Local governments that have to tax counties that include Southlake Mall are likely to pay millions of dollars in refunds to mall owners after a longstanding property tax dispute was settled in favor of the mall on Wednesday.
The Indiana Supreme Court ruled in a 5-0 ruling that the mall’s valuation for property tax purposes was based on the 2010 estimate of approximately $ 240 million mall.
The exact amount of refunds Lake County, Hobart and the other tax authorities will have to pay due to the overvaluation is not yet known.
But a former lawyer for the Lake County Commissioners previously estimated that the county alone could be on the hook to repay up to $ 12 million in property taxes that the mall had paid over those years.
According to court records, the owner of the Southlake Indiana LLC shopping mall objected to the Ross Township appraiser who estimated the value of the mall at US 30 and Mississippi Street, which has approximately 1.3 million square feet of retail space, a 12-screen AMC movie theater more than doubled, and several restaurants.
The case eventually landed on the Indiana Board of Tax Review. Records show that the board was unable to say whether the appraiser’s rating of the mall or the mall’s appraiser’s rating was correct.
To resolve the issue, the Board of Tax Review made its own rating for the mall for the four tax years in question that was closer to what the appraiser said the mall was worth than what the mall officials paid for held worth.
The Indiana Tax Court on appeal in December upheld the board’s assessment of the mall with the exception of two minor issues.
However, the Supreme Court said that both the tax review panel and the tax court have exceeded their limits by independently developing and validating a value for the mall, according to Judge Geoffrey Slaughter, a native of Crown Point.
Slaughter said Indiana bylaws clearly require that if a challenged valuation is 5% higher than the previous valuation, the tax authorities accept either the appraiser’s valuation or the property owner’s valuation as correct – otherwise, the valuation must go on go back to the previous rating.
He said there was no legal authority for the tax office to make its own assessment, as in this case, if it found deficiencies in any of the reports submitted.
Likewise, the tax court should not have confirmed the actions of the board, said Slaughter.
“We are applying the law as it was written and we have no doubts about the legislature’s decision to limit the flexibility of the state committee if the values assessed rise by more than the 5% percent threshold,” said Slaughter.
“By not applying the fallback clause, the tax court made a legal error.”
Brian Cusimano, attorney for the Lake County assessor, said he was very disappointed with the state’s Supreme Court opinion.
“The appraiser provided substantial evidence of the property’s value – a valuation and a sale – which we believed supported the Ross Township appraiser’s valuations,” said Cusimano.
He pointed out that the court-ordered return to the 2010 valuation would reduce the value of the property below the value of the mall for the 2013 and 2014 tax years.
“We hope that in the coming months the Indiana legislature will revise the provisions of the law so that it no longer applies this way,” said Cusimano.
The mall’s senior attorney, David Suess, said he was delighted that Southlake will finally receive a proper tax assessment based on Indiana law.
“The judgment of the court justifies the protection of taxpayers wisely put in place by the General Assembly in order to prevent the appraisers from doing exactly what the assessor did in this case: to significantly increase Southlake’s assessment without being able to prove that the Increase was right, “said Suess.
“Our client looks forward to working with Lake County to resolve any remaining valuation disputes promptly.”
Records show that Southlake Mall was recently foreclosed in Israel after its former owner Starwood refinanced its mall portfolio in 2018 and then defaulted on payments due to the COVID-19 pandemic last year.
Pacific Retail Capital Partners, based in California, and Golden East Investors, based in New York City, were appointed as trustees for the mall, the second largest in Indiana and anchors of the largest commercial district in northwest Indiana.
A valuation of the mall provided to Starwood in 2018 by Chicago-based NPV Adviors put its fair value as of September 30, 2017 at $ 302 million.