Requests to reduce tax value common

Experts: Move not unwarranted

Chrysler tax reduction would cost schools, libraries, and other entities that rely on property taxes millions of dollars.

Chrysler tax reduction would cost schools, libraries, and other entities that rely on property taxes millions of dollars.

Chrysler Group LLC’s petition to dramatically lower the taxable value of its Toledo Assembly complex may be aggressive, but it is not unprecedented or unwarranted, according to experts.

But the move could collectively cost schools, libraries, and other entities that rely on property taxes millions of dollars.

Companies and citizens are entitled to request a property revaluation from the Lucas County Auditor’s office, and hundreds have done so because of the weak economy and declining real estate market, Auditor Anita Lopez said.

“Chrysler is responding to the economic times like everybody else in the county has done,” she said. “It’s a reality of the economy. It’s a reality of the market. Properties in Lucas County have been selling for less.”

Chrysler asked the Lucas County Board of Revision this year to reduce the taxable value of its Toledo Assembly complex from $169 million to about $66 million. City officials, as well as those from both Toledo Public and Washington Local Schools, have negotiated a tentative settlement that would reduce the value to $125 million for the current tax year and $104 million for the next two years.

The devaluation request came nearly simultaneously as a request from Chrysler for an incentive package that would help it build an $8 million addition onto the plant that builds the Jeep Liberty and Dodge Nitro, install an additional $357 million in new equipment there, and hire as many as 1,105 additional workers.

City officials said they were unaware of the devaluation petition in April when they offered the automaker more than $16 million in incentives to move ahead with the expansion. All but one of those proposed incentives — a rebate on taxes paid on profits that would be generated at the plant — have been withdrawn, local officials said.

A state package of more than $10 million in incentives that was approved in late August remains on the table, a spokesman for the Ohio Department of Development said Friday.

Chrysler has not announced whether it will proceed with the Toledo expansion. The automaker is in negotiations with its main union, the United Auto Workers, on a successor agreement to its national contract that has been extended until Oct. 19.

Several local government entities would take a hit if Chrysler’s request for a property value reduction moves ahead. Under the company’s proposed new value of $66 million for the complex, the City of Toledo would lose $2.2 million in tax revenue annually. Toledo Public Schools would lose $261,000 and Washington Local Schools would lose $168,000, according to information provided by the auditor’s office.

Under the settlement proposal of $125 million, the City of Toledo would lose $935,000 annually, Toledo Public Schools $111,000, and Washington Local $71,000.

Ms. Lopez, the county auditor, said government entities will lose tax money, but she cautioned others about criticizing Chrysler. She noted the company has promised jobs and said it is seeking a value drop just like other companies.

“Of course the governments don’t like it because they lose money, surprise, surprise,” she said. “But if the economy’s doing bad, the government cannot be doing better than their taxpayers. Most people’s property values have declined. That’s nothing anybody can control, and the only way we can improve that is by getting more employment in Lucas County, which Chrysler has promised to do.”

Chrysler’s amount of tax value decrease ranks highest out of companies seeking a revaluation of their 2010 property taxes, records from the auditor’s office show. While the firm’s reduction request totals $104 million, other companies have asked for reductions ranging from $13 million to as little as $1,000.

Lynette Reichle, an industrial real estate broker with CBRE Richard Ellis Reichle-Klein in Toledo, said Chrysler may have difficulty demonstrating that properties like Toledo Assembly have suffered dramatic declines in values, if only because there just aren’t a lot of properties like theirs locally or regionally.

“They are so user specific that, just to say what it’s worth, it’s tough to do,” Mrs. Reichle said. “If you look at the overall [regional] market, you can see the decline, which we’ve been in for quite a few years, but our market doesn’t see big swings either up or down.”

She added: “If I were representing them, I would have recommended them doing it, just because that’s what’s being done elsewhere, and why should they pay an elevated value if they don’t have to?”

In Lucas County this year, the owners of 444 commercial and industrial properties — including the Toledo Board of Education, the Diocese of Toledo, the Democratic Club of Sylvania, Kroger Inc., and Toledo Edison Co. — have petitioned the county Board of Revision for an adjustment in tax valuations.

Statewide, the Ohio Board of Tax Appeals is handling more than 6,000 cases this year, more than double what it handled last year.

“It’s a declining market for commercial and industrial property, just as it has been for all the other sections of the market,” said J. Donald Mottley, an attorney with Taft Stettinius & Hollister LLP in Columbus and the immediate past chairman of the Ohio State Bar Association Taxation Committee.

He recently handled a case from Warren County of an industrial property with a tax value of $10 million for which its owners sought a value of $3 million. The facility ultimately sold for $1 million, he said.

“In theory, the value is supposed to be what you sell it for, not what it’s worth to you,” Mr. Mottley said.

A scheduled revaluation this year on Chrysler’s Toledo Machining Plant in Perrysburg Township cut the value of the 169-acre, 1.2 million-square-foot plant from $26.5 million to about $15.1 million, Wood County officials said.

In Lucas County, the value of the former Ford Stamping Plant in Maumee has dropped from $9 million in 2007 — the year it closed — to $4 million this year, in part because of two board of revision cases filed during that period.

However, the value of General Motors Co.’s Toledo Powertrain Plant on Alexis Road has remained largely unchanged since 2009, at about $48.3 million. The values do not take into account machinery and equipment on site.

Nicholas Ray, of Vorys, Sater, Seymour and Pease LLP in Columbus, specializes in such tax cases. He said companies of all sizes have been forced to become very aggressive in watching their tax values because of their effect on their bottom line.

“I do think because the economy’s tightened down and owners are paying attention to every expense line now, and you combine that with anyone that’s gone through a bankruptcy proceeding where those properties have had a value placed on them, and that’s why we’re seeing so many more of these cases now,” Mr. Ray said.

Contact Larry P. Vellequette at: lvellequette@theblade.com or 419-724-6091.