Multnomah County Assessor v. Portland Devel. Comm. II , 21 Or. Tax 66 ( 2012 )

66 December 14, 2012 No. 9
IN THE OREGON TAX COURT
REGULAR DIVISION
MULTNOMAH COUNTY ASSESSOR,
Plaintiff,
v.
PORTLAND DEVELOPMENT COMMISSION,
Defendant.
(TC 5008)
Plaintiff (the county) appealed from a Magistrate Division decision as to the
exemption status of Defendant (taxpayer)’s property for the 2009-10 tax year.
Taxpayer argued that its property should be exempt from taxation because pro-
vision of housing to low income occupants was involved in taxpayer’s activities.
Granting the county’s motion, the court ruled that pursuant to the definitions in
the statute, taxpayer was not the type of entity described in the statute, that is,
a housing authority, and therefore the property in question was not exempt from
taxation.
Oral argument on cross-motions for summary judg-
ment was held June 13, 2012, in the Multnomah County
Courthouse, Portland.
John S. Thomas, Multnomah County Counsel, Portland,
filed the motion and argued the cause for Plaintiff (the
county).
Jack L. Orchard, Ball Janik LLP, Portland, filed the
cross-motion and argued the cause for Defendant (taxpayer).
Decision for Plaintiff rendered December 14, 2012.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This matter is before the court on a second set of
cross-motions for summary judgment. In these motions the
parties present their differing views as to whether the prop-
erty in question is exempt from property taxation under
Oregon statutes. There is no disagreement about the under-
lying facts of the case and they are found in a document enti-
tled Agreed Facts as of January 1, 2009 (the Agreed Facts),
filed with the court on May 30, 2012.
Cite as 21 OTR 66 (2012) 67
II. FACTS
The Agreed Facts establish the following:
(1) The Fairfield is an 82-unit single room occupancy
(SRO) rental housing facility consisting of 27,866 square feet
of building area located at 1103-1121 SW Stark Avenue in
Portland, Oregon. It includes 7,780 square feet of street front
commercial space. Part of the commercial space is presently
leased to the Roxy Café. The remainder of the commercial
space has been vacant since September 2008. This litigation
relates only to The Fairfield’s residential component.
(2) The Fairfield was owned from October 1983
to January 2001 by the Fairfield Group, a for-profit entity.
During this period, the Fairfield Group entered into a
Housing Assistance Payments contract with the Housing
Authority of Portland (HAP). HAP in turn was under con-
tract with the federal Department of Housing and Urban
Development (HUD) to provide assistance payments for eli-
gible parties pursuant to 42 USC Ch 8, section 1437f, com-
monly known as the HUD section 8 program. HAP is a pub-
lic corporation. These contracts concern only The Fairfield’s
residential component. The commercial space is not part of
the section 8 program.
(3) Under the Fairfield Group-HAP contract, the
Fairfield Group was required to meet various facility oper-
ating and tenant leasing standards. Although the Fairfield
Group and the property’s residential component continu-
ously qualified under the section 8 program and was so cer-
tified by HAP, the Fairfield Group neither sought, nor was
the residential component granted, any tax exempt status
during the Fairfield Group’s ownership.
(4) In January 2001, The Fairfield was acquired
by the City of Portland, by and through Defendant Portland
Development Commission (PDC) at the request of, and for
the benefit of, the City of Portland. At the time of PDC’s
acquisition, the residential portion of the facility was desig-
nated by PDC to be used exclusively for preserving afford-
able housing in downtown Portland. PDC has determined to
restrict the facility’s residential use to such purpose and all
occupants must qualify as low income occupants.
68 Multnomah County Assessor v. Portland Devel. Comm. II
(5) PDC is the designated urban renewal agency
for the City of Portland, formed under Oregon Revised
Statutes (ORS) chapter 457. PDC operates under the author-
ity of a five member commission. PDC’s responsibilities are
not confined to urban renewal matters.
