July 15, 2016 11:02 AM

An ongoing legal battle between the developers of Ambassador Town Center and a group of wealthy landowners appears to stem directly from a Louisiana tax law loophole that can be exploited — if you know the game and how to play it.

Concrete is recently poured for infrastructure improvements at Phase II of the PILOT-financed project that is the subject of a legal dispute pitting two prominent local families against a major development company.
Photo by Robin May

Lafayette’s newest and most ambitious retail development in years opened this spring to much fanfare, but the business relationships that built it have unraveled in an acrimonious legal fight. A counter suit filed recently sheds light on its likely origin: defining agricultural land for tax purposes.

In June, a pair of companies — GBB Properties and DBR Properties — filed suit against the Ambassador Town Center developers led by Stirling Properties, accusing the developers of reneging on an agreement to add infrastructure improvements to 65 acres GBB and DBR own adjacent to Ambassador Town Center. Those 65 acres were included in the PILOT — payment in lieu of taxes — deal Stirling got from the Industrial Development Board in 2014 to help bankroll the public infrastructure needed for the development to work. (Virtually unheard-of before this project, the IDB is a seven-member, volunteer board appointed by the Lafayette City-Parish Council that only meets as-needed to evaluate publicprivate economic development tools like the PILOT, which has only been used once before in Lafayette.)

A PILOT allows the developer to divert property taxes from the school system and other taxing authorities and instead use the money to fund, often through private bank loans, public infrastructure like roads and drainage for the development. The principle behind a PILOT is that it hastens development or makes development possible that wouldn’t otherwise happen — a suspect claim considering the prime south-Lafayette real estate where Ambassador Town Center is situated and a claim that was indeed controversial in Lafayette in the months leading up to the IDB granting the PILOT to Stirling.

The B in both GBB and DBR stands for Boustany, one of the wealthiest, most politically connected families in South Louisiana. The R in DBR stands for Reggie, another influential family with deep pockets that has intermingled with the Boustanys through marriage. They have the connections. They have the money. This legal battle proves it.

The Boustanys and Reggies claim in their suit that Stirling agreed to add infrastructure — roads, curbs, drainage and utility connections — to the 65 acres their two companies own adjacent to and behind Ambassador Town Center but that the developer has failed to live up to that agreement. The families plan to construct a mixed-use development on the site. Ambassador Town Center sits on 60 acres and is anchored by Costco, Dick’s Sporting Goods, Field & Stream and other big-box retailers.

But it is in Stirling’s reply and counter suit — in legal parlance it’s called an answer and reconventional demand — to the Boustany-Reggie lawsuit where the emperor sheds his clothes.

Stirling and the other companies involved in the development formed a limited liability company, Ambassador Infrastructure LLC — referred to simply as “Infrastructure” throughout the answer and reconventional demand filed at the Lafayette Parish Courthouse on June 27 — that oversaw the development of Ambassador Town Center.

When the Industrial Development Board approved the PILOT for the development in 2014 — the 60 acres comprising Ambassador Town Center, referred to in the counter suit as Phase I, and the 65 acres owned by Boustany-Reggie, referred to as Phase II — part of the agreement was that the IDB would hold title to the land until the terms of the PILOT were met.

Pursuant to that transaction, Infrastructure LLC and Boustany-Reggie executed a reimbursement agreement, according to the counter suit, stipulating that Boustany-Reggie would pay to Infrastructure LLC “an amount that would be due to the Lafayette Assessor based upon the ‘fair market’ value of the portion of the Property if the Property were held by the Land Owners and not IDB. The payments are intended to reimburse Infrastructure for its construction of infrastructure improvements on the Property.”

Prior to approval of the PILOT, the 125 acres had been classified as agricultural land, but when the PILOT was approved it was reclassified as commercial. For the 65 acres owned by Boustany-Reggie — technically the IDB “owned” the land because it held title per the terms of the PILOT — the property tax burden on the land jumped from $3,400 for ag to $82,700 for commercial (rounding to the nearest 100), according to Infrastructure LLC’s counter claim.

That was the situation in late 2015, according to Infrastructure LLC’s response to the Boustany-Reggie lawsuit: GBB-DBR agreed to pay Infrastructure LLC $82,700 per year — the amount it would have been paying in property taxes on land classified as commercial — for the 10-year term of the PILOT to cover the cost of paying off the construction loan.

But something happened in December of last year, again according to Infrastructure LLC’s counter suit and confirmed by Assessor Conrad Comeaux: Boustany-Reggie asked the IDB, which held title to the land, to have the 65 acres reclassified back to agricultural, which state law allows and, as you’ll read below, is easily exploited by landowners looking to dodge a hefty tax bill. The IDB submitted the application to Comeaux’s office near the end of December 2015.

The application itself is simple: one page on which the applicant checks off whether the land in question is used for agriculture, timber harvesting or is classified as a wetland. The IDB checked for agricultural land “devoted to production for sale of agricultural or horticultural products in reasonable commercial quantities, or under contract with a government agency restricting its use for such production.” The application doesn’t ask what type of ag product is being produced on the land, nor does the IDB offer it.

