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Porter County Council hears of new discrepancies in secretive lease for prosecutor unit

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By LILY REX

At its meeting Tuesday night the Porter County Council heard that a third-party assessment professional found office space leased by the County for the Porter County Prosecutor’s Child Support division at 15 N. Franklin Street is more than 1,000 square feet smaller than some records state, according to an application for a tax exemption.

The space--which was 3,200 square feet according to the original lease and 3,972 according to an application for a tax exemption--is actually less than 2,800 square feet.

The County has leased space for the Prosecutor’s Child Support division at 15 N. Franklin Street since 1999. The original lease has been extended several times since, most recently by Commissioner President at the time John Evans, R-North, at a January 21, 2014 Commissioners meeting where it was not on the agenda and one Commissioner was absent. At the time, the lease was several years from expiration, and the extension appears to have been secured at an above-market value price in the absence of a fair market rent analysis. The owners of the property have also benefited from a tax exemption since 2009.

The Lease

15 N. Franklin Street was bought by Courtney Morgan LLC in 2004, whose registered business agent with the Indiana Secretary of state was Charles Williams at the time of the extension. Charles Williams, also known as Chuck Williams, is a Valparaiso businessman and the Treasurer of the Indiana Republican Party.

Later in 2014, after the secretive extension current Commissioner Jim Biggs, R-North, who was on the County Council in 2014, termed “lucrative,” Courtney Morgan LLC sold the building to its current owner, 15 Franklin LLC, whose registered business agent is William Ferngren, a Valparaiso attorney.

Until receiving a May 29 letter that revealed that the lease was valid through 2024, and a rent increase of 2 percent per year begins in 2019, the current Commissioners and County Attorney Scott McClure were under the impression the lease expired this year, and they could soon move Child Support into the old jail building they acquired in April for $3.6 million as part of their $30 million capital improvements plan.

At least two members of the County Council--Dan Whitten, D-At-large, and Sylvia Graham, D-At-large--have said that their vote to release funds for the jail purchase hinged at least partly on moving the Child Support office to save money on the lease, which has cost the County $87,757.32 annually for the past four years.

The early extension of the lease in 2014 was supposedly a response to $30,000 in upgrades to the office paid for by the building’s owner, but has raised the ire and scrutiny of the Council, Council Attorney Harold Harper, the Commissioners, McClure, and the Property Tax Assessment Board of Appeals (PTABOA), which granted a tax exemption on the property.

At the County Council’s meeting Tuesday, Whitten renewed his concern about the way the lease was extended, the price the County pays for it, and how it affects taxpayers. “It’s problematic. Very problematic,” he said.

“I have great concerns that the square footage isn’t jibing up on all three of these venues, for lack of a better term, not just because it’s county money, but because there’s federal reimbursement money here too,” Whitten added.

The County is reimbursed with federal funds for two-thirds of the cost of the lease, according to McClure.

The Exemption

In addition to the extension being approved at an above-market price by only two Commissioners at a meeting where public notice of the discussion was not given, the owner of the property receives a tax exemption granted by PTABOA. According to County Auditor Vicki Urbanik, the building’s owner has gotten nearly a full year’s rent in tax breaks since 2009.

According to records from Porter County Assessor Jon Snyder, Williams took advantage of an Indiana Statute that allows property owners who have property leased by municipal entities to file for an exemption on their property taxes.

Snyder said in June that the exemption appeared to be in order, except for the discrepancy in square footage listed on the lease and the application for exemption. The lease states that the County is using 3,200 square feet of space, but the application says the County uses 3,972 square feet.

Soon after, Snyder reached out to 15 Franklin LLC to have them remeasure the square footage of the space Child Support uses. They were given the standard 30 days to comply with the request.

“I’m not saying it’s illegal,

but it’s probably very close.”

At the Council meeting Tuesday, Whitten called on Snyder to give an update on his progress with the property. Snyder said he retained the services of Scott Potts, an assessment professional from Assessment Analytics, Inc. who has contracted with the County before, for a third-party evaluation of the property at the behest of PTABOA. In a letter to the Council dated July 30, Snyder said he finds Potts’ work very accurate, and his office has “relied upon his expertise at complex sites, such as hospitals, mills and big box type retail locations.”

In his letter, Snyder also said he was contacted by Sharon Allen, who claimed to be a property manager of 15 N. Franklin. Earlier this year, Williams was still managing the property. Lately, the Assessor’s office and Potts have communicated with Allen.

Potts reported he had access to the whole property. He remeasured everything and concluded that Child Support uses only 2,758 square feet of the space.

Potts said Allen supplied blueprints with shaded portions indicating the space leased by the County. When he measured, he found those drawings inaccurate, and the inaccuracy was limited to the Prosecutor’s Child Support space.

“The only oddity of this building was the Prosecutor’s office, and it was quite odd,” he said. Potts added that “Nothing else varied by more than 20 square feet” in the building, even despite odd angles in the second-floor lobby.

Potts said the other units in the building were measured for leased space using interior measurements, but it appears Child Support wasn’t.

The exterior walls are two feet thick, Potts said. If an odd storage area and the exterior walls are figured in as leased space, then the number starts “getting in the ballpark” of 3,200 square feet. According to Potts and Snyder, using exterior measurements for leased office space is not common practice.

Council Vice-president Jeremy Rivas, R-2nd, asked if the storage area was part of the space leased by the County. Potts said it was shaded on the blueprints Allen gave him, but he said it was “a dead space at the top of the stairway going up from the basement.” He added, “There’s lots of spiders in that space. I don’t think anybody goes there. I may have been the first one to visit it in a while.”

Whitten asked Potts if he saw any signs of the $30,000 in improvements the lease extension promised. Potts said he couldn’t know for sure.

“I can’t find any indication that walls were moved or not moved because of the way the building is constructed. If you were to move an interior wall, there would be no scarring to the interior walls or ceiling. There’s no way to really tell,” he said.

Rivas doubled-back, “Bottom line is we’re only using 2,758 square feet. The contract’s for 3,200.”

Councilman Jeff Larson, R-At-large, said the lease looks more and more suspect to him, as if laws have been stretched. “We’re probably beyond stretching,” he added. “I’m not saying that it’s illegal, but it’s probably very close.”

Larson also noted that litigation on the matter could get very costly despite clear problems with the paperwork, to which Whitten agreed. “I think we need to make some decisions about how far down the litigation road we’re willing to go,” Whitten said.

“We do want the resolution that is quickest and best for the taxpayers,” Whitten added.

Rivas said, “I think we need to coordinate an executive session with the Commissioners because this is something I am not interested in moving forward with.”

The Council expects to meet in executive session to discuss the legality of the lease and the potential for litigation surrounding it. Whitten also suggested that the Council ask the Commissioners how soon they can move the Child Support office. In the meantime, Whitten, Rivas, Larson, and Council President Andy Bozak, R-1, were vocal about having reservations about allocating any more money for the lease at the Council’s upcoming budget hearings.

Snyder said the earliest PTABOA could take any action on the matter would be mid-September, as all involved parties would have to receive 30-days notice. Snyder said he will keep the Council updated.

 

Posted 8/3/2018

 
 
 
 

 

 

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