(6) The Portland City Charter specifies three major
areas of PDC responsibility under Charter section 15-103:
Urban Renewal; Economic Development; and Affordable
Housing. PDC is directed by the charter to “advance social
equity in carrying out all its duties” and is to “create, main-
tain and promote a diverse, sustainable community in which
* * * quality housing * * * opportunities are made available to
all residents.” In carrying out its responsibilities concerning
affordable housing opportunities, PDC is to promote the cre-
ation and retention of multi-family housing.
(7) Concurrent with PDC’s acquisition, PDC
assumed all of the Fairfield Group’s obligations under the
Fairfield Group-HAP contract. On this basis, HAP approved
the assignment of the Housing Assistance Payments con-
tract from the Fairfield Group to PDC.
(8) Had PDC not assumed the obligations of the
Fairfield Group-HAP contract and retained The Fairfield
as a section 8 housing resource, PDC would not have been
authorized to acquire the property, nor to operate it. The
agreements pertaining to PDC’s ownership and operation
of The Fairfield were fully integrated with HAP’s contract
oversight and HAP’s pre-existing control of the property as
a section 8 housing resource. HAP’s authority and control
over The Fairfield remained unchanged following PDC’s
acquisition of the property.
(9) Upon PDC’s acquisition of The Fairfield, PDC
retained Income Property Management (IPM), a for-profit
company, to manage the property under a services agree-
ment. For the 2001 and 2002 tax years, the property was
managed by IPM. For the 2001 and 2002 tax years, The
Fairfield’s residential component was exempt from real
property taxes. Plaintiff (the county) asserts that there was
no basis for exemption of the property in those years and
now claims the exemptions were placed on the roll in error.
Cite as 21 OTR 66 (2012) 69
PDC disagrees with this assertion. The county is unable to
provide any documentation concerning the decision to grant
the exemption in 2001-02.
(10) The section 8 program limits the amount of
rent that can be charged to occupants and sets conditions for
how PDC may administer and manage The Fairfield. PDC
is not permitted to make units available to the general pub-
lic except in compliance with section 8 requirements. Other
than one unit subject to a special rental arrangement, all
of The Fairfield’s units are designated as section 8 units,
subject to the HAP contract. For purposes of calculating the
HUD section 8 assistance payment and the “contract rent”
that is legally chargeable to occupants at The Fairfield, no
reimbursement for property taxes has been included. HAP
administers the qualification of residents under the section
8 program and disburses section 8 subsidy payments.
(11) The PDC-HAP section 8 contract was most
recently renewed effective September 9, 2009. The Fairfield
is designated as HUD Project No. 002 MB002-0001, HUD
Contract No. OR 16-K002-002-1. The section 8 contract
terms have not been materially changed from the original
Fairfield Group-HAP contract, nor have the responsibilities
of HAP and PDC concerning The Fairfield’s operation.
(12) From 2003 to February 28, 2006, The
Fairfield was operated by Central City Concern under a
“Master Lease and Management Agreement.” It replaced
IPM. Central City Concern is an Internal Revenue Code
(IRC) section 501(c)(3) tax exempt organization. While
Central City Concern “rented” the 82 SROs, it occupied
none. Instead, it was required to limit all 82 SRO units to
qualifying section 8 eligible residents (other than the excep-
tion unit identified above). No occupant had any position
with Central City Concern, nor performed any services for
Central City Concern at The Fairfield. All residents had
(and have) signed occupancy agreements, limited to a spec-
ified SRO unit at The Fairfield. Residents are obligated to
pay rent accordingly and The Fairfield receives a section 8
payment associated with each SRO unit. No occupant has
contractual obligations under an occupancy agreement to
pay real property taxes, directly or indirectly.
70 Multnomah County Assessor v. Portland Devel. Comm. II
(13) During the period of Central City Concern’s
management of The Fairfield, applications for exemption
were made under ORS 307.540 to 307.548. The residential
portion of the property was exempted under that statute for
tax years up through 2005-06.
