MASON CITY | The Cerro Gordo County treasurer has filed a civil lawsuit against Southbridge Mall, seeking to recoup some of the unpaid taxes on the property.
“On my behalf as County Treasurer, a civil lawsuit was filed against Southbridge Mall Realty Holding, LLC for the delinquent real estate taxes and interest on the buildings and improvements known locally as Southbridge Mall,” Treasurer Patricia Wright said in a statement.
According to court documents, the lawsuit was filed late Thursday morning.
Prior to the 2017-18 fiscal year, Wright said the Southbridge Mall buildings and improvements were taxed as separate parcels from the land on which the building and improvements sit.
Tax parcels consisting of building and improvements only are not allowed to be sold at the annual tax sale under Iowa law.
“My office has worked diligently over the past 18 months to collect the real estate taxes on the mall parcels,” Wright said.
The Southbridge Mall Realty Holding, LLC is owned by Mike Kohan, of Kohan Investments in Great Neck, New York.
Southbridge Mall Realty Holding, LLC has paid the real estate taxes against the land parcels which were due in 2017 and the spring of 2018 since it took title to Southbridge Mall in the fall of 2016, according to Wright.
According to the lawsuit, Kohan failed to pay:
• the second installment on the East Building Parcel for the 2015-16 fiscal year, totaling $26,917, which was due April 1, 2017.
• the second installment on the West Building Parcel for the same fiscal year, totaling $27,245.
• the first and second installments of the 2016-2017 taxes on the East Building Parcel, totaling $23,763 each, which were due Oct. 1, 2017 and April 1, 2018.
• the first and second installments of the 2016-2017 taxes for the West Building Parcel, $24,044 each, which were due Oct. 1, 2017 and April 1, 2018.
Interest accrues on the unpaid taxes at 1.5 percent per month.
The lawsuit seeks payment of the unpaid taxes plus interest, $177,324 total as of Friday.
Another set of taxes on the two remaining real estate parcels of Southbridge Mall which were not mentioned is due Sept. 30, totaling $75,507. Those taxes are not delinquent.
“The decision to file a lawsuit against a property owner is not one that my office makes lightly,” Wright said. “However, my office has no other avenue to collect the unpaid taxes against the building parcels except through the civil action.”
As of July 30, Kohan owed more than $328,000 to the county. Kohan, who said he's making no money from the mall, previously told the Globe Gazette he planned to repay the taxes.
"We’re gonna pay the taxes," he said at the time. "I’m in touch with Pat, and she’s a great lady to work with."
Southbridge 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.
Mason City Finance Director Kevin Jacobson said in July that if Kohan doesn't pay his property taxes, the city wouldn't immediately receive the money for that revenue stream of the project. Those funds would be delayed until the tax sale process is finalized, he added.
Two options to fill that gap could impact citizens. Using a debt service levy could mean an increase to Mason City residents' property taxes. A local option sales tax would not increase property taxes, but would be applied to goods and services citywide.
Photos: Southbridge Mall in its heyday