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248 Not for Release until 10:00 A.M. April 5, 1993 MEMORANDUM TO: Board of County Commissioners FROM: John V. Witherspoon, County Manager SUBJECT: Proposed Settlement With Philip Morris I recommend that the Board of Commissioners settle the long standing litigation with Philip Morris on the basis of the schedule shown below. The settlement contains a discovery of $240,000,000 on personal property for the years 1986 - '89 and the additional amounts offered by the taxpayer for the years 1990 '92. The proposal relies on the findings and approach used by American Appraisal, without capitalized interest and without economic obsolescence for the purposes of the settlement only. The use of AmericanAppraisal's method of tax valuation, though used here for settlement purposes, may form the basis of future settlements with the taxpayer including its real property. If so, the Assessor may consider certain building equipment as real property to be consistent with the American Appraisal approach. This could constitute a discovery of the Building Equipment Fund as real property back to 1989 and forward. The immediate result is: · A payment of $1,927,867 · Settles Court case. Makes clear what future action the County may take. · Does not commit either party to a resolution of real property matters currently in dispute. Specifically, Philip Morris will agree to the following schedule of personal property tax values to be added to its listing and taxed by the County: Year 1986 1987 1988 1989 1990 1991 1992 Tax Value $69,600 000 $69,400 000 $57,800 000 $43,200 000 $36,298 000 $32,823 000 $26,908 000 Tax Rate Tax .52 $ 361,920 .54 $ 374,760 .595 $ 343,910 .63 $ 272,160 .63 $ 228,677 .58 $ 190,373 .58 $ 156,066 Total tax to be paid $1,927,867 The County will drop its appeal on the case involving Philip Morris currently before the N.C. Supreme Court and close off all further action regarding PM's personal property for the years indicated above. Further action regarding real property will continue in accordance with the procedures and methods provided in the Machinery Act. ANALYSIS; Settlement Goals: 1) Achieve a reasonable compromise with Philip Morris regarding personal property values for the years in dispute 1986-89; 2) Get the tax values right for both personal and real property for subsequent years. The proposed settlement accomplishes 1) and a part of 2). The proposal settles personal property for the years 1986 through 1992. It does not reach settlement of real property values currently in