Archive for Sunday, January 18, 2004

Retirement complex tax breaks challenged

Groups question fairness behind communities’ tax-exempt status

January 18, 2004


Three years after moving into Lawrence Presbyterian Manor, Russell Mosser values the security of knowing he can order meals if desired, receive health care assistance if needed and move into a nursing home once inevitable.

He never bargained for having to pay a property-tax bill.

"We're living long enough that we don't even know if our assets are adequate for whatever our life span may be, because of continuous inflation," said Mosser, an 86-year-old retiree who lives in an independent-living unit. "One of our determinations in moving here was we basically knew where we were starting. The taxes -- that's part of the assessment of what you can afford."

Lawrence Presbyterian Manor is one of dozens of nonprofit retirement communities in Kansas that are exempted from paying property taxes, an exemption now being challenged by a growing number of city and county governments.

Leaders of the Coalition for Property Tax Fairness are pushing for the Kansas Legislature to lift the exemption as it applies to independent-living units. Such units are apartments and duplexes designed to give residents maximum freedom before needing more in-depth services.

Such units are not much different from other properties that remain on the tax rolls, said John Waltner, who leads the coalition as mayor of Hesston and special projects director for Harvey County. And the exemption costs state, county and city governments at least $2.5 million a year.

Even more important, he said, other elderly residents, living in similar surroundings in for-profit retirement communities or even in their own duplexes, are paying taxes.

Fairness questioned

"It's really an issue of fairness," Waltner said. "There are seniors who live in their own homes and are paying for public services. Why shouldn't these people pay, too?"

Waltner and other Harvey County officials are lobbying Douglas County commissioners to join the legislative fight. The effort already is being backed, monetarily, by Harvey and Reno counties and the cities of Hesston and Inman; others pledging formal support include Marion, Riley and McPherson counties, plus the city of Newton and the Kansas Association of Counties and the League of Kansas Municipalities.

Douglas County commissioners expect to make a decision within a few weeks, after reviewing a formal proposal from coalition officials.

As a nonprofit retirement community, neither Lawrence Presbyterian Manor, 1429 Kasold Drive, nor its residents pay property taxes. Lawmakers this session expect to consider legislation that would lift the statewide exemption on independent-living units.The projected annual tax revenue that would be generated by lifting the exemption, according to the Douglas County Appraiser's Office:¢ Manor Woods, 1329 Kasold Drive (26 duplexes): $32,000.¢ Apartments, 1429 Kasold Drive (54): $24,700.

"It clearly is a tax-equity issue," Commissioner Bob Johnson said. "My sense is, if someone came to the state today and said, 'Here's how we'd like to set the deal up,' there's no way they would do it. No way."

Johnson posed a hypothetical example involving himself and Charles Jones, commission chairman: "If Charles and I each lived in and owned half of a duplex, and we lived side by side, and his duplex was worth $125,000 and mine was worth $125,000, and I make a life choice that says, 'I think I'm ready to move to Presbyterian Manor.' So I move into a $125,000 duplex at Presbyterian Manor. I stop paying property tax. He continues paying property tax. Where's the equity in that?"

Chilling effect?

Bill Ward, chief executive officer of Presbyterian Manors of Mid-America, knows the sentiment all too well. He's heard it throughout his seven years in charge of the nonprofit company with 17 communities, 1,600 employees and 2,000 residents in Kansas and Missouri.

The company takes in about $64 million a year, he said, but all of it goes back into services and subsidies for residents. No residents are told to leave the system for inability to pay, and residents who start in independent-living units typically are signing up for care expected to last for the remainder of their lives.

The coalition pushing to eliminate the tax exemption on independent-living units could end up costing their communities more money than would be generated, he said. Presbyterian Manors alone provide more money in charitable giving than the new taxes would produce.

Nonprofit centers could curtail their expansions and new locations, he said, if the tax landscape were to change.

"They're doing the communities, and maybe even the residents they're purporting to help, a disservice," Ward said. "We certainly hope it doesn't happen. We think it's short-sighted for Kansas as a whole."

Waltner has been pushing the issue for more than 10 years. A year ago, a compromise bill, one that would have eliminated the exemption only for independent-living units off campus from the base retirement home, passed the Senate, but died in the House.

Ward expects the contest to flare up again.

"It's a couple communities and a few individuals who are basically saying, 'We are going to keep this up until we get our way,'" Ward said. "Now, if you were doing this on the school ground, picking teams, people would say, 'This is not very sportsmanlike. We've already decided this issue. Let's get on with the game.' But that isn't what happens. So we do it again."

Looking ahead

Sen. Mark Buhler, R-Lawrence, said he welcomed the debate. He supported last year's compromise, which was designed to ensure that "retirement communities that are in the development business and merely buying Aunt Bessie's home" would be forced to pay property taxes, just like any other homeowner.

But taxing people already enrolled at Lawrence Presbyterian Manor, or any other nonprofit community in the state, isn't a politically viable alternative, he said. Those people already have planned out their futures under the existing rules.

But new developments could be held to new standards, he said, ones that would require payment of property taxes.

"You start shining the light a little brighter, maybe something will happen," said Buhler, a member of the Senate's Assessment and Taxation Committee. "There's a little inequity there, sure. But if we legislated and fixed every inequity in this world, we wouldn't do anything but be changing all the laws. ...

"We probably ought to be careful where we step."

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