Meijer Successfully Appeals Property Tax Bill; Millions of Dollars at Stake for Indiana Counties

The Indiana Board of Tax Review recently ruled that a Meijer store located in Indianapolis should have been assessed at the equivalent of $30 per square foot, not at $83 per square foot as originally determined by the Marion County Assessor in 2012. This means Meijer would only be responsible for paying almost one-third less than the original assessment.

The court’s decision covered 9 years of assessments, going back as far as 2002. Therefore, Marion County could owe Meijer a $2.4 million refund. According to Meijer, it will not be pursuing property-tax appeals for all of its Indiana stores. Instead, Meijer is hoping to enter into a settlement agreement with Marion County.

The Marion County Assessor’s office has not yet confirmed whether it will appeal the decision to a higher court. Unless this decision is successfully appealed and reversed, this case will change how all Indiana big-box stores are assessed in the future. In coming to its conclusion, the court agreed with Meijer’s assertion that “big-box” stores should be valued looking strictly at the value of the “box,” not the “highest and best use” value. Valuing the store based only on the value of the “box” means treating all big-box stores the same, whether operational or vacant.

Since millions of tax dollars are at stake, which many counties depend on for revenue, the Indiana legislature was quick to respond on Tuesday, February 17, 2015, with a bill addressing tax bills on big-box stores. The bill, which would require certain special-purpose properties to be assessed based on the cost of construction for the first seven years, unanimously passed the Indiana Senate Tax and Fiscal Policy Committee.

Because the assessed value of commercial property can greatly affect Indiana commercial real estate owners, the attorneys are Bowers Harrison are closely monitoring this issue as it develops. Please subscribe to our blog or check back for more details. If you have any questions regarding the assessed value of your land, or any other real estate issues, please contact us at (812) 426-1231.

Development Incentives – Part I: What is Tax Increment Financing or TIF?

The term Tax Increment Financing (“TIF”) describes a type of public financing available for certain approved development projects, for example the revitalization of a blighted warehouse or a neighborhood.  Essentially, TIF is a value capturing strategy that allows the local government to use future gains to subsidize current improvements.  The idea is that a new development often increases the assessed value of surrounding real estate, which will generate additional tax revenue for the local government.  To incentivize new developments, TIF allows the local government to invest future property tax income, to the extent attributable to the increase in value resulting from the development, to subsidize the upfront financing of the development.

Since the 1970s, TIFs have been used throughout the United States and internationally to subsidize redevelopment projects, infrastructure and other community improvement projects. Many local governments have chosen TIF as a way to strengthen their tax bases, attract private investment, and increase economic activity and create jobs.

TIF is available in Indiana through state legislation allowing local governments to create TIF districts (see Article 8 of the Indiana Administrative Code).  In Indiana, a typical TIF district lasts for twenty-five (25) years. The creation of a TIF district can take several months depending on the complexity of the proposed development.  A redevelopment commission must adopt and approve a development plan.  In Indiana, TIF benefits can be supplemented by other tax credits such as local tax phase-ins or abatements and state income tax credits.  In larger developments local and state bonds can also be added to the incentive package.

The attorneys at Bowers Harrison LLP are highly experienced in working with clients on complex economic development issues.  For more information about TIF, or other economic development strategies, please contact Mark Miller to schedule a consultation to discuss your needs.

This is part of the Development Incentives series. Please stay tuned for additional posts.

Tax Incentives for Business Investment, Job Creation and Job Retention

On February 23, 2012, Bowers Harrison partner, Mark Miller, and Greg Wathen, President & CEO of the Economic Development Coalition of Southwest Indiana, will discuss tax abatement as an economic growth tool. Tax abatement is a tool used by local government to attract private investment and job creation by exempting all or a portion of the new or increased assessed value resulting from new investment from the property tax roll. There will also be discussion of other local and state incentives for business investment.  The seminar will be held at the Southwest ISBDC offices, 318 Main Street, 4th Floor, Evansville, IN 47708-1456.  You can register for the seminar at the ISBDC website.

