Yahoo Finance Lake County challenges U.S. Steel assessment
The Lake County Council agreed to move forward with what was described as an unprecedented attempt to challenge the $108 million property tax assessment for U.S. Steel Corp. in Gary.
Lake County Assessor LaTonya Spearman appeared before the council Tuesday asking for approval of her request to a petition to review the assessment of U.S. Steel, essentially challenging the value assessed by the state. The request must be delivered to the Indiana Department of Local Government Finance by Friday.
“Although U.S. Steel’s assessment is believed to have been undervalued, it has not been challenged since the 2001 determination,” Spearman said.
The challenge to the steelmaker’s value has been building up for almost two decades, ever since the state moved in 2001 to transfer assessment of the city’s three largest industries from the local assessor to the DLGF. In 1999, a state law was enacted that allows industries such as U.S. Steel to self-assess personal property.
The legislation dealt a devastating financial blow to the city by lowering the assessed value of the steelmaker from about $269 million at the time to about $90 million, shifting more of the tax burden to local residents who saw their bills skyrocket. The value was upheld in 2003. As a result, the state established property tax caps in 2008, which were enshrined in the state constitution in 2010.
Unlike other property classes across the county, Spearman said the steelmaker’s real property value has remained constant for the last 20 years, hovering around the $100 million range since. The petition to review only pertains to the real property at the site.
“I think it’s at least reasonable for us to challenge this assessment,” Spearkman said.
Spearman said her office has been in contact with counsel from U.S. Steel for an independent appraiser to assess the property, a necessary part of the challenge. She said the steelmaker has been cooperating and has set a date for the appraiser to gain access.
“If we are unable to clear the first hurdle, this matter dies,” Spearman said. There is no opportunity to appeal the decision to a higher authority.
In order to move forward with the challenge, Spearman said she has to submit substantial evidence the challenge will be successful. She cited the 2021 sale of two Cleveland Cliffs’ properties, one for $21 million and the other for $21.5 million as the baseline for value of the land on which U.S. Steel sits.
The land in those sales was valued at $233,695 per acre. U.S. Steel sits on about 3,100 acres. When looking at U.S. Steel, those prices would suggest the land alone is worth more than the entire current assessment. The pending $14 billion sale of the steelmaker to Japanese firm Nippon also helps establish value.
“We’ve done the work we believe is necessary to move forward,” Spearman said.
Spearman said her office was given preliminary notice March 1 about U.S. Steel’s $108 million assessed value for property tax year 2024 payable in 2025. When final notice came a month later, her office was given about 45 days to gather information and determine if it would seek the council’s help in approving the necessary resolution to allow her to challenge the value.
Spearman said she began to engage Gary Mayor Eddie Melton in March to determine if the city was willing to participate in the action.
“Careful consideration has been given to the matter, and in good faith, we desire to initiate a petition for review,” Spearman said.
The expected cost of the challenge over the duration of time the matter takes is $500,000. Melton, she said, has committed to covering Gary’s share of the cost, which would be 93%.
In a letter to Spearman dated May 13, Melton confirms his commitment to the effort, saying the city is willing to pay its pro-rated share of legal fees and costs related to the appeal of the DLGF assessment of U.S. Steel, which will be outlined in a Memorandum of Understanding.
“By this letter, the City is requesting to be provided with invoices and or cost reports on a monthly basis in order to monitor and properly budget for the cost of this litigation,” Melton wrote.
Melton said he agreed with Spearman that the U.S. Steel tax assessment needed a second look.
“It’s important because although U.S. Steel, as Gary’s largest land owner is the city’s largest single tax payer in terms of the overall amount that they pay, U.S. Steel actually pays the lowest assessed value per acre of any tax payer in Gary,” Melton said in a statement. “While the average tax value per acre of all commercial and residential taxpayers in Gary is approximately $3,843 per acre, U.S. Steel’s property in Gary is assessed at approximately $1,374.00 per acre. That amounts to about a $2,469 per acre subsidy from residential and commercial taxpayers to the benefit of U.S. Steel.”
Melton said the city’s budget includes line items to fund litigation, and if additional funding is sought for this tax appeal, he will revisit the funding issue at that time.
Councilman Ted Bilski, D-Hobart said he wholeheartedly supports the effort. He said the state legislature created a situation in Gary that transferred the property tax burden from industrial to residential properties and left the city in a financial situation where it could not rebuild.
“It’s unfair to the city of Gary,” Bilski said, adding Gary has an integrated steel mill in its backyard and has the same assessed value as the town of Schererville with just 30,000 residents. Bilski said if the steelmaker doesn’t want to pay its fair share and ultimately leave, the city and county have other options for the nine miles of lakefront it occupies.
“It’s unfair a resident in Miller pays more per square foot (for land) than an integrated steel mill,” Bilski said.
Councilman Randy Niemeyer, R-Cedar Lake, questioned the late timing and the lack of detailed information, such as what impact a successful challenge would have on the community and the county as well as the steelmaker and other industrial properties along the lakefront.
“This is a huge deal we just got for consideration last night,” Niemeyer said.
Councilman Charlie Brown, D-Gary, said he was serving in the state legislature when the changes to how U.S. Steel was assessed were approved. He said he was sure everybody would like the ability to self-assess when it comes to taxes. The impact of the legislation has been particularly hard on Gary and other large communities.
“I am very supportive of this. Many of us still view this as unfair…,” Brown said.
Spearman said if the challenge clears the first hurdle, she will be able to put a team in place to gather more detailed information that would answer Niemeyer’s questions.
“When it was challenged 20 years ago, I don’t know what type of care, what type of support the Calumet Township assessor got,” Spearman said, adding in reading articles from the time it did not appear like they got much. She said her office, with the support of the council and Gary, is in a better position to move forward and be successful.
Councilman Ronald Brewer, D-Gary, said he too supports the challenge. As a Gary city councilman for 12 years, Brewer said he knows the negative impact to the city by having valuable property like U.S. Steel under assessed. He said the lack of adequate funding from underassessment for a city like Gary, which has to deal with the impacts of large industry and major highway systems, a safety issue.
“Those dollars I think would greatly serve all of us in Lake County,” he said.
“I actually believe it would be irresponsible not to do this,” Spearman said.
The assessor has to establish a reasonable likelihood of success before the matter may proceed. If this requirement is not met, the petition for review will be dismissed. If the petition is dismissed the only cost will be for the appraisal, which will be paid from the assessor’s 2024 budget.
Unique to Lake County’s large industrial facilities are the requirements for initiating an appeal, Spearman said. The Lake County assessor may not expend public money appealing an assessment under the statute unless three requirements are met before a petition to review is submitted to the Indiana board.
The assessor must submit a written estimate of the cost of the appeal to the county fiscal body, in this case, the council. The council must adopt a resolution approving of the county assessor’s proposed expenditure to carry out the appeal. Finally, the total amount of the proposed expenditure must be in accordance with an appropriation made by the council in the manner provided by law.
With the unanimous approval of the resolution Tuesday Spearman said her office was able to meet all three requirements.
“This is uncharted territory, as this would be the first time a challenge of this nature will have been brought,” Spearman said.
