MARQUETTE — Marquette Township officials say since the tax-exempt Lost Creek housing development was completed nearly 20 years ago, it has not been in compliance with a township ordinance governing tenant income levels, and that local taxing authorities should have been collecting thousands of dollars more per year from the property owner through service fees.

Citing figures provided by the Michigan State Housing Development Authority, township Assessor Dulcee Atherton said 34 percent of the property’s units have been occupied by people who exceeded low-income requirements of the local ordinance.

“They’re at the moderate level,” Atherton said at a recent Marquette Township Board meeting. “This ordinance was only specifically for those that were of low or very low income to provide for affordable low-income housing by giving them a tax break or tax exemption.”

The property is owned by a for-profit subsidiary of Community Action Alger-Marquette.

Amy Lerlie, CAAM executive director, said the township made similar allegations in the past, but that they were found to be without merit.

Lerlie said Lost Creek’s mortgage is through MSHDA, and that the property and its finances are strictly regulated through the state agency. She also said the township’s ordinance doesn’t explicitly define “low income.”

“When this has been brought up in the past, MSHDA has confirmed we are in compliance,” Lerlie said.

Atherton said the enforcement of local ordinances rests with the township, not MSHDA, and that she has made several township boards aware of the situation since 2001. However, none supported rescinding the ordinance if the property owner didn’t comply, which would make the property fully taxable.

Lerlie said if the property is subject to full ad valorem taxation the “financial repercussions will be dire.” But Atherton cautioned board members about allowing other township taxpayers to subsidize the development.

“You’re elected to represent the best interest of this township, all of your electors,” she said. “So, when you have taxing entities, or the potential for tax dollars to be received and it’s not being billed and collected, you’re asking every other resident and property owner in this township to subsidize.”

At the board’s March 7 meeting, trustees encouraged Atherton to enforce the ordinance and indicated they would rescind the regulation if necessary.

The local ordinance, which the township adopted in 1998, established a Payment in Lieu of Taxes of 4 percent of the annual shelter rents collected at Lost Creek. The PILT payment — which Atherton said is around $28,000 annually — is distributed among the different taxing jurisdictions in Marquette County, with the township’s general fund getting roughly $3,000.

But due to part of the development being occupied by other than low-income tenants, Atherton said the ordinance provides for the collection of a service fee equal to the full amount of taxes the property is subject to if the PILT had not been established.

The service fee — calculated on the number of tenants who don’t meet ordinance requirements and 2016 tax levies — would have been $103,000 last year, Atherton said. The township’s general fund portion was nearly $9,000.

Lerlie said that all taxes billed to the development have paid in full since its inception.

“We purchase water and sewer for 150 households, our commercial kitchen and community center,” she said. “And we have enjoyed good working relationships with the township department of public works and fire department.”

If the ordinance is rescinded, Atherton explained the township could collect full taxes for up to three prior years.

If all of the Lost Creek development was taxable, the true cash value in 2016 would have been about $13.2 million, with a taxable value of roughly half that. Based on the 34 percent of incompliant tenants, Atherton said the taxable value of the property was about $2.2 million.

The PILT ordinance was to be in effect until around 2036, or until the mortgage is paid off, or if MSHDA terminates any interest in the development.

Community Action Alger-Marquette is also seeking a similar ordinance through the Ishpeming City Council, which would allow for PILT at the Jasperlite Senior Housing Development, proposed to be built at the former Bell Hospital site.

The council will meet at 6 p.m. Wednesday in the conference room at Ishpeming City Hall to discuss the PILT proposal.

Ryan Jarvi can be reached at 906-228-2500, ext. 270. His email address is rjarvi@miningjournal.net.