LANESBOROUGH, Mass. — The town has settled the tax appeal lawsuits with the former owners of the Berkshire Mall.
The former owners, Strategic Property Services, operating as Berkshire Mall LLC, had appealed its assessment for both fiscal years 2015 and 2016. When preparing for its recent sale to Kohan Retail Investment Group, the owners sought a settlement agreement with the town and the Baker Hill Road District on those assessments and a lawsuit.
Town Manager Paul Sieloff said a settlement was reached in which the town is rebating about $200,000 of taxes paid.
"It was to their benefit to settle before the closing went through. We are expecting the new guy to potentially to bring some kind of action for the taxes, too. But the key thing is we cleaned out the old stuff. That is really valuable for us to not have these things hanging over our heads," Sieloff told the Finance Committee on Tuesday.
The mall property, which has lost two major anchors just in the past year, has seen its value drop by half since 2008's economic collapse.
The last two owners of the Berkshire Mall had continually appealed the assessment values. Pyramid Companies had appealed decisions from 2010 until 2012 and eventually reached a multi-year agreement on the assessment. The mall was valued at $60.4 million in 2008 and decreased to $31.5 million last fiscal year. And that is expected to drop significantly more.
"It is going to go down at least $5 million, maybe $10 million," Sieloff said of the fiscal 2017 assessment.
Sieloff said the town is working through various worksheets with consultants and the assessors to weigh the impacts that will have on the town's finances during the next budget session. He said the town is entering the second of three years of challenges with weighing the loss of the two anchor stores and the onset of the bills to build the new Mount Greylock Regional School.
The town does have $250,000 set aside in the assessor's overlay account to cover the settlement, but the declining value at the mall poses challenges in the years to come. He said the previous owners did have an argument to say that the assessment was too much in recent years — and that is what the town's attorneys believed when analyzing the settlement offer from Strategic Property Services.
"We've got to get a number that the assessors, and they have a consultant they work with, can justify so we don't have to keep fighting these assessment values," Sieloff said. "So much of the assessed value has nothing to do with the structure of the building. It has to do with how much they are making with leases and rents,"
That assessment, however, does not include Target, which Sieloff says the assessors are confident of with their figures. Both Target and Regal Cinemas own their pieces of the mall, and have put $1 million and $2 million into them in recent years. Sieloff said that is a sign that while the rest of the mall may be struggling, companies are seeing value in the location.
The settlement also eases concerns about the town's legal budget. Sieloff said the town budgeted $36,000 for a year's worth of legal services but between that lawsuit and securing easements for the Narragansett Bridge project, the numbers were trending much higher. He said the easement work alone cost $4,000 in legal fees. The town spent $7,000 in August on legal fees, which is more than double the rate of spending for that budget.
With those two cases now completed, Sieloff said the spending on legal services should decrease substantially, down to possibly spending less than $2,000 a month, and help keep that budget on track.
At the same time, however, the Board of Health has been using staff time to tackle blight at a higher rate than budgeted. Sieloff said typically in that situation, he would ask the employee to reduce hours for a period of time to counteract the expenditures but in this case, the town manager feels there is tremendous value to the work. The department has been focused on two particularly rundown buildings and working to get them razed.
"There are some real benefits for what he is doing," Sieloff said, asking the Finance Committee to consider releasing funds to keep that staff member on during the winter instead of asking for a sabbatical.
The town budgets just $4,500 for the work and right now there have been many complaints about the two properties the town is looking to usher through court and get razed. Sieloff hopes to keep that progress going.
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