An unusual $47.8 million increase in the property tax assessment of a Luzerne County cocoa product manufacturing plant will be hashed out in county court, according to attorneys and court filings.
The increase was not triggered by new construction because the Cargill Cocoa and Chocolate building in Hazle Township has had the same footprint since the county valued the property at $17.17 million in 2009, when it was erected by prior owner Archer Daniels Midland, county records show.
Instead, the county assessment appeals board raised the property’s value to $65 million assessment based on a challenge filed by the Hazleton Area School District arguing the value was too low — a strategy known as a “reverse appeal” that can be exercised by school districts and municipalities.
With the board’s increase, Cargill’s total real estate tax payment would increase from $275,444 to $1.04 million annually based on current school, county and municipal tax rates.
An increase on the Cargill plant won’t benefit taxing bodies until the property’s tax-break status expires on Oct. 7, 2019, or a decade after the structure was occupied, officials say.
All three taxing bodies — school, county and local — had approved the property for the state’s Local Economic Revitalization Tax Assistance program, also known as LERTA, in 2006, which means the owner pays taxes on land only for 10 years after occupancy. The appeal board increase impacted only the structure portion of the property’s assessment, not the land.
The company pays a total $53,270 in real estate taxes annually on the land, which remains assessed at $3.3 million, records show.
Conflicting views
Local attorney Ray Wendolowski, who sought the increase on the district’s behalf, has defended reverse appeals, saying they prevent taxing bodies from being forced to live with under-assessed properties until counties decide to conduct a reassessment of all properties. Property owners can seek reductions annually if they believe their values are too high, he has said.
Critics have maintained taxing bodies should not have the power to pick and choose properties for reconsideration out of the blue.
Contacted this week, Wendolowski praised the county appeal board’s decision to raise the assessment of the cocoa plant in the Humboldt Industrial Park and another property in Wright Township — a warehouse in the Crestwood Industrial Park owned by Icon Owner Pool 4 Northeast/Midwest, which is affiliated with Chicago-based GLP US Management.
Wendolowski pointed to the most recent purchase prices of both properties.
Ambrosia US Newco LLC, which is affiliated with Cargill, bought the cocoa plant from for $65.1 million in July 2015 from Archer Daniels.
The Wright Township property, which county records list at the address of Philips Lighting, was purchased for $22.77 million in March 2015 from Keystone Operating Partnership, county records show. The county assessment appeals board increased the property’s value from $10 million to $22.7 million, an increase of $12.7 million, following a recent reverse appeal filed by Wendolowski on behalf of the Crestwood School District, which has started filing reverse appeals this year.
“Clearly the properties transferred ownership for amounts significantly greater than the amounts they were assessed at, and I think the board was correct to increase the assessments to at or near the sales price because the best evidence of value is what someone is willing to pay for a property,” Wendolowski said.
Both property owners are contesting the increases in the county Court of Common Pleas.
Wendolowski said he is prepared to make his case.
Attorney Francis Hoegen, who is representing Cargill, said he will “vigorously defend” his client against the increase.
“We have evidence which will establish the true fair market value,” he said, stressing the purchase price was “far beyond what the real estate is worth.”
The purchase of the Hazle Township property was part of Cargill’s acquisition of Archer Daniels’ global chocolate business for an enterprise value of $440 million, the company’s website said. When individual allocations in such large-scale purchases are split up on deeds, the amounts assigned to each piece of real estate often don’t correlate to fair market value, Hoegen said.
Other buildings in the vicinity of the Cargill property have been assessed at a third of the $65 million value, even though they are about the same size, age and condition and were constructed with similar materials, Hoegen said.
“Our building is three times more than others. How can you justify valuing our building at this amount?” Hoegen said.
New Jersey Attorney Glen-David Schwarzschild, who could not be reached for comment, filed the court challenge contesting the new assessment of the Wright Township property.
Top values
Cargill’s new assessment boosted the property’s standing among the top highest valued commercial properties in the county and was instrumental in allowing Hazle Township to surpass Wilkes-Barre as the county municipality with the largest tax base. The township’s tax base is $50.1 million higher than the city’s.
The Wright Township property’s new $22.7 million value also moved it into the top 20 highest-valued properties.
The nuclear power plant in Salem Township, formerly operated by PPL, remains the county’s highest assessed commercial property, with a value of $248 million and a total real estate tax bill of $4.5 million annually.
The Mohegan Sun Pocono casino’s new $152.5 million tax assessment makes the Plains Township complex the second highest valued commercial property in the county when its multiple parcels are added together, county records show. The casino is challenging its assessment in county court.
Among the other top commercial assessments in the county’s list:
• Wyoming Valley Mall in Wilkes-Barre Township, $76.1 million.
• American Eagle Outfitters distribution center in Hazle Township, $46.1 million
• TJ Maxx distribution center in Pittston Township, $43.1 million
• Amazon warehouse in Hazle Township’s Humboldt Industrial Park, $40 million
• Lowe’s distribution center in the CenterPoint Commerce and Trade Park in Jenkins Township, $28.6 million
• Wilkes-Barre General Hospital in Wilkes-Barre, $27.9 million
• Sears Logistics Services in the Hanover Industrial Estates, Hanover Township, $25.6 million
• Arena Hub Plaza in Wilkes-Barre Township, $23.9 million.
