Yesterday, local blogger Steve Pierce, on his YpsiNews.com site, broke the news that Ypsilanti real estate developer and landlord Stewart Beal owed the City $86,068.80 in back taxes. He later revised the number to be $84,136.96. The error, he said, was “made by the reporter,” by which I assume he means himself… Here’s a clip from the revised article:
…According to records obtained from the Washtenaw County Treasurer, Ypsilanti landlord Stewart Beal and his associated companies owe $84,136.96 in past due property taxes to the City of Ypsilanti. The report, dated April 6, 2010, lists the 38 properties Beal owns in the city.
Of the 38 properties, Beal is past due on 17. Past due payments include missed payments in September 2009 and February 2010…
Anyway, someone left a link to this YpsiNews post in the comments section of an earlier thread on this site about the future of the Thompson Block, which is among those properties owned by Beal, and, as it’s led to a fairly interesting debate, I thought that I’d move it up here to the front page.
As you can imagine, some folks are ticked off that Beal, who has asked the City on multiple occasions to make special allowances for his Thompson Block development, doesn’t feel the necessity to pay the City what he rightfully owes. Or, at least they have that perception based on information presented by Pierce. Others, though, have taken the opportunity to question Pierce, who broke the story, about his own taxes.
Former mayoral candidate Pierce, as most of you probably know, is behind the for-profit community wireless initiative Wireless Ypsi, which may or may not be a division of his company, HDL. HDL, although having an office here in Ypsilanti, is headquartered in Albuquerque, New Mexico, at an address shared by a retail enterprise by the name of Don’s Paperback Exchange. Pierce describes HDL online as follows:
Founded in 1987, HDL is a recognized leader in web hosting and internet service, wireless technologies, Wireless Interent Serivice Provider, and product testing and evaluation services. The company offers a broad range of services including hosting and data connectivity, software development, system integration, and computer and network security services.
HDL, as it’s headquartered in Albuquerque, pays no taxes in Ypsilanti. And, that’s what people seem to have an issue with.
Personally, I don’t think that either Beal or Pierce are looking to rip off the City. I suspect, in the case of Beal, it’s probably a situation of him deferring payment purposefully, even if it means having to pay more in the way of interest and fees, in order to have more working capital available in the short term. (This isn’t that unusual, as I understand it.) And, I imagine that he’ll remedy the situation in a timely manner… or at least in time to prevent the City from taking said properties. And, in the case of Pierce, I’m sure that he’s perfectly within his rights to claim that the headquarters of his company is in Albuquerque. A great many folks, after all, operate “Delaware corporations” with little more than a lawyer’s address in that state. (I’m not arguing it’s the right thing, just that it’s legal.)
But, I do think all of this raises an interesting point… which is, how much do the local businesses in Ypsi contribute to our bottom line? It’s come up recently, for instance, that, if we were to go ahead and build that Burger King on Water Street, it would generate an estimated $29,000 in annual tax revenue for the City. (According to our new city planner Teresa Gillotti, this figure, however, includes more than just City taxes. It also includes all the taxes we would collect from local jurisdictions per the Brownfield plan (county, schools, library, WCC, etc.)) And it makes me wonder what other businesses pay. I’m assuming it must be broken down somewhere, but I’ve never seen it. If you have access to such information, let me know. I think it might help to inform our discussion as to what kinds of companies we’d like to see on Water Street.
Here, on the Pierce tax situation, is the most recent comment in the thread, left by former city planner Richard Murphy:
I’m not sure the HDL issue has much relevance here. HDL’s Albequerque incorporation means, what, that he has a PO Box in NM that his business is addressed to. But keep in mind that Ypsi wouldn’t see any difference if HDL were addressed to, say, a PO Box on South Adams, across the street from Steve’s house. (Though the State of Michigan might.)
Michigan municipalities can only collect property tax (well, and income tax, if we choose to, which Ypsilanti voters chose not to), and a company like Steve’s doesn’t really have much to collect. He may own his own servers – but how many of us expect he’s got his basement full of server racks? (Answer: nobody who knows anything.) HDL’s servers are going to be co-located in some dedicated facility, somewhere in the country, that neither Steve’s location nor HDL’s really has any bearing on. Or they may even be virtualized – HDL may not even own any physical equipment. (In which case, Steve may not even *know* where the servers are located that have HDL’s bits on them.)
I expect all Steve has at his house relevant to HDL is maybe a desktop computer and a filing cabinet. My knowledge of personal property tax ends at the point where maybe he should be paying on that (like, $50/year?), or maybe he’s under some threshold.
More generally, though, this is a big part of why Ypsi and similar municipalities are in fiscal difficulty these days. Michigan’s tax code doesn’t give us good tools for dealing with web hosting companies, or graphic designers, or online newspaper journalists (I’m thinking YpsiCiti), or freelance iPhone programmers, or what have you. Michigan’s tax code assumes that we’re either dealing with literal bricks-and-mortar or huge honking assembly lines and tool and die shops with capital-M Machinery valued in million dollar increments – and when the latter ceases to be the case, well, too bad, because that’s the only thing in our toolbox. (Well, that and local-option income tax, which I don’t want to get into.)
This is why (re)development is such a big deal for a city like Ypsi – with half our property tax equation gone (the machinery), we have to make the most of the bricks-and-mortar side of the equation.
(Incidentally, this is why a project like Water Street, in the general case, Makes Sense fiscally, and why building things like a taco bell or a wal-mart on Water Street would not make sense fiscally – if our only fiscal option as a city is bricks-and-mortar, we’ve got to make sure we’ve got as many bricks as possible.)
And, lastly, for all of you out there, doing your taxes this weekend, here’s a link to the Beatles’ Tax Man. It’s not one of my favorite pieces in their catalog, but McCartney’s bass playing on the track is pretty inspired.
update: I’ve been informed that Wireless Ypsi is not “a subsidiary, division, nor is it an amalgamation of any other business or company.” So, I’m sorry for having speculated last night that HDL might be somehow involved.