(14) No applications for exemption were made
under ORS 307.540 to 307.548 or any other statute for the
2009-10 tax year, nor for any tax year after 2005-06. The
exemption remained in continuous effect.
(15) On March 1, 2006, Central City Concern dis-
continued its management of The Fairfield. IPM was then
renewed as manager under a flat fee, personal services con-
tract. It is the current manager under a “qualified manage-
ment contract” pursuant to the section 8 program.
(16) All responsibility for property taxes has
remained with PDC throughout PDC’s ownership of the
property. The actual use and operation of The Fairfield has
not changed from the original PDC acquisition, irrespective
of its operation by IPM or Central City Concern. IPM has
no ownership or possessory right in the property. All real
property interests, except for occupants’ use of their SROs
are held exclusively by PDC, subject to the HAP contract. No
one associated with IPM occupies or leases an SRO unit at
The Fairfield.
(17) For the 2006, 2007, and 2008 tax years, The
Fairfield was certified as exempt property on the annual roll.
The county now asserts that there was no basis for exemp-
tion of the property for those years and they were placed on
the roll in error. PDC disagrees with this assertion.
(18) On September 21, 2009, the county determined
that The Fairfield was not exempt from real property taxa-
tion for the 2009-10 tax year. On that date, the county cor-
rected the roll to make the property taxable for the 2009-10
tax year on September 21, 2009. The 2009-10 tax roll was
certified on October 9, 2009. PDC was not notified of the
county’s change in position until it received its 2009-10 tax
bill in mid-October 2009. Up to that time, The Fairfield’s
residential component had been continuously exempt from
property taxes during PDC’s entire period of ownership.
Cite as 21 OTR 66 (2012) 71
(19) PDC is required to prepare and submit to
HAP an annual budget for The Fairfield’s operation, includ-
ing revenue, expenses, and any needed capital improve-
ments. Based upon the continuously exempt nature of The
Fairfield’s residential component, PDC has never budgeted
for any property tax expense nor has it been taken into
account in setting the section 8 subsidy amounts by HAP
and HUD.
(20) Because of the special purpose housing func-
tion of The Fairfield, the property is available only for section
8 residential occupancy under its existing section 8 contracts
with HAP and HUD. The property’s use has been restricted
by resolution by PDC and cannot be changed without action
by the PDC commissioners.
(21) PDC timely protested the asserted loss of
The Fairfield’s exempt status and timely filed its appeal
of the county’s change in taxable status for The Fairfield.
The appeal relates solely to the residential portion of The
Fairfield.
III. ISSUE
The issue is whether the property at issue is enti-
tled to exemption from property taxation for the 2009 year
under Oregon law.
IV. ANALYSIS
This order will address the various statutes that
are identified by Defendant (taxpayer) as potential sources
of exemption. Such a statutory source of exemption must
exist if the property is to escape taxation. See ORS 307.030;
ORS 308.210; ORS 308.232 (establishing that all property
not exempt is to be assessed and taxed).1
A. ORS 307.090
ORS 307.090(1) provides, in relevant part:
“Except as provided by law, all property of the state and all
public or corporate property used or intended for corporate
purposes of the several counties, cities, towns, school dis-
tricts, irrigation districts, drainage districts, ports, water
1
All references to the Oregon Revised Statutes (ORS) are to 2009.
72 Multnomah County Assessor v. Portland Devel. Comm. II
districts, housing authorities and all other public or munic-
ipal corporations in this state, is exempt from taxation.”
However, ORS 307.110(1) provides:
“Except as provided in ORS 307.120, all real and per-
sonal property of this state or any institution or depart-
ment thereof or of any county or city, town or other munic-
ipal corporation or subdivision of this state, held under a
lease or other interest or estate less than a fee simple, by
any person whose real property, if any, is taxable * * * shall
be subject to assessment and taxation for the assessed or
specially assessed value thereof uniformly with real prop-
erty of nonexempt ownerships.”
Although taxpayer argues that the individuals
residing in the property are not doing so under a lease or
other interest less than fee simple, the court concludes that
they are occupying space in the property under some form
of lease or license sufficient to fit within the statutory provi-
sions of ORS 307.110(1).
