By Jim Bloch
The city of St. Clair will attempt to nullify the commercial rehabilitation tax break it gave Jeff Katofsky in 2019 to turn the old middle school on Sixth Street into workforce housing and a commercial bakery.
“I would like to make an official statement and say publicly that we’re going to be moving forward to revoking that exemption,” said City Superintendent Quentin Bishop at the regular meeting of the city council Nov. 20. A recording of the meeting was posted on YouTube. “To do that, there’s a few steps we need to take.”
One step is that the council will have to pass a resolution endorsing the revocation of the tax break.
Katofsky is the California-based attorney who headed the redevelopment of the St. Clair Inn. The inn, which was still not finished, opened late in 2019, just weeks before the onset of the pandemic, at which point construction stopped.
Early in 2022, with more than $20 million in debts, Katofsky’s local properties, including the Harrington Inn in Port Huron, were put in receivership under Amicus Management of Grand Rapids. The St. Clair Inn eventually reopened under the receiver, but the renovation work on the hotel is still not finished.
The old middle school was considered to be functionally obsolete, one of the conditions under which a commercial rehabilitation exemption certificate may be granted. The school was constructed in 1921-22, replacing the old Union School, built before the end of the Civil War on the same property. The building’s critical systems — plumbing, electrical, IT and HVAC –were in need updating and the building needed a new roof.
The Economic Development Alliance of St. Clair County expected Katofsky’s rehab of the school to generate 20 permanent administrative jobs and six kitchen jobs, plus construction jobs.
Since the school was exempt from paying property tax, the city had to establish a market value for it before Katofsky could purchase it. The city assessed the value of the land at about $224,000 and the building at $252,000.
Under the commercial rehab exemption, taxes on those values were frozen for 10 years and the new value created during the rebuild would not be taxed until the decade was up.
Katofsky said he would construct 64 new efficiency apartments serving workers of the St. Clair Inn and the Harrington Inn, a new bakery serving both inns and a proposed Starbucks in the old gas station across from the inn, as well as other enhancements.
Geoff Donaldson, a planner with St. Clair County Metropolitan Planning, estimated at the time that Katofsky’s group will spend $3,750,200-$4.3 million on the project. Over the length of the tax break, Katofsky would have saved about $1.5 million.
The taxing jurisdictions — the city, county, schools, etc. — were to have received taxes flowing from the frozen value which had previously been tax exempt.
“He has not held up his end of the bargain in terms of rehabilitating that building ,” said Bishop.
The city council could approve a similar tax break for a new owner of the property, Bishop said, if one emerges.
“We’re not seeing any revenue,” Bishop said. “We’re not seeing any type of rehabilitation. He’s not or the company’s not keeping their end of the deal.”
Bishop said he would have to get the exact amount that Katofsky owed from the city assessor.
“We’ll be seeking a full reimbursement for the amount that we’re owed,” said Bishop.
“Enough is enough with this particular exemption.”
Jim Bloch is a freelance writer based in St. Clair, Michigan. Contact him at bloch.jim@gmail.com.
