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Condo site owner to SL Council: 'I am not going to pay $800K in property taxes'

Friday, November 9, 2012

A nearly 40-minute discussion about a contested minimum assessment agreement and property taxes during Monday night's Storm Lake City Council meeting accomplished little for the new owner of the failed Regency condo site.

"Basically, I just want to do what is fair, for the city, county and me," Craig Smith, Sunset Bay Reflections, explained as he addressed council members. "I want to get everybody together, and I know that's a tough task, but that's what my goal is."

Smith continued to oppose the property's $8 million minimum assessment agreement, and stated it should have been voided when the partially-developed condo site was sold from Regency to Sunset Bay on Aug. 23, 2007.

"From face value, it's over," he said.

The property's taxes peaked at $325,000 in 2008, but the minimum assessment was withdrawn in March 2009 after it was clear the project was going to fail.

Smith further contended the agreement's triggering date for completed condos should have also voided the assessment, since no development occurred.

"The language is clear that the building has to be completed," he said. "I understand that the county has control, but I'd like the City to say a mistake was made (with the assessment) and get it resolved."

According to Mayor Jon Kruse, the City's legal counsel has reviewed the assessment agreement, finding it in legal order.

"Once those taxes were certified by the county, they are binding," Kruse said. "We legally, as a city, cannot do anything to reduce those (taxes) or the assessment, because it has been certified. The only thing we can do is work with you and your developer to reimburse you somewhat...We cannot just tell you we are going to rebate those taxes."

Estimated building value is necessary so the City of Storm Lake can determine how much can be rebated.

"If this is going to move forward, which we would like it to, we need to see some type of preliminary plan so we can determine what we can financially do on the back end to help you out with taxes on the front end," Kruse explained.

Possible single-family apartments or senior living ideas were presented during a joint meeting with Nelson Construction of Des Moines, Smith argued, but Kruse rebutted that the project did not move forward after area real estate agents determined rents were too high.

"We have not heard from them since then," Kruse said of the developer. "If they want to come back to the table and work out a developer's agreement, we would certainly bring a recommendation back to council how we could return taxes in the future.

A letter from Legacy Bank, a potential project financier, to Smith claimed the bank had approached the City with a "comprehensive tax solution" but felt City staff wanted to "control actions on development of ground and tax rebate amounts."

"It seems likely this will be an issue going forward," the letter stated. "We cannot help without clean title."

Council members remained silent throughout the somewhat heated discussion.

"I'm not going to pay $800,000 in property taxes; I don't want to do that," Smith said, as he provided his closing arguments. "I'm just asking for your blessing, folks, not your money. I disagree on the back half---TIF (tax increment financing) is not free money; it's taxpayer money."

During a Buena Vista County Board of Supervisors meeting the following morning, Smith said he felt is was "wrong" to accept money generated by TIF. "I think it cheats everyone---county, schools and everybody," he said.

While the Supervisors have not yet been able to offer a solution, they continue to actively pursue tax advice from Des Moines-based public finance attorney John Danos.

Smith and his son purchased the property for $280,000 in March 2011 at a sheriff's auction. After a 2008 bankruptcy shut down Regency, the West Des Moines-based real estate company abandoned its high-end condo project at the site adjacent to the city-owned golf course.

Sunset Bay Reflections has a nearly $800,000 tax bill, with $284,670.90 owed to Storm Lake TIF, $67,89.76 to the City of Storm Lake, $89,398.78 to Storm Lake Community School District, $30,633.02 to BV County, $14,716.74 to county debt services and $9,083.73 to Iowa Central, BVRMC, Ag Extension and Storm Lake Cemetary. Interest has accrued to $277,773.

In addition to challenging the minimum assessment agreement, Smith has objected to two extra bills due to the City of Storm Lake: a $23,077.13 building permit and $1,617.53 for ground maintenance.

This is not the first time Sunset Bay Reflections has approached local leadership with its tax predicament---the issue was extensively discussed during City Council and Supervisors meetings earlier this fall.

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