State probes tax settlement for shipyard

The state Department of Revenue is investigating accusations that Quincy officials unlawfully reduced more than $1 million in taxes owed to the city and waived hundreds of thousands of dollars in accrued interest and fees on delinquent taxes in a recent settlement with the new owner of the Fore River Shipyard.

Robert C. Haley, vice president of the Quincy Taxpayers' Association, filed a complaint last month with the state Department of Revenue alleging that the city acted inappropriately when it agreed to the tax settlement with March Fourth LLC, which purchased the shipyard property for $9 million last year.

The city had placed a lien on the property and filed a lawsuit against March Fourth to recover $2.6 million in delinquent taxes, costs, and fees that accrued after Mayor William J. Phelan revoked a special tax agreement for the shipyard in 2002. That accord had provided tax incentives to the previous owner, Massachusetts Heavy Industries, in exchange for the creation of jobs at the shipyard.

Rather than proceed with the lawsuit, the city and March Fourth, which is managed by automobile dealer Daniel Quirk, negotiated a settlement that was approved in Norfolk Superior Court in late December. In exchange for the firm's payment of $1.8 million, the city agreed to void the tax claim and liens on the property.

"I am completely confident in the appropriateness and legality of the agreement," said City Solicitor Monica Conyngham. "I think the city made out very well with this settlement."

Haley disagreed, saying the accord conflicts with state law and shortchanges taxpayers. For example, he said, the city reduced delinquent taxes by nearly $500,000, let slide $360,000 in fees, costs, and accrued interest when state law allows only $15 to be waived, and circumvented abatement procedures by lowering the assessed value of the shipyard from $50 million to $10 million without a formal abatement application.

"Other taxpayers can't have these breaks, and the law doesn't allow for them," Haley said. "When the city's raising taxes 18 percent, it's not in our best interest for the city to be reducing real estate taxes owed."

Joan Grourke, a spokeswoman for the Division of Local Services at the Department of Revenue, said the department is in the early stages of investigating the matter. She declined to comment on the specifics of the allegations. "If and when we find any problems with the settlement, we will determine the course of action," she said.

Grourke added that it was unusual for municipalities to negotiate tax settlements, but that it was legal to adjudicate such issues in court.

The city has already collected about $560,000 of the promised $1.8 million, but the tax settlement says that if any portion of the agreement is found contrary to law, it could be declared void.

Frank Marinelli, Quirk's lawyer, said the tax plan was a good deal for the town, considering that March Fourth may not have been responsible for the payment of any back taxes.

After Massachusetts Heavy Industries defaulted on its mortgage, which was held by the US Maritime Administration, it declared bankruptcy, and the federal agency reacquired the title to the shipyard. Marinelli contended that the tax bills the city issued for fiscal years 2002 and 2003 were irrelevant, because the federal government, which is tax-exempt, controlled the property.

"It's a fair agreement on highly contested issues, and it was approved by the court," Marinelli said.

Conyngham agreed, saying there was a significant risk that the city could spend a lot of money fighting March Fourth and end up losing.

Although she acknowledged that state laws restrict the amount of interest and fees municipalities can waive and govern whether delinquent property taxes can be reduced, Conyngham said those statutes are not applicable in this case, because there was a dispute on whether taxes could be levied at all.

"I think the taxpayers of Quincy should be thrilled, frankly, that we were able to do as well as we did in the negotiations," Conyngham said.

Jenn Abelson can be reached at abelson@globe.com.