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Tax bill over $200K for Mason City mall owner: 'My friend, you don't have to worry,' but 'the mall is going under'

MASON CITY | Southbridge Mall's owner said Wednesday the reason he hasn't started paying more than $200,000 in back taxes is because the building and business is failing.

The $200,000 dates to the September 2016 purchase of the facility, a key piece in the city's $38 million downtown project that recently received almost $10 million in state funding.

Arian Schuessler / WORTHINGTON GLOBE 

Kohan

According to the Cerro Gordo County Treasurer's Office, Mehran Kohansiek – who goes by Mike Kohan – hadn't contacted them in the last month until questioned by the Globe Gazette. And now, the taxes owed at Southbridge total $218,637.

Kohan, in a brief telephone interview Tuesday, said he had tried to contact the treasurer's office a few times last month.

Perhaps more importantly, he still promised to pay off the back taxes.

"We are gonna call today, and gonna pay off all the taxes," Kohan said Tuesday. "We are taking care of it."

At 9 a.m. Wednesday, Cerro Gordo County Treasurer Patricia Wright said she hadn't heard from Kohan. 

In another interview Wednesday, Kohan claimed he didn't have the number for the treasurer's office, even though he had paid off taxes before. He insisted he would still pay off the taxes.

When asked why people should trust him, despite over $200,000 owed, he responded: "My friend, you don't have to worry."

About 20 minutes after that interview, Wright told the Globe Gazette she had received a call from Kohan about paying the taxes. She said he plans on paying $30,224 of the balance.

She added the reason for that is to keep the two aforementioned parcels owned as real estate off the tax sale in June. Wright made it clear, however, that the money still needs to be sent to her office.

"I think that until I see the money in the office, he can say, I can say (the taxes will be paid) ... Until the money's here, it's still unpaid," she said.

Then, about 20 minutes after that, Kohan called the Globe Gazette again. He said he plans on sending the $30,224 later Wednesday, adding he would start making more payments on a monthly basis.

"The holdup is the mall is going under," Kohan said about not paying more taxes until now, noting Younkers, the anchor store, is going bankrupt. The Bon-Ton Stores, Inc., parent company of Younkers, announced in January it was closing 42 stores this year. Mason City's store will remain open.  

Wright said Tuesday that Kohan also owes an additional $14,599 for his company's part in the 2011 Federal Avenue Streetscape assessment. That assessment is spread over a 10-year installment with payments due each September. 

In September 2016, Southbridge Mall was purchased for $1.5 million by Kohan Investment Group, Great Neck, New York, doing business as Southbridge Mall Realty Holding LLC.

Wright said Kohan has until June to start paying off the taxes.

"If this dollar amount ($218,637) is delinquent on June 18, it (mall) will go through the tax sale," she said.

That tax sale would occur through the county treasurer's office, Wright said. Previously, Kohan paid $28,190 on two tax sale properties last October, but he has not made any other payments. The mall's property consists of four parcels. 

Wright said the tax sale would be on the two real estate parcels, and not on the other two parcels taxed as "buildings on land on another, leased land."

All four parcels are listed under Southbridge Mall Realty Holding, LLC, c/o the Kohan Investment Group, according to the treasurer's office.

Whoever buys the mall's taxes in a tax sale has to wait 21 months before filing a 90-day affidavit with the county treasurer's office, according to Wright.

At that point — which would be March 2020 — this 90-day "redemption period" is when Kohan must pay all of the taxes, Wright said.

Kohan has had financial and legal problems with other malls he has owned in the past. The Globe Gazette previously reported those issues ranged from a mall in New York shutting its power off because electrical bills hadn't been paid, to Kohan paying $200,000 because of safety violations and fines at a mall in Illinois.

The mall's property taxes are important because they are involved in the River City Renaissance Project. The taxes will be used by the city for tax increment financing, a type of municipal financing method which would pay off bonds on the ice arena/multipurpose venue.

These property taxes are why the city decided to lease -- and not own the arena -- over a period of 20 years.

