Mayor vetoes council-approved PILOT ordinance

Action would have let owner of low-income housing project pay fees instead of city taxes

By: Brian Louwers | Warren Weekly | Published August 19, 2013

WARREN — A plan to develop 42 properties in south Warren for potential low-income renters and buyers remained in limbo Aug. 19 after Mayor Jim Fouts vetoed recent City Council action that blessed the controversial project.

In a letter to City Clerk Paul Wojno and copied to council members, Fouts cited concerns over fairness and the potential for “favoritism” as reasons for his decision to veto the passage of a payment in lieu of taxes (PILOT) ordinance approved by the council with a 6-1 vote at a special meeting July 30. Council member Kelly Colegio cast the lone vote against it.

The vote on the ordinance was the culmination of a process that began last December when the intended developer, Beresh Group Inc., sought the council’s support for its effort to seek tax credits through the Michigan State Housing Development Authority. The properties in Warren — between Van Dyke and Campbell, and Stevens and Toepfer — were part of more than 600 formerly tax-reverted parcels purchased by a single investor through the county’s tax auction last summer.

The plan centers on the construction of single-family homes on vacant lots and the rehabilitation of some existing houses backed by MSHDA tax credits, if approved. The PILOT ordinance would have also allowed property managers to compensate the city through a proposed 6-percent fee from rent paid by tenants, as opposed to traditional property taxes.

Fouts had remained silent as the council considered the plan, but the mayor announced the veto after the City Council’s discussion of the matter turned raucous Aug. 13 when Council Secretary Scott Stevens unsuccessfully sought to rescind his vote in favor of the project and Colegio pressed the mayor to weigh in on the issue. 

In an unusual move, Colegio left the council table and addressed her colleagues from the podium during audience participation to call on the mayor to veto the plan.

Colegio, and eventually Stevens, argued the plan was fraught with ambiguities and issues about the long-term status of the homes as rentals or rent-to-own properties in a city with currently more than 5,000 homes for lease.  

“My challenge to you as mayor, you can’t sit silent on it,” Colegio said. “You’re our neighborhood mayor. If you don’t take some type of stance, it will be the rental neighborhood mayor.

“Low-income rental in a whole section of our city? Shame on everybody,” Colegio added.

Addressing the request to reconsider his vote in favor of the project, Stevens said the vote taken July 30 should have been nullified because the development partnership listed in the PILOT ordinance, Warren Homes Limited Dividend Housing Association Limited Partnership, was not registered with the state when the vote was taken.  To illustrate the point, Stevens said he paid the state’s Department of Licensing and Regulatory Affairs $10 to register the name himself after the vote at the special meeting.

“This should be null and void, it shouldn’t be an issue, because we took action on a limited partnership that didn’t exist,” Stevens said. He added that he later received a letter of clarification from city attorneys about the discrepancy but that he hadn’t had an opportunity to explore who was involved in the partnership.

Stevens further suggested that the PILOT ordinance would violate the city charter because the owner, Macomb County Properties LLC, owes back property taxes on some of the properties it owns. He also said the 15-year term of the proposed ordinance exceeded the 10-year limit approvable without a voter referendum.

In December, developer Bruce Beresh made a presentation before the City Council in which he promised a “first-class product” that amounted to a “comprehensive improvement” to various blocks in south Warren.

Beresh and an attorney for Macomb County Properties pledged to answer any and all questions asked by city officials but Colegio and Stevens said many of their questions remained unanswered and that they felt rushed to give their approval.  

“I didn’t want to reconsider. I wanted this to be a successful venture for the city,” Stevens said. “As it turned out, it isn’t what it was professed to be.”

Colegio later added, “I don’t even know who the partners are. Even if Mother Theresa herself was the owner of that company, the idea itself, for council to target an area for low-income housing and try to sell it to the residents that we’re trying to save your neighborhood is absolutely ludicrous. Shame on them for trying to sell low-income housing as a salvation for the south end of the city.”

Warren City Council President Cecil St. Pierre ordered resident Dean Berry removed during the meeting’s audience participation segment after several residents, including Berry, blasted officials for their handling of the proposed ordinance and the plan to bring low-income housing to south Warren.

St. Pierre, who supported the plan, maintained the project still needed MSHDA approval and that any lingering issues could be addressed later on.

“The tax credits are going to drive the proposed project. Before anything happens, there is a long road ahead of us,” St. Pierre said. “No one should get upset until the development agreement goes forward.”

In announcing his veto, Fouts said he took issue with the concept of accepting fees from rentals as opposed to property taxes.

“Businesses and homeowners pay property taxes to the City based on taxable values. To make a fee payment to the City instead of paying property taxes smacks of unfairness and favoritism to certain groups,” Fouts said. “The property tax concept is based on the theory of fair treatment of each taxpayer. That policy must be preserved at all costs; otherwise, the City opens itself to litigation based on unfairness and preferential treatment.

“While I see merit in constructing new homes in our City’s older neighborhoods, my over-riding consideration must be fairness in taxation. PILOT clearly violates this,” Fouts added.