Cosmolab makes tax offer

Wednesday, December 8, 2010

Lewisburg has decided to accept Cosmolab's offer to pay 82 percent of its delinquent property tax bill, according to comments from councilmen last week.

Meanwhile, Marshall County is weighing its options, County Mayor Joe Boyd Liggett said Saturday afternoon, noting that a final decision will probably have to come from county commissioners who aren't scheduled to meet until late next month.

County Attorney Bill Haywood concurred: "We've got to present it to the commission next month."

Cosmolab was willing to cut checks and issue them on Tuesday, City Recorder-Treasurer Connie Edde said Friday. The delinquent tax bills total nearly $500,000.

The cosmetics manufacturer, that employs hundreds of people here, is emerging from U.S. Bankruptcy Court in Wilmington, Del. -- there because Delaware is where Cosmolab is incorporated, like so many other businesses that enjoy Delaware's tax laws. It's a Chapter 11 case in which a federal judge sanctions corporate reorganization to deal with debts and permits forgiveness of debt.

Cosmolab owes Lewisburg $162,363 and the county $336,805, according to information provided to City Hall during the reorganization of the company that grew from a lead pencil factory.

Councilmen were advised of Cosmolab's offer to pay $144,500 at the close of a City Hall meeting on Thursday evening.

"Is it OK to tell them we will accept?" Edde asked the councilmen. "If we don't accept it, then we will get the pro-rata share over the next five years."

Cosmolab's holding company sold the business and steps toward resolving that and coming out of debt have been ongoing since the spring of 2009, Edde explained.

New owners have been building the business with some help from a training grant awarded by Tennessee which, thereby, indicated trust in the business' ability to rebound.

Councilman Odie Whitehead Jr. asked if the city might get the difference of several thousand dollars from the new owners, and Eddie replied, "No. They want to finish it out by Dec. 7."

The tax debt is for the years of 2008, 2009, and part of 2010. The partial tax year accounts for the discrepancy between the 82 percent of what's owed and what's to be paid. In other words, nearly $11,000 is to be paid by the seller (thereby lowering the buyer's price) for the most recent property tax bill.

Given comments heard Thursday in City Hall, councilmen might be said to conclude they'd rather have a bird in the hand instead of two in the bush. Since then, other information tends to indicate that the tax bills are among the points negotiated between the seller and the buyer.

"They closed [the deal for Cosmolab on] April 9, 2010, for the sale of the business to All4CosmeticsInc," Edde said.

The city property tax bill of $162,363 is for land, structures and personal property such as manufacturing equipment.

If councilmen wouldn't accept the offer of 82 percent of the debt, then Lewisburg "could possibly" be paid "the total amount," the city treasurer said. "But it does not have to be the total."

It depends on the ruling of a bankruptcy court judge, she said.

"It's a deal they have offered to the city and the county," Edde continued. "If the county does not agree, there's a potential they could not proceed."

On Friday, Edde doubted that the county had accepted the offer, and the expression of agreement by the councilmen on Thursday evening was only that. Councilmen won't vote on accepting a check from Cosmolab until Dec. 14, the second Tuesday of the month when the regularly scheduled meeting of the panel will be held.

However, the city recorder-treasurer has advised councilmen on Thursday that she would accept a check on Tuesday this week from Cosmolab, but that she would refrain from depositing it until after the council meets on the night of Dec. 14.

"I think it's a good offer," she said on Friday afternoon.

Still, there's a larger view of the deal. As the corporations' accounts are being closed, approximately $525,000 has been set aside for the payment of the property taxes, Edde said, relaying what she sees as part of the chain of events. The offers to the city and the county would result in payments of some $425,000.

Meanwhile, a typical time-payment of taxes during a Chapter 11 bankruptcy ruling could have a nominal interest rate applied and payments made during five years.

The county mayor was consulted on Saturday afternoon while he was seated in a convertible just before the Lewisburg Rotarians' annual Christmas Parade started on Mooresville Highway.

"We've got to do a little more investigating," Liggett said. "There are two options: Get money up front; and the five-year period."

He remembered the interest rate on the payment of delinquent taxes as two percent, but given his location at the time, he was not perfectly sure.

"This will probably have to be approved by the county commission, so we're still sort of in Limbo," Liggett said.