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GE is one tough customer when it comes to local tax assessments
Review finds many aggressive legal appeals — and costly settlements
By Beth Healy
Globe Staff

Richard Saxl still vividly remembers the court fight with General Electric Co., a decade ago, while he was the town attorney for Fairfield, Conn.

The industrial giant was challenging its property tax bill for the 69-acre suburban campus where it had been headquartered since 1974. The town valued the property at $97 million. GE said itwas worth much less, $68.5 million.

The dispute wound up in court in 2005, a rarity for tax appeals in Fairfield, Saxl said. He brought the town assessor and a witness to the trial, which lasted three days. GE had a dozen people in the room, he recalled, including lawyers, real estate professionals, and observers in the gallery.

“It was David fighting Goliath,’’ Saxl said.

The show of might was not unusual. The company, which recently agreed to move its corporate offices to Boston, with $145 million in public incentives, has repeatedly challenged its property tax bills in cities and towns across the country.

While there is no central repository for these disputes, the Globe reviewed more than 10 cases in major GE locations, from Fairfield and Bridgeport, Conn., to Lynn, Mass., Cowley County, Kansas, and upstate New York.

Officials in those communities say GE tenaciously pursues property tax abatements, particularly after it has received higher assessments or downsized in locations where it maintained large plants.

The city of Lynn, where GE is the largest employer, has experienced this more than once.

In 1983, when GE employed about 13,000 people there, the company spent 34 days before the state Appellate Tax Board, challenging the city’s $44 million valuation of its River Works aircraft engine factory. The tax board awarded modest abatements for two years, but GE sought more, unsuccessfully, in a case that went to the state’s Supreme Judicial Court.

In Fairfield, the judge reduced the town’s valuation of the GE campus by just $1.3 million, according to court records. But the effort, Saxl said, “certainly cost GE a bundle.’’

When GE does prevail, the result can be costly for communities that have come to rely on its tax revenue. In Schen­ectady, N.Y., where General Electric’s $21 billion power turbine business is based, the Schalmont School District had to borrow money to repay the company $11.6 million as part of a 2002 tax settlement following an appeal.

“The bonds will be paid off in 2022,’’ said Joseph Lenz, business administrator for the district.

GE challenged its assessments again in Schenectady County, neighboring Rotterdam, N.Y., and the school district and won rebates in 2012. This time, the school district paid its share of the GE refund, $721,000, in a lump sum.

“If we didn’t have to put that money aside for that purpose, we could’ve utilized it to benefit students,’’ Lenz said.

GE, the district’s largest taxpayer, said it gave Schalmont a $2 million grant to cover the interest on the long-term tax debt. Ray Gillen, commissioner of Economic Development and Planning for Schenectady County, said the 2012 tax deal was a win for the region, where GE employs 6,000.

“It was a very good, fair outcome for the community and the company,’’ he said.

The company, with $130 billion in revenue and 227 US plant sites, says it’s no more aggressive on property taxes than other large companies.

“GE pays its fair share of taxes everywhere we do business,’’ said Seth Martin, a spokesman for the company, in a statement. “We understand our role in the communities in which we operate, and we seek constructive solutions when our views on property taxes differ from those of local authorities.’’

Martin also said GE works with communities to establish a fair level of taxation, so “formal appeals are rare.’’

But to tax officials in a number of cities, GE is a familiar face. The company is well known for its tax expertise, with a large internal staff, as well as a roster of regional specialists it taps, like one New Jersey law firm with the Web address taxappeal.com.

Politicians such as Senator Elizabeth Warrenof Massachusetts have criticized GE over the years for its skill at minimizing federal taxes, by seeking special tax credits and parking earnings offshore. At the locallevel, GE uses its leverage as a major employer to obtain tax breaks and incentives, in exchange for retaining jobs and investing in its facilities.

In some of those same communities, it also seeks property tax abatements.

In Louisville, Ky., where GE is now selling its appliance business to Haier of China for $5.4 billion, the company has enjoyed a host of tax incentives for years.

In 2013, for instance, GE already was operating with a $20 million state incentive when it sought to cut its Louisville property tax bill in half — to save about $200,000.

GE later dropped the tax appeal. It was working with the state on a new $40 million tax incentive deal when GE announced it was selling the appliance group.

