The old ICP building in Lewisburg is valued at nearly $8 million for tax purposes, but three businessmen challenging their property tax bills say the building was bought for less than $2 million.
Each issue involved in the case, that's the subject of a Davidson County Chancery Court hearing on Friday, is relatively simple, but there are so many issues that together they've resulted in one tie vote and a judge refusing to rule.
The case became the subject of a brief mention last week when Marshall County budget committeemen reviewed revenue projections. They set it aside, realizing it won't be done in time for the county's next budget, but an independent calculation with figures from the county trustee's office shows that the property owners owed $213,537, have paid $105,428 (an undisputed amount) in recent years and have an unpaid, yet contested, property tax bill of $108,109.
If that amount was paid in a lump sum this year, it could either lower the county's property tax rate by 2-1/4 cents, or prevent the tax rate from going up that much. Mathematically, that's worth $56.25 in taxes on a house valued at $100,000.
Marshall County Property Assessor Linda Haislip is pursuing the case over how the old air conditioning and heating factory is valued to protect the county's property tax base, she said Monday evening while explaining the situation.
Retired banker Tony Beyer, co-owner of Heil Avenue Properties and a member of the South Central Tennessee Workforce Alliance Board, says he and two of the original three buyers are trying to rent out space in the buildings, admittedly for rental income, but also to put people to work.
With nearly 800,000 square feet, the building was put on the market "in a community that was hemorrhaging jobs, as was the country," Beyer said, adding its operational expenses were stunning.
"If you wanted to turn the lights on for just 15 minutes," he said, "it would cost $1,500 just because of the demand charge (based on a spike of energy required) to energize the transformers. They have nine transformers in one building."
At one time, Beyer says he was told the power used there rivaled what was used in the rest of the city.
The buyers didn't know if they'd ever get a tenant, but made the purchase after speaking with the Lewisburg Industrial Development Board. The IDB granted a PILOT (payment in lieu of taxes) agreement to reduce the tax obligation.
For tax purposes under the PILOT, ownership of the building was placed in the hands of the IDB, a non-profit, tax-free arm of the city government. Then, Heil Avenue Properties had authority to lease space in the building.
Haislip explains that's a leasehold, a business arrangement that has value to be added to calculations when formulating a value of the building for the owners' tax liability.
The co-owners are Beyer, Fred Gillham of Mount Pleasant who's owned buildings in four states, and John Chunn, the owner of Truette Construction Co. on East Commerce Street. Norman Ray of Nashville, ex-husband of the former Davidson County sheriff, was among the first three buyers, but he's sold his interest.
Originally, the owners didn't think they'd have to pay any property taxes because the building was owned by the city.
"Then along comes the leasehold value tax," Beyer said. "It's an old law passed in the 1800s because of a hotel ... in Nashville where a PILOT was issued for 20 years... but what was reasonable in the first year was not reasonable in year 15."
A leasehold value tax is calculated by finding differences in the value between two views of rent - what's paid, and what would normally be paid on the open market, according to explanations from Beyer and Haislip. Both acknowledged the math isn't complicated, but the relationships are best viewed in numbers on paper with a simple example.
The effect of Haislip's contention with the leasehold value tax is, according to Beyer, elimination of any value of the PILOT agreement from the IDB.
"The IDB is giving a break and the assessor is taking it away," Beyer said. "So four months after the purchase, the property is valued at more than the purchase price."
Now, nearly seven years later, he says, "We had someone who wanted to buy it from us six months ago for a price less than what we paid for it."
Furthermore, he contends that if the property isn't rented, then there's not tax.
Clearly there are differences of opinion. The county's Board of Equalization - which is appointed by the assessor, Beyer points out - heard the challenge to the appraisal and agreed with Haislip. A state administrative judge heard the case and decided he wouldn't rule. The state Board of Equalization voted on it and split 2-2.
Procedurally, the case would go back to the county board, but Haislip and Heil Avenue Properties want a chancellor to rule on the case.
"It is about the money," Beyer said, "but it's really about right and wrong."