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VOL. 122 | NO. 175 | Monday, September 17, 2007

Coors Brewing Disputes Tax Assessments

By Andy Meek

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Commenting on the sale of Coors Brewing Co.'s Memphis plant to an employee-led group of investors in 2006, company president and CEO Leo Kiely reportedly called the transaction the most important milestone in a companywide cost-savings effort.

A year after the sale, though, Coors still has at least one unresolved financial matter partly related to that transaction: a Shelby County tax bill.

The Denver-based beer-brewing company has filed a petition in Shelby County Chancery Court for judicial review of its personal property tax assessment covering the tax years of 2004 and 2006, according to The Daily News Online, www.memphisdailynews.com. Personal property consists of things used in the operation of a business, including furniture, vehicles and other items.

Coors' real property assessment also is being contested for 2006. The company thinks it paid more in taxes than it should have, though the suit does not reference a specific amount of money.

Tax roll questions

The reason the company's lawyers give for filing the suit centers in large part on the local sale in 2006 to the investment group, which was granted a tax freeze because of the group members' planned capital investment in the facility. That tax freeze means ownership of the plant, at 5151 E. Raines Road, passed from the investment group to the city-county Industrial Development Board (IDB).

Companies granted property tax freezes by the IDB lease their property from the board in exchange for the tax incentive.

The sale by Coors to Chism Hardy Enterprises, a group of investors led by former Coors plant manager Carolyn Hardy, occurred in September 2006. The tax freeze granted by the IDB occurred around the same time.

Shelby County Assessor Rita Clark's office is named as one of the defendants in the suit. In an interview, Clark described the tax issues involved in the suit as highly complicated in nature. One question that apparently has not been answered yet, for example, is exactly when the plant's property was taken off the tax rolls after the tax freeze was granted.

Lawyers for Coors do not spell that out in the suit, and Clark said her office is looking into that question. Determining how to resolve the Chancery matter appears to hinge on when the tax freeze became effective.

Agreement apparently in question

There are other complexities to become familiar with, as well.

Allan Wade, an attorney for Coors, did not return phone calls seeking comment.

"It appears to be a situation where Coors was partially (in) the IDB program," said Cheyenne Johnson, chief administrative officer for Clark's office. "You're actually given a timeframe to complete an IDB project, and if you pass that timeframe and want to add additional property into the program after that, you can. So you can have a situation where, say, half your property is in the program, half is not."

Clark said the suit came as somewhat of a surprise.

"We went through the regular process on this like we do all other properties," she said. "And we actually reached an agreement with them on this in 2006."

The assessor's 2007 appraisal of the brewery site, which sits on the south side of Raines and includes several offices, warehouses, a brewhouse and more, was $17.8 million. At the time of last year's sale, the deal was heralded as a major coup, coming as it did on the heels of a 2005 announcement that Coors would be closing its Memphis operation.

The Memphis investors were led by Hardy, who once oversaw plant operations and management of the facility, after negotiations fell through with another interested buyer.

Of the total sales amount, $6.5 million for the Hardy-led deal was financed through Sandhurst Asset Management LLC, not counting a revolving loan the Chism Hardy group received for the development.

Under the terms of a revolving loan, a borrower can tap a line of credit up to a maximum limit.

No hearings have been scheduled yet in the Chancery case.

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