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Old Y tax bill $142,000 plus

BY Spencer Durham - sdurham@chronicle-tribune.com

Marion’s Old YMCA property received a bid earlier this year in a commissioners sale, though the property is not expected to change hands and local taxing units are still out more than $142,000 in delinquent property taxes.

An Anderson man placed a minimum bid on the property for $200 in this spring’s commissioners sale but chose not to go through with purchase, despite wanting to turn the building into an office space for nonprofits.

A commissioners sale acts as a supplemental or “auxiliary” sale to the prior year’s tax sale, according to County Auditor Roger Bainbridge. Properties make it to tax sale when the owner falls behind three payments. When a property is not sold at a tax sale, it goes to a commissioners sale, where the minimum bid is much lower.

Unlike in a tax sale where the minimum bid on a property must be at least the price of the outstanding taxes, the minimum bid at the commissioners sale is a flat $200. This is to encourage bidding.

However, more than $200 is needed to complete the sale. The person or entity that places the bid must also pay the current year’s taxes on the property. For the Old Y, the total is about $30,000. The auditor said if the interested buyer pays the current year’s taxes, then all other outstanding taxes are wiped off.

Chad Roots placed the bid on the property. The Anderson man said he will not go through with the purchase due to the ongoing lawsuit that revolves around a failed renovation project at the Old Y.

“Unfortunately due to some large pending litigation, we could not afford to continue paying the excessive taxes on the property through the period of, likely, long-lasting litigation,” Roots said in an email to the Chronicle-Tribune. “Overall we abandoned the idea due to longer term funding source issues.”

Roots said he and his wife, who is from Marion, had “big aspirations for the building.” The two envisioned an office space for a “non-profit incubator” and possibly a ballroom for fundraising events.

“The theory was that we could keep a prominent building in use for the community with the aim to better the community through collaboration,” Roots said.

With the deal likely dead, the property will go back to tax sale and likely another commissioners sale as the $142,611 worth of outstanding property taxes makes it an unlikely candidate to be sold at tax sale.

If Roots had a change of heart, he would have up until the next commissioners sale to pay the current year’s taxes.

Seybold speaks

The property is still owned by Global Investment Consulting Inc., a company of the late developer Michael An, which is named in the ongoing civil lawsuit. The City of Marion has sued a number of parties including renovation manager Chad Seybold, the city’s former financial adviser London Witte and Global Investment. The city claims public funds meant for the renovation project that would have turned the Old Y into a boutique hotel went toward former Mayor Wayne Seybold’s campaign.

In a November interview on EdBoundsLive, a local podcast, Chad Seybold claimed the “TIF is paid because the taxes are paid.”

The taxes have not been paid on the property as evident by the property having been listed in tax sales for the last few years.

Both Seybold, who is the brother of former mayor Wayne Seybold, and his attorney P. Adam Davis, appeared on two episodes of the podcast and talked about the ongoing lawsuit.

Seybold called the lawsuit “a political promise,” referencing Mayor Jess Alumbaugh when he was on the campaign trail where he told constituents he would try to find out where the missing public funds went that were allocated for the Old Y renovation.

The C-T inquired with Davis on a number of statements made on the podcast, including the claim the taxes were paid. The attorney sent the emailed list of questions to Seybold. A response from Seybold’s email account was forwarded to the C-T through Davis.

Seybold said in his response that it was their understanding the property had sold in tax sale, which would have meant the taxes were up to date.

Davis stated on the podcast that the city was “not exposed to any real risk.”

“There are no damages in this case,” he said on the podcast. “In my opinion, there has been a dramatic misunderstanding in what the TIF project does.”

Bainbridge said it depends on how risk is categorized. Marion would not be liable if someone were to slip and fall on the Old Y property. That liability would more than likely fall on Global Investment Consulting, the property’s owner.

However, if talking in terms of financial responsibility, there is absolutely a risk.

“It’s part of a TIF,” Bainbridge said. “There is a financial risk if the taxes aren’t paid on the TIF, we have to find that money from somewhere or take it from somewhere else. There’s a risk there.”

Taxpayers making payments

The failed project continues to cost the city. When the project stopped, the city took out a second $2.5 million bond to be paid back by TIF revenue in 2011 to cover payments for the previous 2009 bond issue. In its lawsuit the city says London Witte knew in early 2011 that An had failed to complete the project and still had no other investors to complete the project. Despite that, the city says London Witte passed the financial risks onto the city and advised the developer to withdraw the remaining $350,000 in the first TIF, according to previous C-T reports. That bond continues to be paid by the city through its public revenues. 

Since the project went unfulfilled, the six promised businesses that were supposed to have been created never contributed to TIF revenue that would have paid back the bond. The bond’s loan agreement stated that if TIF revenues were insufficient to repay the bond, An would make the payments. However, the city freed An of the obligation when it refinanced the bond in 2011, according to C-T reports.

Bond documents showed that February 2011 was the same month the first principal payment, $10,000, would have been due. Had An failed to make the payment, he would have risked defaulting.

Since An was no longer on the hook for making the payments, that responsibility fell on the City of Marion.

Asked if the city would be at financial risk considering it took on responsibility of paying off the bond, Seybold answered, “These bond payment s (sic) are still being paid by the pledged TIF tax allotment, whether paid now or in the future when the property is sold. The payment of the 2011 bond has more properties and pledged tax that pays for that bond other than the old YMCA.”

But the city, and taxpayers, are making up the difference. The city has until 2021 to finish repaying the 2011 debt.

The C-T reported in 2014 that refinancing documents pledged community revitalization enhancement district (CReED) revenue and TIF revenue to repay the 2011 bond. According to information provided by Marion City Controller Julie Flores.

CReED revenue comes from sales taxes paid within established districts. In 2017 CReED Board Member Frank Stotts told the C-T that paying of TIF bonds was not what the program was meant to do.

“The money was never intended to pay city bills,” said Stotts. “It was intended to fund deprived industrial areas. Every vote we’ve had it’s an ethical decision inside me ... but I did take an oath that I would protect the City of Marion, and that’s why I’ve voted the way I did because I felt like I needed to protect the City of Marion ... I sometimes feel like I’m doing something wrong for the right reasons.”

The city paid $364,349.33 on the bond in January, and another $366,630.12 in July. Payments for 2019 total $735,647, nearly $725,000 in 2020 and $363,130 in 2021.

In January, the CreED board expressed concern with finishing payments on the bond, as the board will dissolve in 2019.

“We are somewhat optimistic that there will be enough cash in CreED to make all payments due,” Flores said.