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LCDA to pay $61K for ex-tenant’s taxes

POSTED: April 4, 2012 10:01 a.m.

The Liberty County Development Authority voted Monday to pay $61,000 in taxes assessed in 2007, 2008 and 2009 on property with unclear ownership.

LCDA attorney Kelly Davis introduced the issue during the February meeting and revisited the topic Monday before the board took action.  

In 2005, Bioagra leased a facility at the LCDA-owned Hinesville Technology Park. Bioagra moved personal property such as forklifts and furniture into the space and installed industrial equipment, such as boilers, piping, cooling tower and tanks.

Tax Commissioner Virgil Jones said Tuesday by phone that in Georgia, all businesses are required to pay taxes on their personal property, whether they own or lease their operations facilities.

During the summer of 2009, Bioagra vacated the premises with an estimated $528,000 in arrears owed to the LCDA. When the company left, the installed fixtures remained with the structure.

A memo from Davis to the LCDA board said the lease on the premises indicated that “such permanently installed fixtures were regarded as part of the facility” and were thereby property of the development authority. As property of the authority, the items would be tax-exempt.

In January, the board authorized the extraction and sale of the fixtures to accommodate a new tenant, Florapharm. Revenue from the sale was earmarked to cover renovations and repairs to the facility in anticipation of Florapharm’s lease taking effect in March.

The sale of the equipment generated $137,552, and after repairs to the building, the LCDA had a revenue surplus of $106,000, Davis said.

Jones said he read about the sale of the equipment in the Coastal Courier, and it piqued his interest because he knew there was a lien on Bioagra property for unpaid taxes assessed between 2007 and 2011. He then approached the LCDA to seek payment for the outstanding years.

According to a spreadsheet presented to the board members, Jones requested $126,437.54 in taxes, penalties, fees and interest for the assessed property between 2007 and 2011.

But Davis told the board he thinks Jones was recalling previous negotiations to have a prospective lessee, Organiclabs/ViaSalus, honor the outstanding taxes as a condition to occupancy because it had common principals with Bioagra.

However, the agreement never materialized, and Organiclabs/ViaSalus did not lease from LCDA, according to a memo from Davis to the board.

“At the time, we had discussed — if we should lease the property to these new prospects — paying the tax debt of Bioagra to the tax commissioner,” Davis said. “And again, the only reason that was done is the fact that the authority thought it was proper, given that they were, in fact, principals of Bioagra … and I’m not sure if the tax commissioner fully appreciates that distinction.”

Davis said the authority’s position is that the fixtures always have been its property, and they should be exempt. However, he conceded the property was assumed to belong to Bioagra while the business occupied the space between 2007 and 2009, and its ownership definitely would have deferred to the authority in 2010 and 2011.

The board volleyed questions at length to Davis about common practice and the legal details of the lease and taxes.

“The equipment becomes part of the building, which we own,” said board member John McIver, who also is chairman of the Liberty County Board of Commissioners. “Then the question is: Did we officially notify the tax assessors that that equipment belongs to the development authority and not to Bioagra, so that it won’t be assessed any taxes if that was not the case?”

LCDA CEO Ron Tolley and Carmen Cole, LCDA director of finance and administration, said the assessors’ office had been notified that the equipment belonged to the authority.

McIver said that the assessors’ office would not knowingly include tax-exempt property in its digest and that multiple tax-funded entities made their budgets and set their millage rates based on the understanding the property was taxable.

After discussion, board secretary Brian Smith moved that board dedicate $61,005.79 for the principal tax amounts owed from 2007, 2008 and 2009 — years Bioagra was presumed to own the property. The vote carried, with the caveat that the funds will be placed in reserve until the issue is fully resolved.

On Tuesday, the tax commissioner said he was not fully satisfied with the outcome and added that he does not have the authority to waive interest and fees.

“My hope was that all the years would have been paid, 2007 and through 2011, but I think the board did a good thing by at least paying the years that they knew the equipment was not owned by the LCDA,” Jones said.

He maintains that the LCDA failed to notify the assessors that the property changed hands, which is why it stayed on the tax digest.

However, for the penalty and interest to be waived, Davis will have to provide documentation as the LCDA counsel showing the presumed property owner. If Davis can prove the property was tax-exempt in 2010 and 2011, the tax assessors’ office will have to submit a correction before the board of assessors, Jones said.

“In the end, I’m hoping everybody will come to an agreement that will please all the entities, not just the LCDA and not just the county …,” Jones said. “You also have the school board, and the city and the hospital authority who have (anticipated) revenue in this bill for Bioagra.”

 

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