By VICKI URBANIK
If its acquisition of bankrupt Bethlehem Steel Corporation goes through,
International Steel Group will voluntarily pay local units of government an
estimated $8.2 million this year and next while dropping all pending tax
appeals that could have forced taxpayers to refund the steelmaker up to $34
In addition, local taxing units will receive a settlement of $10.8 million
in back taxes. Though Bethlehem owes nearly $30 million, the amount is
higher than what many officials had expected out of bankruptcy court.
Those are among the terms in a major tax agreement tentatively reached in
recent days between ISG and the 11 taxing units impacted by the Bethlehem
bankruptcy, most notably the county government, Duneland Schools,
Westchester Public Library and Burns Harbor.
The tax agreement is expected to contain additional provisions directly
affecting the town of Burns Harbor, but as of late this morning,
negotiations on that language were still underway.
The agreement is expected to be presented tonight for the Porter County
Council’s formal approval. Other taxing units will be asked to sign off on
the deal as well.
The public release of the tax agreement, which officials have so far kept
confidential, comes just one day before the Bethlehem Board of Directors is
due to take a vote on ISG’s acquisition bid of the Burns Harbor plant and
other Bethlehem assets.
This morning, the tax agreement was lauded as representing the best deal
that local taxing units could hope for, given certain realities.
Under the worst case scenario, local government units could face another two
full years of no tax payments on the Burns Harbor plant. Legally, Bethlehem
is still responsible for property taxes payable in 2003 and 2004; ISG,
assuming it becomes the new owner, won’t have to pay taxes until 2005.
Given Bethlehem’s bankruptcy and financial state, Porter County Council
attorney Dave Hollenbeck said: “The odds of them paying us anything are slim
Bethlehem’s tax bill from 2002, which wasn’t paid, totaled $19.6 million.
ISG, by contrast, has agreed to pay an amount estimated at $8.2 million this
year and next in lieu of those tax payments.
ISG tax consultant Guy Gadomski said the payment is based on the taxes that
Bethlehem would have paid on its real property (buildings and land) only.
When asked why ISG has offered the payment when it isn’t legally obligated
to, Gadomski said ISG is aware of the financial hardships that the Bethlehem
bankruptcy has had on local taxing units. “It’s important that these
entities remain viable,” he said.
Personal property (equipment and machinery) used to make up the bulk of
Bethlehem’s tax bills, but is expected to take on a significantly lesser
role under an ISG acquisition. While Bethlehem’s annual tax bills once
topped $20 million, ISG’s total bill has been roughly projected to be half
Hollenbeck noted that if the tax agreement is rejected, which is still
possible, or if the Bethlehem board turns down ISG’s offer tomorrow, then
the provisions tentatively agreed to by the local units in recent days will
have to be readdressed. But under the current situation, the tax agreement
is a benefit for local government, he said.
“Under the circumstances and given the facts we’re dealing with ... I
believe it to be an excellent resolution for the local units of government,”
Duneland Superintendent Dr. Dirk Baer said the provision in the tax
agreement that is the most attractive to the Duneland Schools is ISG’s and
Bethlehem’s offer to abandon all pending tax appeals.
Bethlehem has several tax appeals at the county and state level dating back
to 1996 challenging its assessed valuation. It has now been estimated that
if the appeals are granted in full, local units may have to refund Bethlehem
up to $34 million.
The proposed agreement abandons all pending appeals. Baer said this
provision removes a big uncertainty for the school system. “You can’t
squeeze blood from a turnip,” he said of the prospects of the Duneland
School having to issue Bethlehem or ISG a refund.
Baer said overall, the tax agreement represents the best deal for the local
“It is not what we hoped for. Obviously, what we hoped for was 100 percent,”
both in back taxes and this year’s and future tax payments, Baer said.
But he added: “Realistically, I think it was the best we could do.”
The $8.2 million payment in lieu of taxes will cause some hardship this year
for Duneland, Baer said, since this year’s budget was based on Bethlehem
resuming full payment of its taxes.
He said that clearly, additional legislative help for the schools will be
necessary. The settlement involving the back taxes will be used to repay the
state loan, and possibly, so will Duneland’s share of the $8.2 million.
“We’ll keep the belt tightened,” he said.
As of this morning, negotiations were still underway involving language
affecting Burns Harbor. ISG consultant Doug Schrader of Public Affairs
Associates said he is optimistic that a resolution will be reached very soon
with the town that will be to the town’s benefit.
“We are working with the folks at Burns Harbor and progress is being made,”
he said. “There are a number of issues still under negotiation.”
He noted that Burns Harbor, which used to get 85 percent of its tax levy
from Bethlehem, has scaled back its budget to the bare bones and has unique
needs. ISG is working hard to address the town’s concerns, he said.
“These are the kinds of things any good corporate citizen cares about,” he
said. “....They don’t want to see the town of Burns Harbor go under.”