Property tax exemption . . . here’s the city attorney’s latest memo . . .
The email that accompanies the memo is as follows:
Mayor Dave and Alders:
At the Mayor’s request, I prepared the enclosed memorandum regarding the language approved by the Joint Finance Committee of the Wisconsin Legislature as part of the state budget bill. I also enclose a copy of the language. I will see that hard copies of this are available for the meeting tonight.
Second, I understand that some or all of you have received communications regarding the claim by Turners. As with the other claims, this claim was denied by operation of law by the City’s failure to take final action within 90 days of the claim. See my memo of April 27, 2009, which is in the Council materials. Even if the substance of the Turners claim were before you (which it is not), we believe the claim is covered by the Court of Appeals decision in Kickers of Wisconsin v. City of Milwaukee, 197 Wis. 2d 675 (Wis. App. 1995), where the Court rejected similar arguments made by an association dedicated to teaching soccer. I enclose a copy of a memorandum from Assistant City Attorney Larry O’Brien discussing the Kickers case. A copy of this was distributed to you in April, but it does not appear to be in the Council packet.
Thank you.
Michael P. May
City Attorney
City of Madison
The Memo says:
Date: June 2, 2009
TO: Mayor Dave Cieslewicz
FROM: Michael P. May, City Attorney
RE: Impact of Joint Finance Committee’s Language on Tax ExemptionsYou have asked for a brief explanation of the effect of the language approved by the Joint Finance Committee of the Wisconsin Legislature on tax exemptions. In particular, you wanted to know how the language impacts existing tax exemption claims filed with the City, and how it might impact future claims.
We have not completely examined the impacts of the language, and the language is complex, so the conclusions stated herein are necessarily tentative.Future Claims.
The language, if enacted into law, significantly expands the ability of low-income housing providers and retirement homes for the aged to obtain property tax exemptions. The proposed law sets out specific tests for these entities, including an expanded rent-use test. It appears to remove retirement homes for the aged, but not low-income housing providers, from any test under the benevolent association portion of the statutes. It expands the acreage limitation test for low-income housing providers from 10 acres to 30 acres. There is also an exemption for facilities financed by WHEDA that were in existence on January 1, 2008.
A. Low-Income Housing Providers.
Although the Assessor will have to look at each specific request for exemption on its facts, it appears that two entities that filed claims against the City (Greentree Glen and Wisconsin Housing Preservation Corp.) likely would be entitled to future tax exemptions for some or all of their property under the new language for low-income housing providers, assuming the other tests for benevolence are met. Other low-income housing providers, such as those entities in the Third Sector Housing group, also appear to fit the new, expanded tests for exemption. The language appears to apply to specific units, so some market rate units might still be subject to taxation.
The new language is effective as of January 1, 2009. This means that many of the 40 or so low-income housing providers that are now subject to review by the Assessor
under the current legal limitations will be entitled to an exemption if the Joint Finance language is enacted.The language has no impact on an entity like the Turners, which is seeking an exemption under a different legal theory, that of being an educational institution.
B. Retirement Homes for the Aged.
The language will also expand exemptions for retirement homes for the aged. I anticipate that several large entities that are now taxable (e.g., Attic Angels) will attempt to obtain exemptions under the new law. While the Assessor’s office has not finished their review of entities to which this new exemption might apply, they have identified the following entities that are retirement homes for the aged: Oakwood East and West, All Saints, Attic Angels Prairie Point, Meriter, and ILI Senior Housing.
The exemption for retirement homes for the aged requires that the “fair market value of a unit be less than 160 percent of the average fair market value of improved parcels of residential property located in the county.” We are not certain exactly how this language will be applied in practice. To give you a rough estimate of those figures in the City of Madison (the proposed law requires use of the county average), the 2009 average assessed value of a single-family residential home was $245,424. 160% of that figure is about $392,000.
Because this analysis applies to individual units, it is possible that some units at a retirement home for the aged would be tax exempt, while others would be taxable.
C. WHEDA Financed Projects.
The proposed law exempts WHEDA financed projects that were in existence on January 1, 2008. This may impact the Pres House in the future. It appears that an entity like Pres House still must qualify as a benevolent association.
D. Chapter 50 Licensed Facilities.
The proposed law also removes any rent-use test for facilities licensed under chapter 50 of the Wisconsin Statutes, which includes, among other things, adult family homes, community-based residential facilities, and nursing homes.
Pending Claims.From a purely legal analysis, the Joint Finance language has no impact on the pending claims. This is because the pending claims are for 2008 taxes (depending on the status of the property on January 1, 2008) and the new law is effective on January 1, 2009. For those entities on the Council’s agenda for June 2, 2009, those claims for exemption have been denied by operation of law, and the next step is for them to challenge that denial in circuit court.
Assuming those entities challenge the denial and assuming the language from Joint Finance is enacted into law, our office would examine the costs and benefits to the City of Madison of enforcing the law as it existed in 2008, given that the State has changed its public policy position on the taxation of some of these entities. In my opinion, it is proper for a public body such as the City to take into account such a change in policy, once enacted. Here, we would face the possibility that for the three housing providers listed above, they would be subject to taxation for a one-year, locked-in period only.
At this point, I would not wish to speculate on what sort of accommodation, if any, would be appropriate for those entities that are in this locked-in period. I recommend that, at the time we have an enacted law and pending legal actions, the Board of Estimates meet in closed session with our office to discuss the City’s legal strategy for those claims. Any resolution of those pending legal actions would come back to the Common Council for approval.
As noted above, other entities, such as Turners, are not affected by the change in law. They also must pursue a court action at this point to raise the question of their tax exemption claim.
CC: All Alders
Mario Mendoza
Mark Hanson
Mike Kurth
Larry O’Brien
