Questions raised about Houghton County's signed purchase agreement

The Houghton County Board of Commissioners has finalized purchase of the First Apostolic Lutheran Church (FALC) property on Sharon Avenue. The purchase price was $1.2 million, which will come from the $6.8 million that the county received from the American Rescue Plan Act, according to County Commissioner Roy Britz, who chaired the negotiations for the property. The county hopes eventually to build a new jail, sheriff’s office and other county offices there.  

Satellite photo from Google Maps

 The purchase agreement allows the church to continue to use the property rent-free for up to four years, while FALC searches for a new home. The county also agreed to insure the building while the church is still occupying it. 

A local citizen contacted the Copper Beacon to express concern about the agreement.

We reached out to Gerald Fisher, a professor emeritus at Western Michigan University’s Cooley Law School who specializes in land use law. Fisher has served as special counsel to governmental bodies throughout Michigan.

Fisher said he saw several issues raised by the purchase agreement. The biggest one, he said, is that a discount to the church—allowing them to use it rent-free—is basically the same as making a contribution to the church. A governmental body cannot legally make a donation to a religious organization. The buyer paying to insure the property while the seller is still occupying it is another contribution to the church, Fisher said. 

Another issue Fisher mentioned is whether the fair market rent equals the difference between the fair market value and the discount received. 

An appraisal received by the county in December showed the fair market value of the FALC property to be $80,000 higher than the price the county paid. That means that the discount received in lieu of rent equals $20,000 a year or $1,667 per month in rent that would have been paid. 

“There are precedents for a lower price in exchange for continued occupancy, but there has to be something in writing specifying the rent to be paid or the discount in price in exchange for no rent being paid,” Fisher said.

The fact that the property is partly in Houghton and partly in Portage Township could have raised another potential roadblock. The county plans to move the sheriff’s office to the new complex, and the sheriff’s office is required by law to be in the county seat, which is the City of Houghton. Portage Township is willing to allow Houghton to annex the portion of the FALC property within the township limits for nine years, said Bill Fink, Portage Township trustee. After that time, if the new jail has not been built there, the property will revert to Portage Township, Fink said. 

In an email in response to our questions about the purchase, Pete Wesa, chairman of the FALC board, described the negotiations.

“The county was looking for property for a possible jail site, and also to move some offices to that location. Hearing that the FALC property on Sharon Ave. was for sale, they contacted the church. Both parties then got together to discuss what would work best for the county and FALC. When that was accomplished, the county then had their attorney write up a purchase agreement which has been signed by both the county and FALC.”

He did not comment on our question about whether FALC felt that allowing the church to continue to use the property rent-free for four years was ethical. 

We emailed County Commissioner Gretchen Janssen about the purchase of the property, which is in her district. She said she considers the $1.2 million price a fair one. 

Janssen, a real estate agent herself, said, “I believe that we are paying a reasonable amount for a valuable property. If we waited a few years to purchase when the church is ready to move, I think the price would likely be higher or perhaps the property would no longer be available to us.”

As for letting the church continue to use the property rent-free, Janssen said;

“It is likely that we would not have an agreement to purchase this property without allowing the church to occupy after the closing. The church had an appraisal done a couple years ago. We are purchasing at that amount. My crystal ball is broken, so I can’t predict the future, but I’ve been selling real estate long enough to know that prices rise over time. If the church were to hold off selling this property until they were closer to moving into the new building they are planning, I would anticipate that the price would be higher, and perhaps there would be multiple entities bidding on the property, driving up the price.”

Janssen went on to say, “I maintain that this is a very reasonable purchase for the County, even with the delayed occupancy.”

We also emailed Tom Tikkenen, county commission chair, to ask about the county continuing to pay insurance on the property while the church occupies it.

“The seller will be responsible for maintenance and utilities during their occupancy after the purchase of the property, including replacement of a portion of the garage roof,” Tikkanen said.