GE has sought to assure Louisville workers that the old tax deal will transfer to Haier. But economic development officials say they would need to secure the same pledges of jobs and investment from Haier.

To woo GE to Boston, the city offered to reduce property taxes by as much as $25 million over 20 years. The state is also offering more than $120 million for public infrastructure. Mayor Martin J. Walsh told the Globe the city’s generosity to GE is not a bottomless well.

“I think everyone understands that at some point when these incentives go away,’’ Walsh said, “that’s it, they go away.’’

GE is often one of the largest taxpayers in its communities, some of them industrial cities where the local tax base has shrunk with the decline of US manufacturing.

When GE has layoffs or closes operations, it has contested its tax bills, arguing that aging factories are no longer as valuable as they once were. Challenging property taxes is part of keeping expenses low for shareholders, tax specialists say.

“I’ve seen these with large companies around the country,’’ said John Lynch, a Boston tax attorney who represented Lynn in the SJC tax case and then represented GE in a more recent tax challenge with the city. “If you’re a big company, yes, you’re going to have tax disputes.’’

In Bridgeport, Conn., GE’s 77-acre mill complex was nearly empty by 2003. The city valued the property at $14.4 million. GE countered that the 1.5-million-square-foot complex was worth only $3.5 million, with some of the buildings more than 80 years old and deteriorating.

“We were $10 million apart,’’ said Russell Liskov, a Bridgeport city attorney who handled the case. “They were not budging. They wanted their full reduction.’’

Liskov said most tax disputes are settled amicably. But not this one. GE sued the city, and the trial lasted three weeks. The judge, who walked the 13-building property himself, eventually settled on a value of $9.7 million, according to the 2006 decision.

It was a compromise, of sorts. But “GE was unhappy,’’ Liskov said.

In some places, GE has demolished unused buildings, in part to help lower its taxes. The company acknowledged it has held onto some properties for extended periods, either because it couldn’t sell them or was involved in lengthy environmental cleanup negotiations.

GE eventually tore down the massive brick Bridgeport property, for instance. The land was contaminated, and the company said it couldn’t find a buyer. In 2013, GE gave most of the empty parcel to Bridgeport for a new high school and is paying to clean it up, while also paying taxes on it for now.

The company also donated idle property in Rome, Ga., that was once contaminated. In Cowley County, Kansas, GE fought its tax bill for years, then engineered a complex transaction to cut taxes on industrial buildings where it refurbishes aircraft engines on airport land.

The saga started in 2003, when GE challenged the taxes it paid on plants at Strother Field Airport. Because the airfield’s land was tax exempt, GE argued, the company’s buildings there should be, too.

The company withheld hundreds of thousands of dollars in property tax payments as the dispute continued. Then, in June 2009, GE transferred the deed for the buildings — valued at $7.4 million — to the airport and leased them back.

The Court of Appeals in Kansas in 2011 ruled that the airfield couldn’t get a property tax exemption on the buildings because GE was running a major business there.

But that wasn’t the end of it. The next year, Strother Field went back to a lower tax court and again sought an exemption.

This time, lawyers argued the deed transfer in 2009 had been a mistake and “General Electric never owned the property.’’

The property is now considered tax exempt.

“You have a huge corporation there that’s not paying any property tax’’ at Strother Field, Cowley County appraiser Lance Leis said in an interview. He took office in 2013 and is looking into the matter. “We’re investigating it,’’ he said.

As in Kansas and upstate New York, GE has challenged its tax bills multiple times in Lynn.

Since the 1980s, GE’s employment in Lynn has declined significantly, to about 3,000. For years, the company held onto about 100 acres in central parts of Lynn where it had mothballed facilities, including GE’s automated “Factory of the Future,’’ which closed in 1992 and was shuttered permanently in 1996.

The land was contaminated. City officials complained the property had become a blight and that GE was holding back redevelopment.

“It sat there, right in the middle of the city, completely dormant,’’ Lynn assessor Peter Caron said of the Factory of the Future site. Still, GE argued in 2009 that its annual property tax bills of about $1 million from 2006 through 2008 were too high.

GE prevailed, and in a settlement, the city agreed to refund it more than $400,000for the three years, Caron said.

The property finally sold in 2013 and is slated to be developed as a Market Basket grocery store.

Shirley Leung of the Globe staff contributed to this report. Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.