Orange County has lost more in property taxes than any other Florida
county because of a tax break meant for nonprofit-housing groups but which
largely benefited companies that develop low-income apartment complexes.
According to Florida Housing Finance Corp., Orange County lost about $16 million in taxable-property value last year because of the exemption, out of an estimated $115 million that was shaved from property-tax rolls statewide.
That's because the Florida Legislature changed the state's property-tax laws two years ago so Habitat for Humanity and similar nonprofit organizations would not face large property-tax bills when they built apartments or other multifamily-housing projects, officials at Florida Housing Finance Corp. said.
But the exemption also wound up reducing the tax bills of multifamily-housing developers, including two Orlando-area businesses: CED Cos. and Atlantic Housing Partners. Maitland-based CED was founded about a quarter-century ago by one of Central Florida's leading philanthropists, Alan Ginsburg of Winter Park. Atlantic Housing Partners, based in Winter Park, was formed about seven years ago by former CED executives.
"My board was not happy about" the exemption having been extended to apartment complexes produced by such companies, said Wellington Meffert, general counsel for Florida Housing Finance Corp. "It appears that none of these projects needed any kind of relief. ... They are all cash-flowing projects."
The loophole, as one Florida legislator calls it, is in the process of being plugged. The Legislature during its recent session passed a measure that would eliminate the exemption for apartment owners, such as CED, that partner with nonprofits by transferring their interests to them. The legislation has been sent to Gov. Rick Scott for his signature.
The tax break allows for-profit developers to transfer ownership of apartment complexes in a way that removes the properties from local tax rolls. As a result, local governments statewide lost out on more than $11 million in property taxes last year alone.
"When it was originally put into law, this exemption was only projected to result in a small loss to local governments," said state Sen. Wilton Simpson, R-New Port Richey, who sponsored this year's bill to close the tax loophole. Instead, local governments lost revenue needed to fund schools and build other infrastructure, he said.
"There are still other state and federal tax credits available to entities involved in affordable housing," Simpson noted. "Repealing this exemption was the right thing to do for the state of Florida."
Moves to undo the property-tax break in the Legislature this spring were opposed in Tallahassee mostly by Southern Affordable Services Inc., a housing-related nonprofit formed in 2009 by executives with CED Cos. and Atlantic Housing Partners. Those two companies subsequently transferred their interests in 80 apartment complexes to Southern Affordable Services Inc. so they would be exempt from property taxes.
Ginsburg was out of the country and unavailable for comment. Officials with Atlantic Housing Partners and CED could not be reached for comment.
Ginsburg, who founded CED in 1988, is known for constructing apartments using the federal government's system of tax credits for low-income housing. Through the years, CED has completed more than $2.5 billion worth of apartments, most aimed at lower-income workers and their families.
SAS complains that the Legislature's move to end the exemption would kill its housing-related programs, which include tutoring for residents' children and an initiative to identify homeless families able to transition into permanent housing.
"Without the ad valorem tax exemptions, SAS may be forced to cut these important programs," said Lori Trainer, a spokeswoman for the Winter Park-based nonprofit. Also, more apartment communities may be removed from the state's affordable-housing inventory, affecting some of Florida's more-vulnerable residents, such as single parents, teachers and hospitality workers, she said.
To obtain its federal tax exemption as a nonprofit, SAS has stated that it develops, owns and operates rental housing for tenants with no more than moderate incomes. SAS apartments do have some of the lowest rental rates in the region among comparable complexes, but they are not always the most affordable within a given area, according to an informal survey using rental data from the Apartment Association of Greater Orlando.
For instance, the Willow Tree Apartments complex near MetroWest in west Orlando was valued at $15 million last year on Orange County's property-tax books. But because of the exemption, the 384-unit property, completed in 1999 and owned by a limited-liability corporation affiliated with SAS, was taxed as though it were worth little more than a million-dollar home.
Its owners saved $286,589 in property taxes on that complex alone -- enough to shave rents by more than $60 a month on each unit. Yet about 1.5 miles away, Metro Place Apartments -- built about the same time as Willow Creek -- charges about $64 a month less for a two-bedroom unit than Willow Tree does, even though Metro Place does not get the tax break.
Meffert, Florida Housing Finance Corp.'s general counsel, said the exemption has given certain apartment owners a competitive advantage.
"There are areas where the market for apartments has plenty of capacity, and this has driven down the price of rentals," Meffert said, adding that the property-tax savings for a nonprofit owner is a "real competitive disadvantage" for nearby apartment complexes trying to match the nonprofit partnership's rents.
Local officials are eager for the state to restore the lost property-tax revenue.
Orange County Comptroller Martha Haynie said the exemption is similar to the reduced impact fees given to some developers when they build housing complexes, because in both cases they diminish the county's ability to provide residents with related public services. She said that, although Ginsburg is a close friend of hers, the apartments that he and others develop have an effect on county roads, schools, parks and other taxpayer-funded services.
"It seems to be the American way to get tax breaks and take advantage of opportunities," Haynie said. But local governments losing out on millions in property taxes, she added, "is a problem."
(c)2013 The Orlando Sentinel (Orlando, Fla.)
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