City Settles Tax Fight Over Mills
Claremont — City Manager Guy Santagate said Friday he is pleased with the settlement in a longstanding tax abatement case involving two renovated mill buildings on Water Street, but the property owner who took the city to court, John Illick, was less enthusiastic.
The city will return a portion of property taxes paid on the buildings since they were renovated several years ago, and the city also agreed to reduce the assessed values of the buildings by millions of dollars, although not as much as the owners had sought.
“I’m glad this is behind us, but I feel that 21 Water St. is still assessed at a higher value than it is worth,” Illick said in an interview on Friday. “All we wanted was an equitable tax assessment.”
The $600,000 settlement, filed in Sullivan County Superior Court, requires the city to immediately return $350,000 to Claremont Mill Redevelopment and Sugar River Mill Redevelopment, the respective owners of 21 and 29 Water Street, and apply a $250,000 property tax credit that will be spread over the next five years.
Santagate said had the city lost the appeal in a Supreme Court trial, it could have been forced to return as much as $1.7 million in past tax payments on the two properties.
“It takes $1.7 million off the table for $600,000. Not a bad deal,” said Santagate. “We got a good deal, a fair deal for the taxpayers.”
The assessed value of the Wainshal building at 21 Water St., which is home to the Common Man Inn, Red River Computer and National Field Representatives, is now set at $8.5 million, and the nearby Peterson building at 29 Water St. is assessed at $550,000.
The values, effective as of Feb. 1, will remain in effect for five years or until the next citywide revaluation, whichever is longer.
Illick owns the Peterson building, which has undergone exterior renovations including new windows but remains vacant, and is a managing partner on the Wainshal.
The city had assessed the Wainshal at $12.6 million and the Peterson at $2.3 million after extensive renovations were completed in 2008.
The historic brick buildings date to the late 19th and early 20th century.
In 2009, Illick sought a tax abatement from the city and was denied; he then went to court.
A trial was held in September 2012 and late last year, Judge Brian Tucker ruled in the city’s favor.
Though Tucker agreed with Illick’s expert witness, who appraised the Wainshal at $3.9 million and the Peterson at $550,000, Tucker denied the abatement, ruling that there was no proof that the mill building owners were paying a “disproportionate” share of property taxes.
Illick appealed to the Supreme Court, which accepted the case and ordered mediation. An agreement was reached during a five-hour mediation session on Jan. 28.
“It is less than what we were getting originally, but we are still getting healthy numbers,” said Santagate. “It is really a gain for the city.”
At the present rates, the buildings generate annual property tax revenue of about $328,000, which is about $210,000 less than under old assessments.
Had the case gone to trial and the city lost, the annual tax revenue on the two properties could have dropped to around $160,000.
There is no interest paid on the tax refunds, and each side is responsible for its legal costs.
“When I saw that $3.9 million (ruling), I knew we had to do something,” said Santagate of the city’s willingness to negotiate a settlement. “I didn’t want to go below $8 million, and the fact we had the leverage on (Tucker’s ruling) on disproportionality played in to that.”
Illick said the settlement was less than he had hoped for in terms of the property assessments.
“In a way, I am not at all happy. I think we left some money on the table. But I am pleased this is behind us and we can move forward,” Illick said.
The city agreed to the court’s ruling on the Peterson assessment of $550,000, Santagate said, because it is vacant and a lower tax burden could encourage development of the building, which at one time was going to be converted into condominiums
Illick said he has no plans for the building.
“With the city’s approach to assessing, I won’t be doing any development there,” he said. “I’m not in a position to take on another fight.”
Santagate said it is possible that other commercial property owners could use the settlement as grounds for a reduction in their own assessments.
City Finance Director Mary Walter said the city set money aside to pay for any refund in the case and there is more than enough for the $350,000 payment.
Patrick O’Grady can be reached at email@example.com