double the council meeting schedule for next year, so we can accommodate two votes on each issue. Ever heard the carpenters rule "measure twice, cut once"? Those are words to live by.
Elaine F. Owsley
Wed, Dec 22, 2010 : 4:15 p.m.
If someone is allowed to ignore the rules, then everyone wants to ignore the rules. The best control is one where everyone has to play by the same rules - and there are penalties if they don't.
pseudo
Wed, Dec 22, 2010 : 4:01 p.m.
in. out. up. down...this thinking and back tracking this council is doing hurts all of here in Ypsilanti. Make up your minds - btw...that means bring up the issue, consider possible solutions transparently, engage with all of us and do your bloody home work. this council, even with new members is a development nightmare. make a deal? or not? how would you know? oh then they are still out there trying to sell water street property by saying *wink* *wink* we don't need clear zoning, City Council will work with you *wink* *wink*.
SurlyCommenter
Wed, Dec 22, 2010 : 4 p.m.
The consequences of businesses closing are far more severe than the city council "sending the message" that it's okay for a business to be late in paying its taxes. In one scenario, the city gets nothing, in the other, the city gets its tax revenue either on time or late with a late fee added. This is not a "teachable moment."
jbhuron
Wed, Dec 22, 2010 : 3:27 p.m.
I recently looked into starting a business in Ypsilanti. Like the article mentions, the rents are usually tied to taxes. Ypsilanti has the highest business property tax in the state of michigan at 80 mils! On top of that the building was being sold, so the new taxable value would have doubled my taxes that were paid through rent. All that for the right to operate a business in Ypsi, you know the most desirable destination on the planet. Maybe the way to grow revenues for the city is not to continue ridculous, prohibitive business taxes that drive development away and start partnering with the busineses to come here through reduced taxes. I agree that developers should pay their bills on time, but couldn't we entertain a payment plan or something instead of showing that council could care less about the few operations that are actually committed to this city? I propose a stupid tax on the council for everytime they vote one way only to reconsider in the next view meetings and swing the other way. Festival tax anyone? They might as well be drawing out of hat at this point.
BenWoodruff
Wed, Dec 22, 2010 : 2:48 p.m.
What kind of yahoos vote 5-2 to grant an abatement and then turn around and vote 5-2 to deny it TWO WEEKS later? That's REAL leadership and forethought by those who changed their votes. What, you didn't read it, or didn't understand it the first time? Sheesh...
ypsilanti
Wed, Dec 22, 2010 : 12:23 p.m.
Beal knew the consequences, and he missed the payment anyway. He has nobody to blame but himself. If I don't pay my taxes, I end up with a lien against my property and can't sell it. Beal is getting off much easier than that by simply having his abatement taken away. Frankly, I think the reason Ypsi struggles is because it has too many "businesspeople" who think they can get away with this nonsense. By setting low standards, we foster this type of bad corporate citizenry. What I don't get is when residents hoot and holler at the first blush of actual policy enforcement like it's unfair to enforce the law. I think the correct approach is to enforce the policy. If we aren't going to enforce it, then get rid of the policy. If you start failing to enforce with Beal, the next guy who comes along is going to expect a pass, too. That's no way to run a city.
glimmertwin
Wed, Dec 22, 2010 : 11:39 a.m.
We had one quiet day. It's reading stories like these that make me want to just head over to the Club 13, have a drink and relax. Oh yeah, that's closed also. Please, someone buy my house for what I owe so I can just get out of this town. Chalk it up to one big mistake on my part.