FDIC Provides Guidance to Banks for SBA Lending Products

In its Summer 2011 Supervisory Insights publication, the FDIC reiterates its goal of encouraging banks to lend to creditworthy small businesses. The FDIC notes that the "guaranty that accompanies a Small Business Administration (SBA) loan is increasingly attractive to banks looking to expand lending opportunities."  The Summer 2011 Supervisory Insights publication provides specific guidelines to banks that wish to pursue SBA lending, including information that may be helpful for banks in preparation for examiners reviewing a bank's SBA loan portfolios.  Because the requirements for underwriting, servicing, risk grading, and liquidating SBA loans often differ from those for conventional lending programs, the FDIC advises banks to identify and understand these requirements and develop an SBA lending program that includes opportunities for ongoing training.

The most common SBA guaranty programs are the 504 and 7(a) loans.  The 504 Loan Program provides small businesses with long-term financing to acquire major fixed assets, such as real estate, machinery, and equipment. Typically, lenders finance 50 percent of the acquisition with a senior lien, the business provides at least 10 percent equity, and the remaining balance is financed by a Certified Development Company (CDC) with a second lien. A CDC is a private, nonprofit corporation that contributes to local economic development. The CDC receives funding from a debenture that is 100 percent guaranteed by the SBA. The advantage of this program is that the CDC portion is a fixed, below market rate loan for 20 years.

The 7(a) Loan Program features a range of loans, including standard, special-purpose, express, export, and rural business loans. These loans are funded by lenders and conditionally guaranteed by the SBA. Banks participate in 7(a) Loan Programs as a regular, certified, preferred, SBAExpress, or Patriot Express lender and must submit applications to the SBA to receive approval for these designations. Each designation provides lenders with varying degrees of authority and responsibility. The preferred, SBAExpress, and Patriot Express designations allow lenders to make loan approval decisions without prior review by the SBA; lenders must be approved for these designations every two years. The SBA makes all loan approval decisions under the regular and certified designations.

The most widely used 7(a) programs are standard and SBAExpress loans.  As of May 2011, Standard 7(a) program loans are for a maximum of $5,000,000 with a guaranty of no more than $3,750,000 or 75 percent of the loan amount. Standard loan terms can be up to 25 years for real estate, up to 10 years for equipment, and up to 7 years for working capital.  Interest rates are based on published indices as well as the size and maturity of the loan.  The SBAExpress program features an accelerated loan approval process. As of May 2011, the SBA Express guaranty is 50 percent of the loan amount, and the maximum loan is $1,000,000. The advantage is that lenders can use their own closing documents – rather than SBA closing documents – which saves time and expense. This program also allows lenders to fund lines of credit up to 7 years, which is not allowed under the standard program.

If you have any questions regarding this issue or any other banking and finance issues, please contact the author, Mark E. Miller, or the Bowers Harrison attorney with whom you usually work.

SRF Green Project Reserve (GPR) Sustainability Incentive

The State Revolving Fund (SRF) Loan Programs provide low-interest loans to Indiana communities and some private and not-for-profit businesses for projects that improve wastewater and drinking water infrastructure.  The SRF Loan Program has recently announced the Green Project Reserve (GPR) Sustainability Incentive Program.  GPR provides incentives to SRF participants to reduce resource consumption – such as energy, water, and construction materials – to attain energy efficiency and save costs. 

Eligible projects include sustainable green infrastructure, water or energy efficiency measures or environmentally innovative solutions.  A participant may be eligible for improved ranking on the SRF Project Priority List as well as an interest rate break up to 0.5% on an SRF loan.  Information about the program is available at the Indiana Finance Authority's website.

If you have any questions regarding this issue or any other natural resource and energy law issues, please contact the author, Mark E. Miller, or the Bowers Harrison attorney with whom you usually work.