Wheaton developer wants assessments slashed to get $1 million back

A developer who received more than $8 million in assistance from Wheaton to construct a retail/office building in the city’s downtown claims the structure has lost more than half its value since opening in 2008.

But the Milton Township assessor’s office and Wheaton legally are opposing a property value reassessment being sought by Wheaton Property Partners. They insist the five-story building at 120 E. Liberty Drive still is worth what it cost to build — at least $25 million.

Starting next month, the state’s property tax appeal board will have the first in a series of hearings to determine which side is right. If Wheaton Property Partners prevails in its effort to get its property taxes reduced, Wheaton could lose about $1 million for a special taxing district where the building is.

“What they (Wheaton Property Partners) are doing is they’re trying to get the taxpayers of Wheaton to subsidize their new building,” Milton Township Assessor Bob Earl said.

But Donald Hemmesch, the attorney representing Wheaton Property Partners, said no one could have anticipated the economic downturn that happened after the city inked a deal that gave his client roughly $8.2 million worth of incentives for the project, including about $2.4 million in land and $5.8 million to build a city-owned parking garage on the site.

Those incentives are being paid for by revenue generated by Wheaton’s second downtown tax increment financing district, which was created in 1999.

In a TIF district, property tax payments to local governments are frozen for up to 23 years. A municipality can improve land within the district and as the property appreciates and more tax money is paid, the extra cash goes into a special fund used to help pay off the cost of helping to develop and improve the area.

Wheaton City Manager Don Rose said assistance was given to Wheaton Property Partners after officials estimated how much revenue a $25 million building would generate for the taxing district.

But the developer has filed an assessment appeal for every year since 2008, the year the building opened with anchor tenant First Trust Portfolio. In its most recent appeal, Wheaton Property Partners wants the valuation reduced to about $11 million.

“All of our assumptions on what the TIF could afford were based upon a higher value than $11 million,” Rose said. “If it is reduced to that level, all those projections go out the window.”

If all of Wheaton Property Partners’ appeals are successful, officials estimate the city could be forced to refund about $1 million that went to the taxing district.

Hemmesch said that shouldn’t prevent his client from seeking a reassessment of the building.

“A lot of people made decisions that weren’t prudent,” said Hemmesch, adding that TIF money shouldn’t have been used to pay for the parking garage. “But why should they pile on my client?

“This is a guy who lives in Wheaton,” Hemmesch added. “This is one of their neighbors. Personally, I think he’s getting a raw deal.”

Hemmesch said the bottom line is that the property has been “grossly overassessed” by the township assessor.

“The assessment bears no relationship to the fair market value of the property,” he said.

Earl insists the building has been assessed correctly, especially because it cost at least $25 million to construct.

“I don’t think a new building that is assessed at what they paid for it is overassessed,” Earl said.

However, Hemmesch said the office market collapsed during the building’s construction. By the time the building was finished, it had lost millions of dollars in value.

“If they went to sell that property today, what could they sell it for?” Hemmesch said. “I would venture to say that it would be very difficult to find a buyer.”

Earl said the argument that Wheaton Property Partners couldn’t sell the building for $25 million is “kind of irrelevant in this case” because that’s what it paid to build it.

In fact, Earl last year increased his estimate of the property’s market value to about $29 million — a move Hemmesch called “arbitrary and fundamentally unfair.”

Hemmesch said he has recommended his client seek a property value reassessment every year “until we get our number.”

“I am at the point where I am pursuing this as a matter of principle,” Hemmesch said. “This is just everything that’s wrong with government from my personal perspective.”