Gunner: KBI short-changing district

Perkins Schools challenges plant's value.
Tom Jackson
Feb 3, 2014

 

Hundreds of thousands of dollars in taxes are at stake in an Ohio Supreme Court case that pits the cash-strapped Perkins Schools against the KBI wheel bearings plant, which has been fighting to stay in business.

Administrators at Perkins Schools, who contend KBI is trying to seriously undervalue its plant, say they’re willing to negotiate a reasonable compromise with the company.

Perkins superintendent Jim Gunner said the school district wants to strike a compromise, but he believes KBI should be willing to give ground on its claim that a plant that sold for $25.5 million is only worth $2.5 million.

“I don’t know how a reasonable person can argue the value drops tenfold right after a purchase,” Gunner said. “I think that’s unreasonable on their part. It’s not fair for us to agree to that. All that does is shift the taxation to you — you’re going to pay more because KBI pays less. I think companies need to pay their fair share”

KBI and officials with the local chapter of the UAW did not return calls requesting comment. KBI’s attorney, Andrew Ferris, did not return repeated calls.

The school district won a ruling in 2012 from the Board of Tax Appeals in Columbus.

KBI appealed, however, and the case is before the Ohio Supreme Court. Mediation was ordered, but it apparently failed and the case went back on the high court’s docket this month. A ruling is apparently at least a few months away.

It’s impossible to say when the Supreme Court might rule if the case doesn’t get settled, but a ruling before the end of this year seems unlikely, said Karrie Kalail, the attorney representing Perkins Schools.

The Erie County auditor’s website shows KBI owes about $225,100 in real estate taxes this year on its property of close to 130 acres, at the site at Perkins and Hayes avenues.

The Perkins school district will get about $125,000, with Perkins Township getting about $56,000, EHOVE about $11,000 and the Erie County Board of Development Disabilities about $10,200, with smaller amounts going to the Erie County commissioners, the mental health district, the health department, the county park system and senior citizen services.

The auditor’s office values the property at about $10.8 million.

The Board of Tax Appeals, however, sided with Perkins Schools in its 2012 ruling and set the value at $25.5 million.

KBI representatives say the property is only worth $2.5 million.

The end result of this battle could have huge implications for both sides.

If the Ohio Supreme Court upheld a valuation of $25.5 million, KBI’s tax bill would approximately double, Erie County auditor Rick Jeffrey said.

That bill would get a lot bigger if the Ohio Supreme Court ordered back taxes, going back to the 2008 local Board of Tax Revision ruling that the Perkins school district appealed, Jeffrey said.

“I tell people that there are three things that can happen,” Jeffrey said. “It can go up, it can go down, and it can stay the same. I really don’t know. I don’t want to guess on how they’re going to rule. We kind of have to put it in neutral until the dust settles”

The KBI plant has changed owners more than once in the last few decades.

It was originally a General Motors plant. In the 1990s, it became part of Delphi Automotive, a car parts company spun off from GM.

In 2006, Delphi announced it would sell or close 21 of its 29 plants, keeping only eight plants; the Sandusky plant was one of the 21. In February 2008, Kyklos Bearings International bought the plant from Delphi.

In August 2008, KBI sold the property to 2509 Hayes LLC for $25.5 million. KBI executives have said the sale was a saleleaseback arrangement, designed to allow KBI to raise operating capital.

The legal issue the Ohio Supreme Court must decide is whether that sale should be used to determine the property’s value.

The Board of Tax Appeals cited a Supreme Court ruling that stated a sale between a willing buyer and seller is the best way to determine value, and that ruling would apply to the KBI sale.

Perkins has lost three straight levy tries. The school board voted Wednesday to make a fourth attempt on the May ballot.

Gunner and Kalail both said the school district is willing to settle the case.

“The school district is certainly willing to look at a different value. It’s not advocating the full $25.5 million” Kalail said. “It wants to be realistic and reasonable”

Gunner said the school district never challenges the valuation of local residences, but sometimes it will challenge the value set for commercial businesses if the district’s attorney thinks it’s worth it.

In a typical year, the district will challenge fewer than five valuations. In many cases, the district intervenes when a company says its property is overvalued, Gunner said.

“That’s what happened with KBI” he said.

After the 2008 sale, KBI claimed the property was not worth the $25.5 million price, Gunner said.

