Here, the Petitioner argues
that it provides “safe, decent, affordable housing for low and moderate income
individuals and families.” And that because 75% of its residents are at 80% of
the local adjusted median income and 20% of that population is at 50% or less
of the adjusted median income, the Petitioner’s property should be entitled to
an exemption. However, as the Respondent notes, the Petitioner must restrict
the income levels of its tenants in order to maintain its federal income tax
exemption.
Moreover, the Petitioner failed
to show the income levels of its tenants differ from the income levels of
residents at other conventional apartments. And like the residents in Mountain
View Homes, Inc. v. State Tax Comm’n, 427 P.2d 13 (N.M. 1967), cited by the
Indiana Tax Court in Jamestown Homes of Mishawaka, Inc. v. St. Joseph County
Assessor, 909 N.E.2d 1138 (Ind. Tax Ct. 2009), the Petitioner’s residents
might be “surprised to learn that they are considered as being proper objects
for, or as recipients of charity.” 427 P.2d at17. For example, a single
individual earning an annual income of $34,400 or $34,850 – which represents
80% of the area median income – would seem far from “indigent” and in need of
charity under normal circumstances. See Petitioner’s Exhibit J.
And like the Petitioner in Jamestown
Homes, Bradford Run retained “several ‘typical’ landlord rights: it could
evict tenants who failed to pay their rent, it charged fees for late rental
payments or returned checks, and charged security deposits.” Jamestown
Homes, 909 N.E.2d at 1140. Ms. Rhodes admitted the Petitioner does not
offer any rent forgiveness or other concessions other than standard rent
concessions and application fee waivers. Rhodes testimony. Further, Ms.
Rhodes admitted that the Petitioner filed eviction proceedings for 26 tenants
in 2010 and 24 tenants in 2011 and the Petitioner instituted 99 collection
actions between February of 2010 and December of 2011. Id.
Although the
Petitioner claims to offer its residents “affordable” apartments, affordability
does not equate to charitable. And the Petitioner’s own evidence fails to
clearly show that its rents are “below market.”
Ms. Mutzl
estimated that in 2010 adjusted comparable rents on a 676 sq.ft., one bedroom
apartment ranged from $442 to $574, and the subject property’s rents ranged
from $350 to $513. Mutzl testimony; Petitioner Exhibit K. Likewise, the
2010 adjusted comparable rents on a 715 sq.ft., one bedroom apartment ranged
from $442 to $574 and the subject property’s rents ranged from $375 to $699. Id.
Thus, the subject property’s rents were within the range of rents charged
by other conventional apartment complexes. A similar result was found for 2011:
adjusted comparable rents on a 676 sq.ft., one bedroom apartment ranged from
$442 to $594 and the subject property’s rents ranged from $355 to $504; and the
adjusted comparable rents on a 715 sq.ft., one bedroom apartment ranged from
$442 to $594, and the subject property’s rents ranged from $385 to $699. Id.
Thus, for each type of unit, in each year, the Petitioner’s apartments
rented within the range of rents charged at “comparable” conventional
apartments. Although in many cases the Petitioner’s rents were at the “low end”
of the range of rents charged by the properties its appraiser deemed
comparable, having a lease rate below the average lease rate does not make an
apartment complex “charitable.” By definition at least half of the properties
would have a rent rate “below the average lease rate.”
For the two
bedroom apartments, Ms. Mutzl estimated that in 2010 adjusted comparable rents
on a 852 sq.ft., two bedroom apartment ranged from $515 to $723, and the
subject property’s rents ranged from $425 to $529; the adjusted comparable
rents on a 948 sq.ft., two bedroom apartment ranged from $530 to $738, and the
subject property’s rents ranged from $475 to $660; the adjusted comparable
rents on a 968 sq.ft., two bedroom apartment ranged from $530 to $738, and the
subject property’s rents ranged from $500 to $699; and the adjusted comparable
rents on a 1,034 sq.ft., two bedroom apartment ranged from $530 to $738, and
the subject property’s rents ranged from $525 to $714. Mutzl testimony;
Petitioner Exhibit K. Thus, for each size of two bedroom apartment, the
Petitioner’s apartments rented within the range of rents charged at
“comparable” conventional apartments. Id. The only exception was that
the range of rents for a 889 sq.ft., two bedroom apartment at Bradford Run in
2010 fell entirely below the range of rents at “comparable” properties: the
2010 adjusted comparable rents on a 889 sq.ft., two bedroom apartment ranged
from $530 to $738, and the subject property’s rents ranged from $450 to $529. Id.
But even on that unit, Bradford Run’s highest rent rate was only one dollar
lower than the range of “market” rents identified by the Petitioner’s
appraiser. Id.
In 2011, Ms.
