2012-04-12 / Front Page

Manistique City Council approves delinquent tax payment plan

Clears hurdle in paper mill bid process

With the future of Manistique Papers still uncertain, action by the Manistique City Council Monday helped clear a major hurdle. With the bid deadline fast approaching, the city council approved a payment plan for back taxes which allowed negotiations on the sale to continue.

According to MPI’s General Manager Jon Johnson, negotiations on the sale hit one of several road blocks late in the game when their restructure plan did not include the payment of $614,270.10 in back taxes owed to Schoolcraft County and the city of Manistique. The total included $228,773.70 in outstanding county taxes and $385,496.40 due to the city.

Solving the tax issue was a necessary step to exit bankruptcy and one that Johnson, said was a “dealbreaker” in negotiations with their one potential buyer.

According to Johnson, seven groups have expressed interest in buying the mill, five had toured the facility at one point or another over the last seven months, and they had communications with others as recently as late last week.

But Johnson anticipates only one bid on the sale.

In order to reach a compromise on the delinquent tax issue, both the city and the county were approached with the concept of accepting payments on the past-due taxes over a period of 24 months.

Johnson said, the county agreed to the concept but later found out that they legally cannot extend the payment period beyond February of 2013 – the time at which the past-due taxes would become come a lien on the property.

Because the city was “chartered,” they had the flexibility to facilitate the request and did so in a unanimous vote of the council Monday night.

The schedule calls for payments to the county of $23,000 per month from May 2012 through January of 2013, with a final payment of $21,773.70.

To facilitate those payments to the county, the city will receive just $5,000 per month through January 2013 and $6,000 in February.

When the county tax bill is satisfied, the monthly payments to the city will increase to $23,892.60 until that bill is also paid off in April of 2014.

In addition to the payment schedule, city manager Sheila Aldrich said the 2007 tax abatements currently in place will carry over to the new buyer once the transaction is closed. “The new owner will be able to take advantage of tax abatements currently in place at the mill and there is dollars available to cover future investments” Aldrich said.

In addressing the issue, Mayor David Peterson informed council that the Downtown Development Authority had made the motion to recommend approval of the request at a special meeting held earlier Monday.

Peterson also said they had several discussions with Johnson over the weekend and again were told the request came from the potential buyer, and would be part of a purchase agreement should one be executed.

“We are between a rock and a hard place,” Peterson said. “We go into this with the understanding this will have an effect on the city and our employees, but because it is a deal-breaker, we need to get it done in order to save jobs at the mill and any other jobs that may be added in the future there.”

Peterson thanked Johnson and the employees at the mill for all their efforts to get to this point, calling it a “win-win for everyone involved.”

Johnson returned the favor, thanking the city for its support.

“We have been working on this for quite some time,” Johnson said. “It’s a heck of an ordeal to go through. A lot of people have made concessions. Employees at the mill have changed work schedules and agreed to other concessions that will also affect them. Along with their efforts and those by the city and mBank, we are hoping to get this deal done and start looking towards the future.”

Johnson said they are anticipating a purchase agreement to be finalized as early as Wednesday (after press time).

The agreement, which calls for the buyer to issue a non-refundable deposit of 10 percent of the purchase price, is subject to approval by the U.S. Bankruptcy Court in Wilmington, Del.

It is also contingent on several state and environmental permits being transferred to the new company.

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