Peter Zaehringer, executive director of the Erie County Economic Development Corp., said the KBI plant currently employs about 600 to 700 people.

Layoffs last year prompted speculation that KBI’s days might be numbered.

In August, however, a UAW official said KBI had accepted a GM contract to continue making wheel bearings at the plant, guaranteeing it would stay open until at least 2016.

Zaehringer, who said ECEDC has taken no position on the tax dispute, has been working closely with the plant’s management to try to preserve KBI’s viability.

“The situation is better now than it was a year ago, before the new union contract,” he said.

Before that contract they were absolutely not competitive, he said. The new labor pact gives the plant more opportunities to compete for new business.

Comments

Donegan

Another nail in the coffin. expect KBI not to hang around much longer than 2016.

Man of the Republic

Perkins better be careful or they'll be getting no dollars from that property. Either KBI will pack it up for good, or they'll annex over the Sandusky. I'm guessing SCS would be happy to cut them a deal...

JohnDorian12

Gunner trying to con anyone outta more money these days....he's pathetic

sash

How is paying your fair share a con? I think the $25 million is out of line and a reflection of inflated property values prior to the 2008 crash, but $2.5 million on 130 acres is absurd. The best estimate would probably be around 2000 before the real estate market went through the roof.

Donegan

"The auditor’s office values the property at about $10.8 million."
The school on the other hand wants money and are going to run them off quicker leaving them in a lurch 2 years from now. They cannot think ahead for more than 5 minutes because doubling taxes in one year will run them off.

goodtime1212

Well, the voter don't know how a reasonable person cant understand when the voters vote NO FOR A NEW SCHOOL THEY MEAN NO. Or how reasonable person moves money around to start the process of building a new school after voters told them no and then say they don't have enough money to run the school.

Elwood

I think my house should be valued at 10% of what I paid for it. OK, now lower my real estate taxes please.

doctorsRdrugdealer

How about the people that go set in the perkins stands pay for it! Since the good people of perkins township thought it was ok to build a million dollor stadium!

slightthroat212

putting pressure on a business that is already in trouble is not a good idea. It is the surest way to push then right out of your district and into somewhere else. Gunner is taking an awful risk here. Isn't greed getting in the way of common sense???? Can't you people in Perkins get rid of this guy? Now he is hurting those in Sandusky who work at KBI. We don't want the jobs taken away just because of YOUR school board. Tell him to stop it now.

atroublemaker

They can just move the work they do in Sandusky to one of their other plants.
Does he actually think the owners care where they make the parts?
They care about the $$$$!!!!
Make them close & put like 600 people out of their good jobs,what a genius.

AnyMajDude

OMG, What is the Perkins school system teaching their kids? Are they teaching “Entitlement”, or is it the Win at all cost mentality we see from their athletic programs. In either case the board needs to step up and make some corrections immediately.
If this is an economics’ lesson? Get ready to explain to the kids why their parents and grandparents got laid off. Get ready to explain to the business owners and auto dealerships why no one is spending any money. Explain why the local United Way fund is half of what it used to be. Take the kids over to the plant and watch as the trucks haul away the equipment. The last lesson will be to explain why there are no jobs in the local community.
The Perkins community has a superintendent that misappropriates funds, who cannot control his staff, and now he wants to wreck the local economy. Somebody needs to speak up and stop this train wreck. Oh wait a minute, I just did!!!

oldpirate

Looks to me that Perkin's Schools are simply trying to live within their means as many have suggested they do. Why shouldn't KBI pay their fare share? What if all the business industry had the same approach? You still wonder why the school's have a tuff time.

Darkhorse

This is why everyone is having to pass more levies.

BabyMomma

Gunner has got to GO!

slightthroat212

you got that right. The sooner the better

Julie R.

Why is the Perkins SD making a big deal about KBI supposedly not paying their fair share? Does the Murray law firm pay their fair share? How about the Rutas and the Hotys? How about Tygh Tone?

*correction: Why is the Perkins SD, the auditor, and the prosecutor, who oversees the auditor's office, making a big deal about KBI supposedly not paying their fair share? Does the Murray law firm pay their fair share? How about the Rutas and Hotys? How about Tygh Tone?

Julie R.

These jokes and their taxes pushed just about every factory around out of Erie County. Looks like the clowns are now trying to get rid of the few that are left.