Mutzl found that the adjusted comparable rents on a 852 sq.ft., two bedroom
apartment ranged from $515 to $726, and the subject property’s rents ranged
from $430 to $529; the adjusted comparable rents on a 889 sq.ft., two bedroom
apartment ranged from $530 to $741, and the subject property’s rents ranged
from $460 to $538; the adjusted comparable rents on a 948 sq.ft., two bedroom
apartment ranged from $530 to $741, and the subject property’s rents ranged
from $330 to $660; the adjusted comparable rents on a 968 sq.ft., two bedroom
apartment ranged from $530 to $741, and the subject property’s rents ranged
from $520 to $667; and the 2011 adjusted comparable rents on a 1,034 sq.ft.,
two bedroom apartment ranged from $530 to $741, and the subject property’s
rents ranged from $525 to $714. Mutzl testimony; Petitioner Exhibit K. Again,
for each size of unit, the Petitioner’s two bedroom apartments rented within
the range of rents charged at “comparable” conventional apartments in 2011. Id.
Finally, for
the three bedroom apartments, Ms. Mutzl estimated that in 2010 adjusted
comparable rents on a 1,158 sq.ft., three bedroom apartment ranged from $682 to
$824, and the subject property’s rents ranged from $600 to $830; and the
adjusted comparable rents on a 1,482 sq.ft., three bedroom apartment ranged
from $692 to $834, and the subject property’s rents ranged from $829 to $1,085.
Mutzl testimony; Petitioner Exhibit K. Similarly, for 2011, the adjusted
comparable rents on a 1,158 sq.ft., three bedroom apartment ranged from $682 to
$827, and the subject property’s rents ranged from $625 to $830 and; the
adjusted comparable rents on a 1,482 sq.ft., three bedroom apartment ranged
from $692 to $837, and subject property’s rents ranged from $683 to $1,085. Id.
Again, for both units, for both assessment years, the Petitioner’s
apartments rented within the range of rents charged at “comparable”
conventional apartments and, in fact, even exceeded the range of rents charged
at comparable apartments. Id.
Based on her
comparable analysis, Ms. Mutzl merely concluded that “in many cases” the
Petitioner’s rents “are set at the low end of the market.” Mutzl testimony;
Petitioner Exhibit K. This is insufficient to show that the Petitioner’s
rents were “below market” rents and fails to show a “public benefit” or
“charitable intent” sufficient to justify the grant of an exemption.
Even if the
Petitioner had sufficiently proven that its rents were “below market,” the Tax
Court has explicitly held that renting at below market rent is insufficient for
the grant of an exemption. See Jamestown Homes of Mishawaka, Inc. v. St.
Joseph County Assessor, 909 N.E. 2d 1138, 1142, n.9, and 1144 (Ind. Tax Ct.
2009).
The Petitioner
makes much of the services that it offers its residents such as hot breakfasts,
backpacks and school supplies for its resident’s school age children, its
partnership with PNC bank to teach money management and budgeting, its
partnership with the library to promote reading, its arrangement with the fire
station to teach fire safety and its arrangement with other Howard County
organizations to promote resident’s health, and its computer station for
residents where they can write a resume and search for a job. And those
services are admirable. However, the evidence shows that the Petitioner’s
programs and services are not unique to the Petitioner’s property or to a
“charitable” enterprise. Many of the Petitioner’s programs are offered
elsewhere by for-profit entities. As the Respondent testified, local grocery
stores and pharmacies have an annual “buddy bag” drive; the Windmill Grill does
a program to “pack the bus" with school supplies; and Chrysler Corporation
gives millions in charity to the community. Shepherd testimony. Moreover,
the fire department presents its “stop, drop and roll” program to day care
facilities, the public library’s “bookmobile” stops at many locations,
including places like the Marsh supermarket, and being a drop off point for
another organization’s coat drive occurs at other locations, such as the Rusty
Bucket Restaurant in Indianapolis. Id.; Meighen argument. Finally, banks
go to various offices to promote their business and work stations are available
in hotels and other apartment complexes such as Walnut Creek. Id.
Ms. Minch
admitted that the Petitioner’s amenities attract residents. Minch testimony.
Moreover, the cost of such programs appears to be included in the rent
because Mr. Myrvold described the property as “self-sufficient.” Myrvold
testimony. And, in fact, the property contributes money to the Foundation
for its grant-making mission. Myrvold testimony. Like the taxpayer in Mountain
View Homes, “here, we have an enterprise to furnish low-cost housing to a
certain segment of our population. It was intended to be self-supporting,
without any thought that gifts or charity were involved. The tenants are
required to pay for the premises occupied by them with the rentals being fixed
so as to return the amount estimated as being necessary to pay out the
project.” 427 P.2d at17.
Thus, the
Board finds that the Petitioner failed to sufficiently prove its property was
owned, operated and used for a charitable purpose pursuant to Indiana Code §
6-1.1-10-16 for the 2010 or 2011 assessment year.