Kohan said, however, multiple times that Mason City residents shouldn't be worried about the taxes.

"I'd tell them not to be nervous," he said. "We'll pay that obligation."

Correction: A previous version of this article stated the tax sale would be on two parcels "the city owns as real estate." According to the Cerro Gordo County treasurer's office, the four parcels are listed under Southbridge Mall Realty Holding, LLC, c\o Kohan Investment Group. So, the tax sale will occur on two real estate parcels, NOT the other two parcels taxed as "buildings on land on another, leased land." The Globe Gazette apologizes for the error.


Arian Schuessler / ARIAN SCHUESSLER, The Globe Gazette 

Southbridge Mall in Mason City. 


Local
Mason City Council approves budget, city administrator search still ongoing

MASON CITY | City council members approved Interim City Administrator and Finance Director Kevin Jacobson's proposed budget for FY19, which included a roughly 12-cent increase in the city's tax levy.

But Jacobson, in a budget presentation to the city council, explained that despite this increase, a typical homeowner should see around a 6-cent-per-week decrease in taxes and other utility costs.

The proposal increases the city's total budget from roughly $70.9 million to $98.6 million from FY18 to FY19. Jacobson noted the large increase was because of numerous capital projects, including the River City Renaissance Project and road improvement projects.

Jacobson told the Globe Gazette following the meeting the city tax levy rose because of multiple areas, ranging from tort liability to employee retirement benefits, including IPERS. 

"The numbers show you there was a reduction in taxes even though the tax levy went up, because the overall taxable evaluation (to a typical homeowner) went down," Jacobson said.

Jacobson 

During Tuesday night's meeting, council members also approved a $30,000 Corridor Revitalization Loan for 1335-37 N. Federal Ave. Property owner Russ Hardy wants to whitebox the two first-floor stores for retail use, and then add four two-bedroom apartments on the second floor.

The total cost of the project is $339,648, according to Hardy's application. Mayor Bill Schickel said that if it is executed, it could help revitalize the North End.

"Those are two historic sites, and if we can get some commercial (use) on the first floor and some residential (use) on the upper floor, that could really stimulate some things in that neighborhood," Schickel said after the meeting.

Schickel

Hardy told the Globe Gazette Wednesday the project is only possible with not only the $30,000 loan from the city, but also a pending $100,000 grant from the state.

He added his project was the one selected by Mason City officials to be eligible for the state grant.

"If we don’t get the state grant, I don’t think we’ll doing this project," Hardy said, later adding: "When they (the state) let us know, we’ll either be excited or disappointed."

One area where the city could see some cuts is through the state backfill program, which was implemented when commercial and industrial property tax rates were reduced statewide. Jacobson told the City Council a bill concerning that funding is currently being debated in the state Legislature. 

The city could lose up to $190,000 from its general fund if changes to the backfill program are implemented before this fiscal year begins, Jacobson said.

Jacobson said after the meeting that if that happens, the city will have to look at possibly cutting employees, which could be from a variety of sectors.

"You’d probably be looking at somewhere between three and six depending on which sections you would like at," he said. "Within the general fund, throughout City Hall, you’d have some of the different areas, like the museum, the library, parks and recreation, the cemetery, you got public safety, police and fire that could be affected."

After the meeting, Schickel, Jacobson and the city council held a closed session to discuss who should be the next city administrator.

"We had a really good discussion," Schickel said about that meeting, which lasted over an hour. "We’re really not putting a timeframe on things because we’ve got very good bench strength, with a very strong interim administrator and great department heads."

Symonds

Schickel also appointed Second Ward Councilman Will Symonds to the city's Housing Rehabilitation Committee.

Symonds said in an interview Wednesday he is still learning more about the committee's role in the city. He added, however, he's looking forward to serving on it.

"I think that we as a city, we’re here to help everyone that we can," Symonds said. "Even from a economical standpoint, it’s a lot better for the city, in terms of risk, to help take some homes that are on a downward trend than to let a house fall into complete disrepair … and then having to demolish a house."


Symonds


Schickel