Edward A. Crapo, as Alachua County etc. v. Provident Group - Continuum etc.

Citation: 238 So. 3d 869Docket: 17-0280

Court: District Court of Appeal of Florida; February 6, 2018; Florida; State Appellate Court

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Edward A. Crapo, as Alachua County Property Appraiser, appeals a Final Declaratory Judgment determining that property owned by Provident Group Continuum Properties, L.L.C. is equitably owned by the University of Florida (UF) and therefore immune from ad valorem taxation. The property, known as “The Continuum,” spans 350,000 square feet near UF’s Gainesville campus, primarily serving graduate and professional students. Provident Group’s sole member, Provident Resources Group, Inc., is a non-profit that aids public universities in developing student housing.

The organization’s Articles of Organization specify its charitable purpose of planning, developing, financing, and operating student housing for UF students, in accordance with a Student Housing Agreement with UF. Article V emphasizes that the company operates exclusively for charitable purposes, avoids activities that might jeopardize its tax-exempt status, and prohibits private inurement of earnings. Its Operating Agreement mandates that surplus cash flows be used solely for charitable activities and outlines a distribution priority upon winding up the company—first to creditors, then to UF, and finally to its sole member for charitable purposes.

The Student Housing Agreement, executed on August 9, 2010, acknowledges the need for additional housing for UF's graduate and professional students and outlines the company's commitment to assist UF in this regard, including implementing housing programs tailored to these students' needs. The appellate court affirmed the lower court's decision.

UF is responsible for marketing and promoting the Facility as a university-affiliated housing option specifically for its students. All net revenues from the Facility’s operations are to be allocated exclusively to support Charitable Activities. UF recognizes that it will benefit significantly from the Facility’s development, operation, and management by Provident, which is deemed essential to addressing housing shortages. Upon full repayment of the project’s financing, ownership of the Property will transfer from Provident to UF or another similar charitable organization. In cases of condemnation or eminent domain, compensation will first cover any remaining financing obligations, with the University receiving the remainder.

The Declaration of Covenants and Restrictions mandates that the Property be used solely for housing with related retail and ancillary uses, and UF retains the right to enforce these restrictions. In April 2013, Appellee sought declaratory relief for tax immunity from May 28, 2010, until judgment and requested tax refunds for parts of 2010 and 2011. After the trial court dismissed this action due to lack of subject matter jurisdiction, Appellee amended the complaint as "Trustee for the use and benefit of the University of Florida" to seek tax immunity from 2010 to 2014 and additional refunds. The trial court again dismissed the amended complaint, a decision subsequently appealed. 

In the case Provident Group-Continuum Properties, L.L.C. v. Crapo, the dismissal was reversed as the documents indicated the establishment of a trust for UF's benefit, granting the appellant standing to contest the tax assessment despite time limitations. Appellee later filed additional amended complaints for tax immunity concerning partial 2010 and for 2011 through 2016 and sought refunds for earlier taxes. During the trial, Norbert W. Dunkel from UF testified about the project's inclusion on the Department of Housing and Residence Education website, noting that UF had been exploring housing expansion since 2008 but opted for a public-private partnership due to cost constraints. UF considers the partnership vital for fulfilling its housing needs and actively participates in oversight committees, while providing dedicated staff for residence education, a service not offered to for-profit housing projects.

Surplus funds from the project are allocated for debt repayment. Donovan Hicks, Appellee’s Executive Vice-President, confirmed that Appellee is a 501(c)(3) organization focused on alleviating government burdens. The project involves a partnership between a private non-profit and a university, designed to mitigate risks associated with university projects, allowing the university to benefit without incurring debt. Appellee has no personal financial stake in the property.

Hicks stated that any surplus cash from tax immunity must be reinvested in the project or used to assist the university. Benefits from surplus cash flow go to the project, students, and ultimately the university upon project transfer. Market-rate rents are charged to cover high construction and operational costs, aimed at maintaining standards desired by the university. The university influences rental rates through its representation on the project’s operational committee.

The trial court's Order Granting Plaintiff’s Declaratory Judgment highlighted that the property is designated for graduate and professional student housing, with surplus revenue allocated to charitable use for the university's benefit. Upon financing completion, the university receives a deed to the property at no cost. The SHA outlines the university’s rights to approve project aspects and receive condemnation proceeds.

While Provident holds legal title, it lacks equity in the property, functioning as a trustee for the university, the equitable owner. The First District Court of Appeals ruled that a trust exists, confirming the project is operated under this relationship. The university has actively benefited from this arrangement for over five years, utilizing its name to attract tenants and receiving services. If tax relief is granted, it will benefit the university, solidifying its status as the equitable owner for tax immunity purposes. The trial court also recognized Appellee's entitlement to governmental and charitable tax exemptions for the years 2014 through 2016.

The trial court issued a Final Declaratory Judgment granting Appellee a refund of $44,878.12 for tax year 2011, ruling that the entire assessed value of the property was immune from property tax for the relevant years. This decision is presumed correct on appeal, but legal questions are reviewed de novo. Factual findings are upheld if supported by substantial evidence. The Florida Supreme Court limits “the State” for ad valorem tax immunity to certain governmental entities. Appellant contends that state immunity should not benefit a private entity without a legal basis, although acknowledges that property can be equitably owned rather than legally owned to qualify for tax immunity. The excerpt references the case of Leon County Educational Facilities Authority v. Hartsfield, where the court recognized the concept of equitable ownership in taxation, determining that the appellant was the equitable owner of the property despite legal title being held by a private entity for financing purposes. Furthermore, in Russell v. Se. Housing, LLC, the court affirmed that property was not subject to taxes because the Navy retained equitable ownership. Appellant argues that Appellee is the equitable owner due to its operational control, while attempting to downplay the benefits UF receives from the project, a contention that is dismissed.

UF recognized significant advantages from the development, operation, and management of a housing facility, which it deemed essential for its housing supply and educational goals. The Student Housing Agreement confirmed UF's substantial involvement, including rights to approve project plans, financing, operations, and rental terms. UF's name and affiliation are utilized to attract tenants, and it provides on-site services. Upon fulfillment of repayment obligations, UF will receive legal title to the property without payment and is entitled to compensation in any condemnation proceedings. The documents indicate that a trust exists for UF's benefit, establishing it as the equitable owner of the property, which is thus immune from ad valorem taxation. The court affirmed the trial court's decision, with no need to address the alternative tax exemption conclusion. This immunity arises because the property is owned by a sovereign entity, distinguishing it from properties that might be exempt under state law. The ruling was supported by judges OSTERHAUS and BILBREY and involved legal representation from Dent, McClain, Chartered for the Appellant and Broad and Cassel LLP for the Appellee.