Janesville16.1°

Some question tax-exempt status of luxurious senior housing

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Stacy Vogel
January 18, 2009
— Virginia and Ray Anderson have paid more to lease their Cedar Crest apartment than they paid for their house, but they love the quality of life the “senior living” complex offers.

Their apartment is almost as big as the three-bedroom house they used to own, and they enjoy access to weekly movie nights, exercise classes and lectures, Virginia said.


But despite the steep price, neither they nor Cedar Crest pays property taxes on the spacious apartment.


As a benevolent association, Cedar Crest, 1702 S. River Road, Janesville, doesn’t pay property taxes on its buildings, which include a nursing home and assisted living and memory care units.


But some wonder why luxurious not-for-profit apartments and duplexes, such as the ones at Cedar Crest, aren’t on municipal tax rolls.


The issue has been debated statewide for years, officials said. Some argue such exemptions unfairly benefit wealthy seniors, while others say they help not-for-profits subsidize other forms of care.


What is benevolent?

Wisconsin offers property tax exemptions to “educational, religious and benevolent institutions … including benevolent nursing homes and retirement homes for the aged,” according to state statute.


But the state has never fully defined benevolent, said Richard Haviza, Janesville assessment operations manager.


Cedar Crest, a not-for-profit organization, leases its apartments and duplexes to residents through an upfront payment and a monthly service charge.


The Andersons paid $156,000 when they moved in and pay about $1,300 a month, Virginia said. When they move out, they or their family will get back 85 percent of the initial payment.


“I joke with people; I say, ‘We paid all this money, and we don’t own a thing,’” Virginia said.


The organization owns three parcels of land, Haviza said. It pays property taxes on 13.7 acres that exceed the 10-acre parcel limit for exempt property and on a smaller parcel that is not tax exempt, totaling $70,500 in assessed value, he said. It doesn’t pay property taxes on its buildings.


The situation smells fishy to John Eyster, Fulton Township. He was outraged when he toured Cedar Crest’s duplexes in August and found a brochure touting the fact that residents don’t pay property taxes.


The exemption is an example of many loopholes in Wisconsin tax law, he said.


“We need to review and reassess what is property-tax exempt,” he said. “One major argument has been that it’s for the public good … Several of those institutions, I think, would be hard pressed to go to court and prove they are a public good.”


Softening the blow

But the Cedar Crest campus does provide a public good, said Marion Wozniak, president and CEO.


Cedar Crest offers a continuum of care to senior citizens, from independent living to round-the-clock care, she said. Because it is a not-for-profit, it can’t evict residents who become unable to pay.


“When they’re here, they’re essentially aging in place in Cedar Crest, and as their health care needs change and their level of service changes, they move throughout the (Cedar Crest) community,” she said.


The fees from duplex and apartment residents help pay for residents who need more care, she said. Half of the residents are on Medicaid, which doesn’t come close to covering care expenses.


“If all these residents were in the community … taxes would be impacted, and we do soften the blow,” she said.


If Cedar Crest had to use some of its income for property taxes, that would be less money for residents who need care. If it raised rates to pay the taxes, it would force residents to burn through their assets more quickly and put them on public assistance sooner, she said.


The Wisconsin Association of Homes and Services for the Aging supports Wozniak’s position, said Tom Ramsey, director of government relations.


“In many instances, these people are in essence paying for their future care,” he said.


Looking for a solution

But Dan Thompson, executive director of the League of Wisconsin Municipalities, said the property tax exemptions unfairly shift the municipal tax burden onto other property owners.


“When one group of residential property owners is tax exempt, what that means is everybody pays more,” he said. “It’s really a fairness issue.”


Wozniak said she understands the controversy and hopes stakeholders can come to a compromise. For example, in some states institutions pay usage fees instead of property taxes to cover municipal services.


“What we need to do is work at a solution where we can meet the needs of both parties,” she said.


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Cedar Crest is one of many local housing organizations that receive property tax exemptions.


Other tax-exempt properties offer everything from care for disabled residents to drug treatment centers.


Some, like Cedar Crest, offer housing to senior citizens, though many have income limitations.


First Senior Homes, the apartment buildings on property donated by First Lutheran Church at 1720 E. Memorial Drive and 1801 E. Milwaukee St., Janesville, are property-tax exempt even though not all of the housing is low-income, manager Byron Mullaney said.


But Mullaney said the residents don’t benefit from the tax-exempt status because it makes them ineligible to receive the homestead credit. The state offers the credit of up to $1,160 to homeowners or renters with annual household incomes of $24,500 or less.


Some senior care organizations aren’t exempt from property taxes.


Huntington Place, a senior care campus at 3801 N. Wright Road, Janesville, pays property taxes because it is a for-profit corporation, a spokeswoman there said.


Fairhaven Senior Community, 435 W. Starin Road, Whitewater, is not-for-profit and doesn’t pay property taxes on its nursing home or assisted living units, but it does pay taxes on its Prairie Village duplexes.


The organization discussed applying for tax-exempt status for Prairie Village, but the Rev. David Yochum, executive director, said they didn’t for several reasons:


-- State law limits an organization to 10 acres of tax-exempt property in one parcel, and Fairhaven already was at the limit.


-- The organization received tax incremental financing from Whitewater.


-- The organization didn’t believe the duplexes should be tax exempt.


“There was not a compelling reason to seek the tax exemption,” Yochum said.


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There has been action on Wisconsin’s property-tax exemption law in the last few years. In 2005, a special committee recommended limiting the exemption for benevolent associations to:


-- Nursing homes.


-- Community-based residential facilities.


-- Adult family homes.


-- Residential care apartment complexes.


-- Domestic abuse shelters.


-- Homeless/transitional living shelters.


-- Low-income housing.


-- Alcohol and drug abuse treatment housing.


-- Housing for the permanently disabled.


-- Non-residential property.


The proposed bill didn’t make it out of an Assembly committee, and it has not been reintroduced.


Benevolent associations aren’t entirely satisfied with the state law either, said Tom Ramsey, director of government relations for the Wisconsin Association of Homes and Services for the Aging.


The law states any lease income on a benevolent property must be used for maintenance or construction debt of that property. That means senior complexes such as Cedar Crest aren’t supposed to use income from senior living apartments to subsidize nursing home care, even though many of them do.


“The policy itself simply doesn’t make any sense,” Ramsey said. “If you can’t pay for your utilities or—in the case of senior housing—if you can’t pay for transportation to the doctors, what’s the point?”


The state Senate included language removing that restriction in last year’s budget repair bill, but Gov. Jim Doyle vetoed the provision, Ramsey said.



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