Vlahakis Explains Tax Delinquencies and Libel Suit, Advocating $100M Public-Private Deal

Above: Dublin Square, which would be demolished under the plan envisioned.

Local real estate developer Paul Vlahakis has provided ELi a statement responding to charges that his companies have a history of tax delinquencies and addressing his dismissed lawsuit against the Lansing City Pulse for prior reporting on that subject.

On Friday, ELi broke the story that Vlahakis is looking to secure a $100 million real estate deal with the City of East Lansing for a project he’s calling “Park Place." That deal would involve multiple forms of participation from East Lansing’s government, beyond all the necessary approvals.

According to the plan sketched out by Vlahakis, the redevelopment would include: an agreement by East Lansing’s Downtown Development Authority to allow the use of millions-of-dollars’ worth of public property; a probably large tax increment financing (TIF) scheme; and construction of two new robotic parking garages that would be sold to East Lansing.

Singer’s complaint:

After reading ELi’s report on Vlahakis’ idea, ex-East Lansing resident and frequent redevelopment critic Eliot Singer posted a message to the local discussion list Public Response decrying the idea of Vlahakis doing a deal with the City of East Lansing.

Singer has previously called on City Council to pass reforms to stop the City from making deals with developers with troubled financial and legal records, to prevent another prolonged problem like that which has occurred because East Lansing made repeated deals with the companies of Scott Chappelle, even after Singer and others pointed out financial and legal troubles facing those companies. The deals with Chappelle led to prolonged blight downtown, depressed tax revenue, and ongoing legal troubles.

Below: Downtown blighted buildings which Chappelle's company lost to foreclosure and which have since been demolished by the new property owners. Chappelle continues to threaten legal action if a new development happens here without paying him what he says he is owed.

In his message on Friday, Singer said that Vlahakis’ East Lansing companies are delinquent on taxes owed to the City. He also said that records show state tax liens against Vlahakis’ company, Authentic Properties, federal tax liens against Vlahakis Companies, and a State of Michigan tax lien against Paul Vlahakis.

Singer also likened Vlahakis's actions to President Trump's “attempts to intimidate the free press” because Vlahakis brought a libel suit against the Lansing City Pulse’s owners for reporting on his tax records in 2009. In 2011, the City Pulse reported that the judge in that case threw out Vlahakis’ lawsuit, but not before another judge “ordered Vlahakis to pay about $2,000 in sanctions for failing to answer questions during his deposition.”

What ELi finds in tax records:

Records available via the City of East Lansing as of yesterday show that ELA Food Services LLC, a company affiliated with El Azteco restaurant, owes over $25,000 in back taxes to the City, stretching back three years. The resident agent for that company in state records is Johnny Vlahakis. Correspondence with City staff shows City staff pushing Paul Vlahakis to pay what was owed by ELA Food Services LLC.

(A larger image of the above is available through this link.)

Johnny is also the registered agent for a company called 225 Ann Street LLC, which as of yesterday appears to owe the City about $130,000 in back taxes, dating back to 2014 tax bills.

The same City records system shows Authentic Properties LLC owing East Lansing about $30,000 in back taxes. Authentic Properties owns Dublin Square Irish Pub, which Vlahakis would like to demolish and redevelop as part of his Park Place redevelopment.

Ingham County records show a Michigan Tax Lien against Paul John Vlahakis in the amount of $96,507 dated January 16, 2018. It does not show paid at this time. It also shows Federal Tax Liens against Vlahakis Companies from May and June 2018 that appear to have been settled in August 2018, and MESC Tax Liens against Authentic Properties LLC from 2015 which appear to have been discharged in 2016.

Vlahakis’ response about tax delinquencies:

Asked to respond to Singer’s post, Paul Vlahakis told ELi in writing yesterday, “The taxes for those LLCs mentioned by Mr. Singer have been paid or are being paid, and may not yet be posted. The property tax structure put in place by the City and County allows property owners to pay property taxes late with a fee. However, none of our properties have ever been subject to tax foreclosure, which is a critical distinction.”

Writes Vlahakis, “Each of the issues he mentioned either has already been resolved or is currently being resolved. With regard to the State sales tax lien, this was from a partnership in which I was the Managing Member but not involved in the business operation. An agreement has already been reached with the State of Michigan for that tax to be paid in full.”

Vlahakis says it was the bad economy that has made some of his payments late. He says he would be a minority partner in the Park Place project, with Royal Properties as the majority stakeholder. ELi’s Chris Root reported on Friday that Royal Properties’ website says it “is a company with one purpose: to develop, own, and manage multi-family student housing near four-year universities throughout the United States.”

Record of delinquencies does not automatically disqualify Vlahakis from business with East Lansing:

In September of last year, City Council passed a resolution designed to limit the City’s use of tax increment financing (TIF), a type of redevelopment tax incentive approach that has resulted in many large projects not paying into the City’s revenue stream for many years. One of the things Council resolved was this:

“Any development entity being considered must be in good financial and legal standing with the City of East Lansing. This includes any principals or managing partners of Limited Liability Companies [LLCs] that control more than a 10% interest in a development seeking TIF support.”

The resolution only says a person like Vlahakis would have to be in good financial standing at the time of the deal, and he has said he will pay up what he owes soon. Therefore his record would not automatically disqualify him from making a $100 million redevelopment deal with East Lansing.

Vlahakis’ response about the libel suit, and his intention to move forward:

On the issue of the libel suit, Vlahakis tells ELi, “I simply disagreed with the way the article was written. The City Pulse is a good informative publication, but we all have the right to pursue legal remedies when wronged, and I chose to take action by filing the referenced lawsuit.”

Vlahakis tells ELi, in conclusion, “After we ultimately submit full plans to the East Lansing Planning Commission and City Council, the time will be ripe to discuss financing as a condition of the site plan approval. The City Council is doing a great job in leading East Lansing to a successful future and I’m excited to be a part of its progress.”

Below: A rendering of the buliding that would replace the Dublin Square building.

East Lansing’s Downtown Development Authority (DDA) has not yet determined whether it will offer the DDA-owned properties Vlahakis wants to other developers through a Request for Proposal (RFP) process.

In the case of the Center City District project, City Council and the DDA opted to make a deal with specific developers without going to an RFP to see what other developers might propose to do with City-owned Parking Lot 1. That was because, as is true in this case, one of the development partners owned nearby private property that was rolled into the deal.

The DDA meets this Thursday, August 23, at noon (see agenda). Citizens can speak on any subject during public comment, and can also submit written comments on email to City staff member Tom Fehrenbach.

Update, August 21, 5 p.m.:  The DDA agenda for this week is now showing a proposal to appoint a special Evergreen Properties Marketing Committee "to set priorities and make recommendations for marketing of the Evergreen Properties." The DDA will discuss and likely vote on a resolution to "establish the highest and best use for redeveloping the properties". 

Update, August 22, 9:30 p.m.: Vlahakis indicates that some of the taxes owed to East Lansing were paid on the day this article was published, and others paid much sooner, but that the online city and county websites do not accurately reflect when delinquent payments were made. The websites confirm that information about delinquent payments is often not posted in a timely fashion. 

Related materials:

Read Singer’s complete post from August 17, 2018

Read Vlahakis’ complete response from August 20, 2018

Read City Council’s resolution on tax increment financing deals

See a compiled PDF of tax delinquency information related to this story

Correction: Eliot Singer objected to our suggestion that he was accusing Vlahakis of "attempt[ing] to intimidate the free press" and noted that he had used that line about President Donald Trump, while discussing the Lansing City Pulse lawsuit. We corrected this article in response. You can read the whole of Singer's Public Response post here.