Ford Motor Co. is contesting seven years of tax assessments by Ramsey County on its closed St. Paul assembly plant, seeking a tax rebate that could amount to several million dollars.
The 122-acre site in the Highland Park neighborhood, one of St. Paul's most desirable residential districts, is characterized as "an opportunity for redevelopment unlike any other in Minnesota" by the local real estate broker hired by Ford to market the site, given its proximity to housing, schools and shopping.
The Ramsey County assessor's office agrees, which is why it says it has assessed the value of the property since 2007 -- after Ford announced it would be closing the plant -- as a mixed-use development, following its standard practice of valuing property according to its "highest and best use."
However, in documents filed with the Minnesota Tax Court, Ford contends that other factors also should be considered to determine the property value for tax purposes. The property is zoned industrial, and the company says that's how it should be assessed -- at a lower value.
It raises the question, said Marc Manderscheid, an attorney representing Ramsey County in the case, "whether Ford is going to pan the property at trial when they're going to try to sell it for the highest possible use."
The dispute is expected to go to the state tax court for trial sometime in the next few months. A trial date was set for the case last fall, but had to be postponed when the assigned judge, Sheryl Ramstad, resigned in September. The case since has been reassigned to Judge Bradford Delapena.
The Ford site is one of several development possibilities that have emerged in recent months. From the Schmidt Brewery housing project on W. 7th Street slated for groundbreaking later this month to a proposed Wells Fargo consolidation in downtown Minneapolis, "people are sniffing around" for opportunities, St. Paul-based developer Jim Stolpestad said.
"The sense is that we've been on the upswing for the last couple years or so and the economy continues to stabilize and improve a little," he said. "Developers tend to be optimistic or they wouldn't be in the business."
Mixed-use development typically refers to a neighborhood-style blend that may include housing, business, retail and light industry. Most of St. Paul's plans and development scenarios since 2005 say the Ford site is best suited for such a development mix.
Ford argues that the property long has been zoned industrial, that neither the city nor the company has sought recent zoning changes and that the county's assessment should be based on what is "legally permissible" on the site. The company also argues that the property's potential pollution and the "stigma of environmental contamination" should lower the property's market value.
County Assessor Stephen Baker said Ford has continued to pay taxes on the disputed assessments in the past few years but is seeking "a substantial refund" that he said amounted to more than $5 million.
Baker said the county has made attempts over the years to settle the dispute, "but the gap between our two positions was too great for me to feel that settlement ought to be a resolution." Two years went by without a response from Ford, he said, "and we were uncomfortable in letting this continue to stack up."
Becky Sanch, a Detroit-based spokeswoman for Ford, said it is company policy not to talk about ongoing litigation. "We're always willing and interested in potentially settling these cases prior to litigation," she said.
A long battle
The tax dispute has roots going back more than 90 years, when St. Paul approved its first zoning code.
According to Ramsey County, the Highland Park area -- including the future Ford plant site -- was zoned residential in 1922, making it available for single-family homes, duplexes, schools, churches and other public uses.
Then Henry Ford announced plans to build an assembly plant there, drawn in part by the site's hydroelectric potential. "It is the finest location in the country," he reportedly said.
Ford purchased 160 acres south of St. Catherine Avenue (later renamed Ford Parkway) and west of Cleveland Avenue. A month later the City Council rezoned the tract as "heavy industrial."
As the years passed, the plant property was rezoned to light industry and land along its edges was opened to offices, commercial and residential uses, such as the Highland Village Apartments and Lunds shopping center.
An analysis of the Ford site in 2005 for Ramsey County's board of appeals and equalization determined that "a mixed commercial and residential project ... would create the maximum return for the subject property" based on comparable land sales and its location in "a highly desirable neighborhood."
Demolition starts this year
Baker, who has been county assessor since 2001, said Ford first appealed its assessment in 2006. The county valued the property at $71.8 million in 2007 and dropped it to $58.1 million after the economy tanked in 2008. This year it was assessed at $40 million.
Manderscheid said the county believes it's highly likely that the buyer of the Ford property won't use it as an industrial plant. The main factor in deciding the property's value, he said, should be what price you can get from a buyer who's aware of its potential.
Ford plans to begin demolition on the property this year, tearing down the main assembly and paint buildings and a training center built in 1999.
Richard Palmiter, a local real estate broker at CBRE Inc. hired by Ford, said marketing of the property will begin after environmental testing is completed and the Minnesota Pollution Control Agency has approved a remediation plan.
"It is too early now to discuss future land use, possible use restrictions and users," Palmiter said.
Kevin Duchschere • 651-925-5035