BrentRequest to City Council
I respectfully ask council to please consider instructing the city attorney to review what type(s) of “obsolescence” should be considered for the city to decide whether to declare the Diesel Plant site an “Obsolete Property Rehabilitation District” in view of the likely, foreseeable request by its developer for 1) the designation; and 2) a multi-year tax abatement for the site if so designated.
Recent Council Discussions
Council’s recent discussion about a possible 12-year property tax abatement on the Diesel Plant included comments about the county assessor office finding the property “functionally obsolete”. I did not see the assessor office note, but I take council members’ statements as accurately restating it. I’m merely repeating what I heard. From listening to council’s discussion, it seemed the finding of “functionally obsolete” might become a determining (if indeed not the determining) fact in any further, ongoing council pro and con discussion of declaring the Diesel Plant site an “Obsolete Property Rehabilitation District” (OPR District) as Step 1 opening the door for council to then consider Step 2; to wit, a foreseeable developer request for a tax abatement.
Regardless of the pros and cons for establishing or not establishing the Diesel Plant as an OPR District, council must understand very clearly there are three kinds of commercial real estate obsolescence. The assessor office finding of “functionally obsolete” is only one of them. As I understand it (not seeing the assessor office note itself), the other two types of obsolescence were not addressed. Zero value for assessment is one thing. Zero value for development is something else. Assessors deal with assessment, not development. Hence, the needed caution and care by council on the issue of obsolescence.
Obsolescence in a Nutshell
Functional Obsolete means the building and fixtures are so outdated due to design or internal process, it cannot be used (won’t function) in a commercially viable way as originally intended and should be valued as obsolete ($0.00) for the purpose of real property assessment. For example, outdated factories and old-technology workflow processes frequently fall victim to this functional demise and need to be updated or torn down.
Economic Obsolete means the location itself (not the buildings on the location) loses commercial value due to uncontrollable events such as traffic pattern changes, closing of a highway exit ramp adversely affecting a gas station & convenience store at the base of the former exit, etc.
Physical Obsolete means neglect or mismanagement of the physical property, the building itself. This is different from how the building “functions”. This speaks to how the building “is”. Is it commercially feasible to repair, or wiser to demolish and start anew from a cost standpoint? Examples include neglected roof leaks that now make the roof unrepairable. Foundations and walls have eroded and crumbled to become unsafe. Mold spreads due to ignoring wetness and leaks. Etc.
The Diesel Plant is probably functionally obsolete, but it’s future use is not to generate electricity. It also might be physically obsolete but cannot be torn down because the sale agreement terms require the developer to preserve its historical presence. However, nobody can argue the Diesel Plant is economically obsolete since it sits on one of the most valuable sites along South Harbor.
The application for tax exempt status of an obsolete property (Mich Dept of Trea Form 3674) speaks only about the “facility” obsolescence. The physical and (perhaps) also functional obsolescence. The application is silent about “economic” obsolescence as a basis for seeking the tax abatement.
Council (and city staff) must be well schooled on what they mean when they use the term “obsolescence” if council ends up considering whether to declare the Diesel Plant site an Obsolete Property Rehabilitation District. Guidance from the city attorney will help them in that regard.
