Albany battles retirement home over 99-year tax exemption
ALBANY - The city is challenging an agreement it signed with the Avila Retirement Community two decades ago that exempts the nonprofit senior living facility from paying full property taxes for 99 years.
If successful, the legal challenge could mean millions in tax revenue annually while also potentially forcing some of the community's senior citizens to find new homes.
Several years ago, the city began reviewing all the properties that are listed as nonprofits to ensure they were following the tax code. More than 60 percent of the city's property value is tax-exempt.
City Assessor Trey Kingston said when he reviewed the exemption for Avila used in the state assessment system, it came up as a nursing home, which it is not.
When the city investigated further, it discovered an unusual 2004 tax exemption agreement signed by former Mayor Jerry Jennings and approved by the Common Council. The city believes the agreement violates the law for nonprofits seeking tax exemption for providing housing. In April 2023, the city sent Avila a letter saying the city would no longer abide by the agreement and sent it a tax bill.
"In effect, the Council, the Mayor, and the Assessor at the time acted to forgive the property's taxes without any authority to do so," Kingston wrote.
In response, Avila filed a tax certiorari petition in July 2023, which launched the first of what is now three legal challenges the nonprofit has filed as it seeks to maintain its tax-exempt status. In one filing, it notes the tax exemption agreement was crucial to the retirement community's construction.
In addition to the 2023 assessment challenge, Avila sued the city earlier this year to force it to honor the 2004 agreement. It also filed a petition challenging its 2024 assessment and tax bill. All three legal matters are still pending. The property is assessed at more than $29 million.
Avila has not made any property tax payments or payments under the exemption agreement since the city said it would no longer honor it.
Ryan Moore, a spokesman for Avila, said it is confident the tax agreement will be upheld.
"We're very optimistic that the community will get to where it needs to be, and that the good people that are there can continue to live their lives without worry." he said. "These are people who love this community and have been here for a long time and to see this happen to them just isn't right."
Tucked in the Pine Bush, Avila touts itself as the "premier" retirement community for seniors with active lifestyles in the Capital Region. The 16-acre campus offers three styles of apartments for its seniors, ranging from 780-square-foot, one-bedroom apartments to 2,000-square foot cottages. The retirement community was built in two phases, the first in 2004 and an addition in 2011.
Its website does not list the total for its monthly fee, which covers all residents' expenses.
Avila's property is owned by Burke Community Services, a nonprofit associated with the Roman Catholic Diocese of Albany. The Teresian House Housing Corporation, a nonprofit also associated with the diocese, operates the building and services for residents. Bishop Edward Scharfenberger and Michael Costello, the attorney representing Avila and who has represented the diocese in other legal actions, sit on the Teresian House Housing Corporation's board of directors.
There are two ways an organization can receive a payment in lieu of taxes agreement, according to the city. The main one is through the city's IDA, which is authorized to approve those agreements. Typically, those agreements require the property owner to make a payment that is less than what it would otherwise owe in taxes for a set period of time. The second is through the state's Private Housing Finance Law.
In response to Avila's legal challenges, the city argued Avila did not qualify for a tax exemption as a nonprofit that provides housing, under the state's real property tax law. The most common exemption for those nonprofits requires a property owner to satisfy two benchmarks. First, the owner must be "organized or conducted exclusively for religious, charitable, hospital, educational, or moral or mental improvement of men, women, or children purposes, or for two or more such purposes"; and second, the property must be used principally or primarily for such purposes," according to state law.
The city noted in its April 2023 letter informing Avila it was terminating the tax exemption agreement that an organization that provides housing to poor people, including the elderly, at below-market rates would qualify as a charitable purpose, but renting to the elderly who are not poor does not qualify.
The formula used to devise Avila's annual payment to the city does not follow the payment schedule for a tax abatement agreement typically used by the city's IDA. Those agreements usually offer 10 to 20 years of lower payments that increase gradually over the life of the agreement until the property is paying full taxes. The payments are also split between the city, county, and school district.
Avila's agreement included a formula to determine the annual payment based on a percentage of the property's construction costs, multiplied by a percentage of the city tax rate, and multiplied again by the equalization rate. It also exempts Avila from paying any county or school district taxes.
City officials said they could not find a similar agreement with any other organization. The agreement with Avila was signed by Jennings, former Bishop Howard Hubbard and the city assessor at the time, Keith McDonald.
In January 2023, Avila paid the city $59,038 under the agreement. It's 2024 city tax bill for the two tax lots it owns is $927,132. That does not include school taxes. Avila owes $1.4 million in past due 2023 school taxes, according to the district's tax bill search.
In short, the city argued in its legal filings, city taxpayers have been subsidizing that retirement community for 20 years.
Treasurer Darius Shahinfar said he did not know how much Avila would have paid over the last 20 years if it had not received the exemption. Shahinfar added the city intended to try and recoup the last three years of back taxes, the maximum allowed under the law.
In recent weeks, several residents of Avila's 194 seniors have sent emails to some Common Council members, urging them to use their influence to have Kingston comply with the tax agreement. The property's tax payment would increase more than 3,000 percent if Avila had to pay taxes based on its assessed value.
"For senior citizens on fixed income, and especially for some of us who are basically living on Social Security and life savings, that tax increase is essentially an eviction notice," one resident wrote.
This story was originally published September 21, 2024, 3:31 PM.
