IWF Property Tax Exemptions Conference Feb. 19, 2010
Summary of breakout session on nonprofit housing
About 20 people attended the breakout on “Nonprofit housing—should housing for affluent seniors be tax-exempt?” In addition to handouts in the conference packet described below, there was one on changes in property tax exemptions for housing in the state’s 2009-2011 budget—on retirement homes, low-income housing, student housing, and leased property.
Mary Reavey, assessment commissioner for the city of Milwaukee, showed slides of “high-end” retirement homes existing or being built in Milwaukee. These have been exempt but may be taxable under new statutory language enacted in 2009. Portions of the prospectus for the tax-exempt bond offering for one of those homes, St. John’s Communities, Inc., was included in the conference packet. The prospectus referred to property tax and other issues facing nonprofit retirement housing and listed monthly fees and entrances fees and deposits, demonstrating that the project was targeted toward well-off residents.
Mary also shared a list of non-profit housing in Wisconsin, which may not be exhaustive since it includes members of a state nonprofit housing association, and a summary of legislative initiatives relating to property tax exemptions for benevolent associations over the past 20 years.
Mary suggested that a good question to ask when discussing property tax exemptions is: is this something government would provide if nonprofits didn’t? If not, then maybe it should not be exempt.
Steve Miner, Wauwatosa city assessor, shared his city’s efforts to challenge claims for exemptions that the city felt were unfair. These challenges are a significant drain on city financial and staff resources, but the city receives no financial benefit in return—it receives no additional revenue if it wins as the same tax levy is simply spread over a larger base. To the extent that an expanded tax base is beneficial, other taxing jurisdictions also enjoy it, but do not contribute to the cost of the challenges. And, if the city wins, the property owner may successfully appeal to the state Legislature to change the rules.
One suggestion was that the proposed state board of exemptions be given broader powers than those currently envisioned by the Department of Revenue, including power to review and grant all exemptions and to defend their decisions. DOR’s proposals would leave these powers in the hands of local jurisdictions.
Mike Kurth, assistant assessor for the city of Madison, talked about the difficulties that face assessors in administering new state laws relating to retirement homes and low-income housing. He noted that one difficulty facing assessors regarding retirement homes was the new requirement that units are exempt if their fair market value is less than 130% of the average equalized value of improved residential property in the county. It was asked whether this 130% standard would become the basis for being considered “benevolent”: if all units are valued less than this standard, is a project benevolent?
A point made during discussion was that a property may be owed by a nonprofit and thus exempt, but the nonprofit may be able to shift income from that property to private interests—in high prices paid to purchase land and buildings, high salaries, and payments to management companies and other vendors.