Taxpayer also argues that exemption should apply
because the legislature did not intend ORS 307.110(1) to
apply so as to cause taxation when provision of housing to
low income occupants is involved. Unfortunately for tax-
payer, the legislature specifically addressed the extent to
which ORS 307.110(1) should not apply in such situations
when it stated in ORS 307.110(3) as follows:
“Nothing contained in this section shall be construed as
subjecting to assessment and taxation any publically owned
property described in subsection (1) of this section that is:
“* * * * *
“(g) Property of a housing authority created under ORS
chapter 456 which is leased or rented to persons of lower
income for housing pursuant to the public and govern-
mental purposes of the housing authority. For purposes of
this paragraph, ‘persons of lower income’ has the meaning
given the phrase under ORS 456.055.”
Taxpayer is not a housing authority created under
ORS chapter 456 and therefore taxpayer’s article fails. The
court cannot expand the favorable provisions set forth by
the legislature. The provisions of ORS 307.110(1) cause the
property to be taxable.
Cite as 21 OTR 66 (2012) 73
B. ORS 307.092
ORS 307.092 provides, in relevant part:
“(1) As used in this section, ‘property of a housing author-
ity’ includes, but is not limited to:
“(a) Property that is held under lease or lease pur-
chase agreement by the housing authority; and
“(b) Property of a partnership, nonprofit corporation
or limited liability company for which the housing author-
ity is a general partner, limited partner, director, member,
manager or general manager, if the property is leased or
rented to persons of lower income for housing purposes.
“(2) Except as provided in subsection (3) of this section,
the property of a housing authority is declared to be public
property used for essential public and governmental pur-
poses and such property and an authority shall be exempt
from all taxes * * *.”
Taxpayer is not a housing authority within the meaning of
the statute. Therefore, paragraph (1)(a) of ORS 307.092 does
not apply to provide relief to taxpayer.
Taxpayer argues that because the Housing
Authority of Portland (HAP) provides oversight of the oper-
ation of the property on behalf of the federal Department of
Housing and Urban Development (HUD), the property in
question here is property described in paragraph (1)(b) of
ORS 307.092. However, for that paragraph of the statute to
apply, taxpayer would have to be one of the specified types
of entities (partnership, nonprofit corporation, or limited lia-
bility company) and HAP would have to bear the particu-
lar statutorily defined relationship (general partner, limited
partner, etc.) to that entity.
The facts are that taxpayer is not the type of entity
described in the statute and HAP bears none of the rela-
tionships to taxpayer required by the statute. Even if HAP
has some role with the property, it does not have one of the
statutorily described roles with respect to taxpayer.
Taxpayer observes that the particular descrip-
tions in ORS 307.092(1) are some but not all definitions of
“property of a housing authority.” That is true. However the
74 Multnomah County Assessor v. Portland Devel. Comm. II
court cannot undertake to supply other definitions in this
instance. The court concludes that the provisions of subsec-
tion (1) were added to describe either ownership by a hous-
ing authority of less than a fee interest (a lease interest or
interest of a lessee with an option to purchase) or ownership
by an affiliate of a housing authority. Neither of these situa-
tions is present here.
The court concludes that ORS 307.092 offers no help
to taxpayer.
V. CONCLUSION
The statutes to which taxpayer points do not, by
their express terms, apply to the property in question under
its current ownership. Taxpayer argues that all the policy
purposes of the various statutory provisions relating to
housing for low income persons are satisfied and therefore
the existing statutes should be construed so as to slightly
extend their reach to this set of facts. The court is not autho-
rized to make the determination that statutes that do not
fit the facts should be extended to apply to the property in
question. It is for the legislature to determine if statutes
should be amended or added so as to provide the relief which
taxpayer seeks. Now, therefore,
IT IS ORDERED that Plaintiff’s Motion for Partial
Summary Judgment is granted and the motion of Defendant
is denied.