The question of whether the Grand Campus student housing complex leased by Eastern Kentucky University is tax exempt has reached the second level of appeal.
At stake is more than $253,000 in revenue that local taxing districts would collect if the exemption is finally denied.
In March, Madison County Property Valuation Administrator Billy Akerman refused to exempt the property, assessed at $26 million, from taxes. EKU then took its case to the county’s Board of Assessment Appeals. After a public hearing July 17, the board upheld the PVA’s decision.
A state statute requires local assessment boards to follow the “advice” of the state Revenue Department. But the board concluded the “opinion” EKU obtained from the department was not binding on it or the PVA.
In the recording of a conversation with Revenue Department officials, board chair John Gilliam can be heard asking for the department’s advice. After first saying its “advice” was to exempt the property, David Gordon, Office of Property Valuation’s executive director, backtracked and said, “That is our opinion.”
The recording was played before the board went into closed session to deliberate.
In a decision mailed after the meeting, the board concluded EKU’s agreement with the Grand Campus owners resembles a conventional triple-net lease and does not constitute the “equitable interest” the university asserts is tantamount to ownership. Because state revenue officials continued to offer an “opinion” rather that give “advice,” board members said they did not believe it was binding, their statement added.
At the hearing, Jerry Gilbert, attorney for the Madison County School Board and the county library board, argued against exemption, calling the lease unexceptional.
In its Aug. 7 appeal to the state assessments board, the university notes its expressly asked the Revenue Department in July 2014 if the property would be tax exempt. EKU also informed the board it submitted the lease to state revenue officials and told them the property would not be leased without assurance it was tax exempt.
In its opinion to EKU, the Revenue Department stated the agreement between EKU and the Grand Campus owners was “inconsistent with those of a convention lease. Rather the agreement reflects an intention to transfer practical ownership of the Property to EKU.”
Also under the agreement, “virtually all present rights of ownership … vest in EKU,” the opinion stated. And “the fact that Grand Campus will retain bare legal title poses no obstacle to this interpretation.”
The opinion noted EKU had first refusal rights if the property were to be sold. And insurance proceeds would be shared with the university’s in proportion to its remaining “equitable interest” if the property were destroyed by fire or other disaster.
By Friday, the school and library boards had not responded to the university’s appeal. After the state board’s decision, either party may take the issue to a court of law.