Item Coversheet
Commission
Agenda Report
C i t y  of  K a l a m a z o o


TO:Mayor Hopewell, Vice Mayor Cooney, and City Commissioners
FROM:James K. Ritsema, ICMA-CM, City Manager
REVIEWED BY:Thomas C. Skrobola, Management Services Director / Chief Financial Officer
PREPARED BY:Aaron Powers, MMAO, City Assessor
DATE:4/3/2017
SUBJECT:Zoetis Tax Appeal
RECOMMENDATION

It is recommended that the City Commission approve the following:

 

  • An Agreement with Value Trends Inc. in the amount of $45,000, inclusive of an agreement with the Michigan Department of Attorney General to share ½ of the cost ($22,500), for the appraisal of and expert witness services in the matters of Zoetis LLC v City of Kalamazoo et al., Michigan Tax Tribunal case numbers 16-002373, 16-002377 and 16-002382; and

 

  • An increase of expenditure appropriations of $22,500 to the City Assessor’s FY 2017 Budget to cover the above contract.
BACKGROUND

Zoetis, through their agent, Marvin F. Poer and Company, filed an appeal in the Michigan Tax Tribunal in 2016 for five parcels of real property in the City of Kalamazoo. The 2016 combined taxable value for these properties is $43,808,078. Zoetis is the second largest taxpayer in the City of Kalamazoo. It is to be assumed that their appeal will be amended to include the 2017 assessment/tax year.

 

The appeal covers the valuation of two improved buildings located at 333 Portage St. (632,218 sqft. office/laboratory & power/steam generation), and 329 S. Pitcher St. (power/steam generation), and three vacant parcels. In their initial filing of the appeal, Zoetis identified a potential amount in contention of $33,808,078 of taxable value. While it is likely this amount will change, the amount was significant as to have the City Assessor seek the Michigan Attorney General’s Office to make an appearance in the appeal. In large cases such as this, this is normal.

 

In conjunction with the AG’s office the City Assessor identified appraisal experts able to conduct a valuation of the property under appeal. Mike and Brandon Ellis of Value Trends Inc. were chosen. Upon request of the City Assessor and review of this case by the Michigan Department of Treasury staff and the Michigan Attorney General’s Office, the State has offered assistance to the City of Kalamazoo in the defense of this appeal.

 

The State will pay for ½ half of the costs associated with the appraisal of the subject property and expert witness fees if necessary. The scheduling deadline the Tax Tribunal has set for the conclusion and submissions of the parties’ appraisals is June 5, 2017. If the case goes to trial, it would likely be scheduled in late September or October of 2017.

 

Due to the complexity of the appraisal of the property under appeal, it is recommended that if settlement is not achieved prior to trial, expert legal counsel specializing in matters before the Michigan Tax Tribunal be retained. A proposal from Hallahan and Associates, P.C., has been obtained.

 

A historic review of the SEV and Taxable values of the combined parcels under appeal is provided below. No significant changes to the values of the parcels under appeal occurred for 2016, nor has the property been appealed in the past.

 

(Table)

 

While extremely unlikely, if Zoetis was 100% percent successful in achieving a reduction of their property tax liability as specified in their initial petition a refund of for 2016 would exceed $2,530,000 from all taxing entities. This property is located in the DDA as well as the TIF District. Again, this is highly unlikely.

FISCAL IMPACT

The appropriation increase requested above includes the City’s portion of the appraisal fees from Value Trends, Inc. of approximately $22,500.

 

Please note that an additional estimated $60,000 could also be added at a later date if this matter were to proceed to a full trial:

 

-       The City’s portion of estimated expert witness fees (i.e., industry experts, accountants, etc.) of $10,000;

 

-       The City’s portion of specialized legal counsel of $50,000, for preparation and a full week long trial.

ATTACHMENTS:
TypeDescription
AgreementAppraisal Contract
ProposalLegal Counsel Estimate/Proposal