Done. The assessor approved the application. The Boustany-Reggie group then went to Infrastructure LLC, according to its reply to the lawsuit, and more or less said, “Well, fellas, we agreed to pay y’all what we would be paying in property taxes and, well, what do you know, that comes out to $3,400, not $82,700. Here’s a check.”

Infrastructure LLC’s reply to the Boustany-Reggie lawsuit notes that the “Agricultural Use Application was submitted two and a half months after the date the tax rolls close by law.”

Citing a section in the reimbursement agreement between the two parties, Infrastructure LLC demanded full payment on Jan. 7 of this year. Boustany-Reggie didn’t reply, according to the counter suit, so on Jan. 26 Infrastructure LLC “delivered written notice of default to GBB/ DBR. On the same day, GBB/DBR stated in a letter that they disagreed with the PILOT amount due and made a payment of $79,155.94 [the balance owed on the agreed-upon $83,700] under protest and with a full reservation of rights.”

“Under protest and with a full reservation of rights” is an indication that GBB/ DBR (Boustany-Reggie) intended to file suit, which they did in early May.

Infrastructure LLC’s counter suit also claims that due to additional permitting requirements from the city, along with a rainy spring 2015 that slowed progress on the development, the original estimated infrastructure construction cost of $12 million ballooned to $15.4 million and that Boustany-Reggie owes an additional $1 million as its pre-agreed-upon share of the cost overrun.

Assessor Conrad Comeaux
Photo by Robin May

The IDB, which is under the umbrella of Lafayette Economic Development Authority, has been mum on the legal battle between the two sides, but clearly there was some back-and-forth between the board and Assessor Comeaux, who received a brief email on Feb. 12 from LEDA’s Pamela LaFleur obtained by ABiz. It reads, simply, “Per our conversation, please disregard this application. The land should be viewed as commercial.”

As ABiz’s sister publication The Independent reported extensively in 2011 and 2012 in a series we called “Fair Share,” affluent landowners have for years squirreled away prime real estate within the city limits of Lafayette — land that is often surrounded by commercial development — by, in many cases, simply having a single bale of hay on the property, which allows them to maintain the land as “agricultural.” The property taxes on ag land are less than 1 percent of the land’s fair market value, as opposed to 10 percent on land classified as commercial. The distinction is huge and allows these landowners to save tens of thousands of dollars per year in taxes.

When land is sold it automatically triggers a review of the land’s use classification by the assessor’s office, but many landowners know they can simply submit a form that asks them to check off the ag box, even if the assessor has re-classified it as commercial, and maintain a low tax rate. Based on our earlier reporting, it appears a bale of hay will do, and assessors have historically been lackadaisical in holding these landowners to the terms of the application, i.e., “production of agricultural or horticultural products in reasonable commercial quantities.” The application for agricultural use stipulates that the parcel has to be at least three acres in size “and has produced an average annual gross income of at least $2,000 ... for four years preceding this application.” But as The IND’s Fair Share series demonstrated, there are plenty of “farms” tucked into Lafayette’s city limits where no reasonable person — save maybe the owner of the land — would conclude agricultural activity is going on.

As Comeaux explains, however, using the ag classification isn’t always a matter of gaming the system to lower one’s tax bill. Oftentimes, he says, landowners will request an ag classification for a year or two as the land is being developed into a commercial enterprise to keep taxes on the land low until it starts generating commercial-grade revenue.

“It happens all the time where people buy land for future development and it may be a year or two years before they develop it and in the meantime they continue cutting hay,” Comeaux says.

The assessor says that after he received the application from Boustany-Reggie to move the land back to agricultural, he drove out to the location and inspected the land and says he didn’t see infrastructure improvements. There wouldn’t have been any hay-bailing happening on the land during the winter.

Infrastructure LLC, however, claims in its counter suit that it has done infrastructure improvements to the Boustany-Reggie land, citing “on site roads to stabilize bed soils,” “drainage to add pipe runs” and “temporary drainage swales.” Aerial photos of the area circulated last November appear to show some infrastructure work being done on the Phase II property owned by Boustany-Reggie.

Comeaux, it’s worth noting, opposed the PILOT and even spoke against it at the public hearing two years ago during which the PILOT was approved. He maintains that the request to return the land to ag classification, especially considering what he saw when he inspected the property at the beginning of the year, raised no red flags.

“A perfect example is Acadiana Mall: Look at all the land around Acadiana Mall that’s not developed that they still cut hay on; that happens all the time,” he tells ABiz. “So for them to say it’s not going to be immediately developed, well OK — if it qualifies for ag usage it qualifies. I didn’t think anything of it.”

ABiz was unable to reach attorneys for the litigants before press time for this story.

[Editor’s Note: ABiz Editorial Director Leslie Turk is married to Kirby Pécot, the father of Stirling Properties Development Executive Ryan Pécot, who spearheaded the development of Ambassador Town Center.]

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