The Attention-Getting Device

The following gets into the details of local tax law, complex but still important to any resident of Athens County who cares about how their tax dollars are spent.

In 2006, a local retirement center, the Lindley Inn, sued over Ohio University's plan to give 16 acres of tax-exempt state land to National Church Residences to build a retirement village next to the Stimson Avenue Bridge. OU’s original lease was for the token sum of $1 a year, and lawyers for the competing complex alleged that this amounted to a state institution giving preferential treatment to NCR over its competitors. In response to pressure from the Ohio Department of Administrative Services, OU has raised the yearly lease to $40,000. However, lawyers for the Lindley Inn recently filed another complaint, claiming that OU's land appraisal and new lease amount are still unacceptably low.

I have a related question: is NCR's payment in lieu of county property taxes enough?

In the early days of the project proposal, an arrangement was suggested where NCR would pay a $20,000 fee to Athens County, City and Athens schools to make up for the fact that the development was to be built on tax-exempt land. OU's new yearly lease has sometimes been quoted in the media as being $60,000 when what has supposedly happened is that the $20,000 tax replacement fee is now paid to OU instead of directly to local government, with OU then splitting up the $20,000 between the County, City and school district.¹

From a citizen’s perspective, NCR should pay the full amount of property taxes that it would if it decided to develop land elsewhere in Athens County. Any amount below this fair market tax value is in effect forcing the rest of Athens County taxpayers to shoulder the tax burden for the retirement center and its residents, all of whom will apparently be from middle to upper income brackets.^¢1 Since 60% of property taxes in Athens City go to the Athens City School System and 30% go towards County services, these entities would stand to lose the most. Also, Athens City does not collect income tax on pensions or retirement benefits², so without a replacement for property taxes the 200 proposed residents would contribute zero to the city tax base, while the City and County (meaning the rest of us) would be financially responsible for providing them with safety, street & road maintenance and recreation services.

With this in mind, I examined NCR’s tax replacement payment against what four comparable local retirement facilities paid to their respective Athens County tax districts in 2007. By scaling the building area of each facility to the size of NCR’s plans and averaging the resulting numbers, I was able to reach an solid estimate of what NCR’s tax bill should be. To take an in-depth look at the study, complete with spreadsheet calculations, a slideshow of site measurement techniques and hyperlinks to source data, click here.

The annual bill I arrived at was between $80,000 and $220,000, depending on how many stories the retirement center will be (2 or 3 floors will double or triple the total square footage of the development). That’s four to eleven times the proposed tax replacement fee, and this leads me to ask what may be a silly question: Will NCR still pay property taxes to Athens County for the buildings it erects on tax-exempt state land?

If so, then the $20,000 fee OU now plans to charge NCR on the city and county’s behalf replaces tax on only the tax-exempt land NCR is leasing. There is certainly precedent for this type of arrangement, since one of my four comparison facilities, Heritage Commons off Stimson and Kurtz, is a tax-liable structure built on exempt land. Sadly, this explanation appears unlikely, since $20,000 would be more than double the annual tax due on land appraised at 480k.^¢2

If, on the other hand, NCR will not be paying taxes on the retirement center buildings, then OU’s fee is far too small, and Athens County taxpayers will be subsidizing the retirement center to the tune of $60,000-$200,000 a year. That’s between $1.2 and $4 million over the next 20 years (not adjusted for inflation, which will increase the loss if the replacement fee stays fixed). It would amount to highway robbery, with the entire county as victim and the cash going directly into NCR’s pocket. Remember that even the government-supported low-income senior center at Heritage Commons pays taxes on its building; the idea that a retirement center for the well-off shouldn't have to do the same doesn't just tilt the playing field against NCR's competition; it also flies in the face of a basic sense of fairness and human decency.

Can anyone help shed some light on this? I find it hard to believe that County and State officials wouldn’t have made a fuss about such a huge tax subsidy if the second scenario is the correct one.