Roger Zappa

MARQUETTE –The Marquette Township Board opted to delay consideration of the first reading of an ordinance that alters property taxes for Whetstone Village Apartments until its next meeting.

Trustees expressed concerns about the proposed duration of the payment in lieu of taxes, or PILT, as well as the financial implications of the accompanying service agreement.

Magellan Property Management, the company that oversees the low-income housing development, is seeking an allocation of Low-Income Housing Tax Credits from the Michigan State Housing Development Authority in order to complete building renovations.

The ordinance, if approved, would allow the township to collect 4 percent of the annual shelter rents for the 42 units situated in the Marquette Township portion of the Whetstone complex in lieu of ad valorem property taxes. Another portion of the property lies in the city of Marquette.

Board Trustee Dave Wiegand objected to the language surrounding the duration of the agreement, noting that the development could add time to Whetstone’s existing mortgage through refinancing or if the complex owners secure another mortgage after the initial loan is paid off without input from the township.

The PILT “shall remain in effect and shall not terminate so long as either the Authority’s Mortgage Loan remains outstanding and unpaid or the Authority has any interest in the Housing Development or the Housing Development remains subject to income and rent restrictions pursuant to Section 42 of the Internal Revenue Code of 1986,” the ordinance draft states.

“When I read this — the way it’s worded — as long as there is a mortgage outstanding, that this could carry on forever because there could always be a mortgage outstanding,” Wiegand said. “I am not comfortable with that.”

Township Attorney Roger Zappa said state law dictates that the duration of such agreements can be no longer than 50 years.

“I don’t know how much consolation that is, but at least there is some type of a terminus to it,” Zappa said. “Again, this is going to require considerable discussion and consideration by the board, but these are typically very long-term agreements once you enter into them. That’s certainly a valid area of discussion.”

Zappa said he is also working with the attorney representing Whetstone to iron out details of the services agreement that will accompany the ordinance.

“The issue on that as to whether the services agreement would be for an inspection or something else is one of the ongoing discussions we have been having,” Zappa said.

The type of services spelled out by the agreement are important, he said, because an inspection fee “does not have to be allocated back” to the other taxing jurisdictions, whereas other types of fees would.

“If it’s a fee for public services rendered, then it would have to be allocated among the other taxing jurisdictions,” Zappa said. “And, generally, just in round numbers, when we collect $1 in taxes, the township retains roughly 15 percent of that. So if it’s a fee for a service that is agreed to contractually but you don’t necessarily otherwise have to provide, that is a revenue source.”

He said it is unlikely that the funds collected under the service agreement when added to the annual PILT collection will equal what the township currently collects in ad valorem property taxes.

“As I look at it, regardless of how the service agreement is implemented with the numbers being discussed, the township will not be made whole. The numbers aren’t going to accomplish that,” Zappa said.

He said the management company had previously mentioned the need to have the ordinance and service agreement wrapped up by some time in March in order to move the process forward and submit a notice of intent to apply for the financing from the Michigan State Housing Development Authority by Aug. 15.