DKI Division Disputes Property-Tax Bills

September 24, 2009

Source: Gabrielle Russon, Kalamazoo Gazette
Email: grusson@kalamazoogazette.com

KALAMAZOO -- The real-estate arm of Downtown Kalamazoo Inc. says it shouldn't have to pay taxes on some of the property it owns.

That arm, called Downtown Tomorrow Inc., has disputed it owes about $200,000 on 31 properties last year and is contesting those bills with the Michigan Tax Tribunal.

If it succeeds, the city of Kalamazoo and other taxing bodies could be forced to refund the money, plus interest.

Ken Nacci, president of DKI, said the 31 properties should be tax-exempt because they are "obsolete'' and vacant. Nacci said other properties, such as the former Deja Vu site on Portage Street, were purchased by DTI on behalf of the city.

DTI is not contesting tax bills on its other 15 parcels, such as the Otto Kihm Building on Kalamazoo Avenue, because tenants are using the properties and paying rent, Nacci said.

The 31 parcels of which DTI is contesting taxes include the site of a proposed downtown arena, as well as the four buildings in the 100 block of East Michigan Avenue that a private developer plans to refurbish.

If the properties cannot be tax-exempt, then their values should be lowered to reduce the tax levels, Nacci said.

DTI puts the properties' collective market value at $2.25 million with a taxable value of $1.13 million and an assessed value of $1.13 million, according to the petitions filed with the Michigan Tax Tribunal.

The city, however, argues the properties are worth nearly three times more, at $6.51 million, with a taxable value of $2.82 million and an assessed value of $3.26 million, documents show.

The Kalamazoo Community Foundation had previously loaned DTI millions of dollars to purchase several parcels, and then paid for property taxes and other holding costs. In 2008, the foundation declined to loan DTI money for the property taxes, Nacci said.

The tax tribunal's docket is so backed up, it could take years before it rules on the case, officials say. No court hearing has been set since the petitions were filed in May 2008.

"If you got a case heard today, you might not have an answer for two or three years,'' said Kalamazoo City Attorney Clyde Robinson, who declined to comment on specifics of the litigation.

Nacci said the city and DTI also were trying to negotiate between themselves. "We're not in a boxing match,'' he said.

The appeal is not retroactive for property taxes before 2008 -- the year the petitions were filed, according to Nacci. But the petitions will automatically dispute any property-tax bill after 2008, he said.

The DTI's property-tax bills range from less than $200 per parcel to as high as $82,924 for the former Miller Canfield law offices at 444 W. Michigan Ave., according to the 2008 tax roll.

"When you add it up, year after year, DTI has to go out and borrow that money,'' Nacci said of property tax payments.

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