After questions were raised regarding a Land Use Change Tax (LUCT) agreement between the Town and Pillsbury Realty- the owners of Woodmont Commons, Town Manager Shaun Mulholland has clarified what took place.
The questions first emerged following comments made by Town Councilor Dan Bouchard at the Dec. 1 Town Council meeting.
On the docket were the appointments of Planning Board members.
Bouchard said he was concerned with the appointment of former Town Councilor John Farrell, who was one of the town councilors at the time who signed the agreement.
According to Mulholland, the agreement, that was signed in 2017, “specifies the amount of the land use change tax that is due to the Town for the property identified as 7 and 15 Pillsbury Road,” which is all of the land south of Pillsbury Road in the Woodmont PUD (Planned Use Development).
“It specifies the amount of LUCT assessed would be $568,600 as being owed to the Town from the property owner, Pillsbury Realty,” Mulholland wrote in an email. “The value of the property was determined to be $5,656,000 according to the agreement.”
At the Dec. 1 Town Council meeting, Bouchard made allegations that the agreement was actually illegal since the method used to calculate the amount being paid did not follow the state RSA on LUCT.
Contacted after the meeting, Mulholland stated that it’s not necessarily illegal.
According to Mulholland “on its face the agreement is per se not illegal.”
“However, there are questions regarding the methodology that was used and the timing of the determination of the amount of LUCT owed to the Town,” Mulholland wrote. “LUCT is determined at the time the property no longer qualifies for the current use exemption as detailed in NH RSA 79-A:7,I when its status changes.”
Mulholland explained that the Town “cannot say what the LUCT amount owed might be on a piece of land will be two-years from now.”
“The LUCT is assessed when an actual change occurs,” Mulholland wrote. “That occurs when the land is physically changed such as constructing a road or the development of buildings on the property. And then only those portions of the land that are experiencing the changes.”
Mulholland went on to say if a project is a phased project then “only the portions actively being developed in that phase trigger the LUCT.”
He added, “Further, the tax is assessed on “the tax shall be at the rate of 10 percent of the full and true value….” (RSA 79-A,I),” Mulholland wrote. “That means that the LUCT is determined not on what the previous value of the property was in its undeveloped state, but on its new projected value based upon the approvals of the Planning Board. The apple orchard had a certain property value. The value of the property with the Woodmont plan is certainly of a higher value.”
Mulholland listed a number of different bullet point in an email to the Londonderry Times:
- We do not know how the LUCT was calculated for this agreement. The assessor at that time has passed away. I have not found any documentation as to how the amount was determined.
- The agreement was signed on June 6, 2017.
- The A-5 form, which actually assesses the LUCT, was filed with the registry of deeds on Aug. 2, 2017. The document shows the actual date of change to be May 15, 2017. The A-5 form was signed by three of the five Councilors on June 9 and June 12, 2017 respectively. The tax was due on July 15, 2017.
- The property card for 2018 shows the land value of $5,876,340.
- The property card for 2025 shows the land value of $7,321,600.
- What we do not know is what the land value was at the time of the actual change (construction on the site). Was it assessed at its “…full and true value…” based on its development potential.
- The A-5 form is the appropriate document for the Town Council to assess the LUCT. I would say that is uncommon, if not unheard of, for municipalities to enter into an agreement as to what the LUCT would be for a piece of property. This is determined by the Town’s Assessor and acted upon by the governing body via the A-5 form.
Asked specifically what the amount of land being developed at the time of the agreement Mulholland said it was unknown.
“That is the fundamental question,” he wrote in an email. “I do not know the answer. The project was and is still being developed in phases. I don’t know what was being built and when. That could be figured out, however that would take considerable staff time and effort.”
Mulholland explained the Town Council entered into the agreement in June of 2017, years before he became Town Manager.
“I was provided a copy of the agreement from Pillsbury Realty recently as we are in discussions regarding the assessment of LUCT for the Procopio project on the north side of Pillsbury Rd,” Mulholland wrote. “We have no intentions of entering into any similar agreement.”
Mulholland said “Procopio is trying to determine the amount of the LUCT so that they can determine the ROI and how much capital will need to be raised for their development project(s) and when the LUCT will be assessed.”
At this point the project has not been approved.
“The Planning Board has not approved a subdivision or site plan for these properties yet,”Mulholland wrote. “The best we will be able to do is provide a rough estimate of the range of the LUCT that might be due to the Town depending upon when the construction actually begins and on what parcels.”
During the Dec. 8 meeting, Town Councilor Deb Paul called for an apparent opinion given to the Town Council from their Attorney regarding the matter to be released so the public has all the relevant information.
Councilor Ted Combes, said he was concerned with voting on releasing the report without getting clarification from the Town Attorney on whether or not it is privileged information and invoked Councilor Privilege meaning no vote was taken.
At the Dec. 15 meeting, it was explained that the attorneys who worked on the report agreed it could be released.
On an unanimous vote the Town Council voted to waive privilege allowing for the release of the legal opinion on the previous LUCT agreement.
Combes asked for an apology from Bouchard who called the agreement “illegal” during a previous meeting, when discussing the appointment of previous Town Councilor John Farrell to the Planning Board.
Combes and Farrell were both on the Town Council at the time and signed the agreement in question.
Bouchard did not issue an apology during the meeting, but reaching out to him after the document was released, Bouchard stated, “When I first learned about the Land Use Tax Agreement between Woodmont Commons and the Town, I wondered, why do we need a land use tax change agreement when a state RSA governs current use taxation. Citizens have voiced concerns about preferential treatment towards this project and this document verifies the citizens concerns. This agreement did not benefit the taxpayers of Londonderry and I would like to know why it was done and if it was approved by the towns legal counsel. The agreement was not needed, because clearly NH RSA governs Land Use Change Tax. Further, my understanding is when you have a parcel of land that is under current use and you want to develop part of it you take the area you intend to develop out of current use and pay a land use change tax as stated under NH RSA. The remainder of the property stays in current use. When you go to develop more of this property you have now increased the value of this remaining open land that has improvements that have been built around it. As a result, the vacant land has increased in value and the Land Use Change Tax is higher that is owed when you take more of it out for development. This is where this agreement short-changed the Londonderry taxpayers.”
He also said, “As stated in the legal review from the town’s attorney “New Hampshire courts have recognized that the plain wording of New Hampshire RSA Chapter 79-A indicates the precise timing upon which LUCT assessments “shall” occur-namely, loss of the factors that qualify the property for current use. There is no specific wording in New Hampshire RSA Chapter 79-A or the Current Use Board’s Rules that permit either a municipality or a taxpayer to deviate from this timing.”
Bouchard added, “Some people have asked if it was illegal and while reviewing this complex agreement and the legal counsels review you can see that NH RSA Chapter 79-A of the Current Use Boards’ Rules were not followed in this case.”
The full legal opinion here.