many decades of economically stable and environmentally-friendly
freedom from ad valorem property taxes, the tax status of all Santa
Rosa Island property has been thrown into a state of flux by tax-happy
county commissioners and creative courts.
However, vacant lots on Pensacola Beach enjoy a unique tax status: they are the only property which remains tax-free without any doubt. The reason is that Escambia County moved to attempt taxation only against "improvements" on Pensacola Beach -- that is to say, houses, condos, and commercial buildings. Vacant lots, for the time being, remain free from taxation.
This explains why, for example, the tax "assessed value" for 5 Calle Traviesa is $332,500, but the current real estate taxes are $0.
Of course, the situation could change in the future, depending on the will of Escambia County governing authorities and future court rulings. For now, however, an investment in a Pensacola Beach lot is one of the few "tax sheltered" investments available.
Santa Rosa Island Leasehold Tax Cases
By John Pinzino
Island Realty of Pensacola Beach
Remarks read to assembled beach residents, May 12, 2008
(Reprinted here by courtesy of John Pinzino and Pensacola Beach Blog.)
Most everyone knows that development of Pensacola Beach came about with a promise of no ad valorem taxes. Over time, laws were changed and leaseholds were taxed even though Escambia County owns the land as well as the improvements.
Recent History of Tax-Free Leaseholds
In 1979, the Florida Legislature passed legislation that defined leasehold interest in government owned property as “intangible personal property.” This legislation changed the law to stipulate that a 100 year lease was the same as ownership, but a 99 year lease was not. Many people attribute this change in the law to the threat from Daytona Speedway that it would leave Volusia County if it had to pay taxes on its 99 year lease.
In Escambia County, the former Property Appraiser and Tax Collector disagreed with the language in this statute and continued to tax improvements on Santa Rosa Island as real property. In 1984, a group of leaseholders filed suit. The case known as Bell v. Bryan effectively put an end to ad valorem taxes on Pensacola Beach from 1987 through 2003.
Renewed Efforts to Tax Beach Leaseholds
All that changed in 2004, even though the legislature made no change in the law. [Escambia County] Property Appraiser Chris Jones decided Beach leaseholders were “equitable owners” based on a Santa Rosa County Circuit Court decision involving Navarre Beach. In December of 2004, five law suits were filed against Property Appraiser Jones and Janet Holley, the Tax Collector. A law firm from Tallahassee represents Jones and Holley in all these Escambia County cases, as well as the Santa Rosa County cases.
I am going to update all these cases without going into great detail. There are some references on the agenda that was handed out that will direct you to web sites where you can find additional information and legal documents related to these cases. (Just in case you need some bed time reading.)
Navarre Beach “Equitable Ownership” RulingIn June of 2005, the 1st District Court of Appeals upheld the ruling in the Navarre Beach case known as Ward v. Brown. Two members of the 3 judge panel ruled that the automatic renewal clause of Santa Rosa County leases made them “perpetual” leases and agreed that the Navarre Beach leaseholders had sufficient rights and duties to make them equitable owners. This ruling does not help the Pensacola Beach cases.
But, the dissenting opinion in Ward v. Brown was very much in our favor. There is hope that other judges will see it our way. There are also differences in the leases for the 2 beaches that could make a difference in the outcome. But, I have to say that so far there hasn’t been any good news.
Pensacola Beach Commercial Leases
The case known as Alvin’s Stores v. Jones involving 32 commercial leases was ruled on by [Circuit Court trial] Judge Nick Geeker in November of 2006. Geeker ruled in favor of the County’s position, citing a number of findings of fact in his order that the attorneys at Shell, Fleming, Davis & Menge felt provided a strong basis for appeal. However, the appeal was not successful.
A three judge panel filed an opinion of "Per curiam - Affirmed" ("PCA") just 5 days after the oral arguments were heard. A PCA means the 3 judges agree with the trial court’s decision and find no need to explain further. This ended the commercial case. There can be no appeal to the Florida Supreme Court.
The commercial plaintiffs must pay ad valorem property taxes from 2004 forward on their improvements. They are also still obligated pay lease fees to the SRIA.
Since the 1st DCA offered no explanation as to why they affirmed the lower court decision by ruling per curiam affirmed, it has no direct precedential impact on other cases. In other words, the appellate decision went against the commercial leaseholders but it cannot be cited as authority that is binding on another court or by a trial judge in a separate case.
Portofino Condo Leases
Portofino is represented in their court case by McDonald, Fleming and Moorhead. This lawsuit challenges the property taxes and the amount of the tax assessment. All the Portofino 99 year residential leases are the same and do not have a guarantee for renewal. Judge Frank Bell likewise ruled in favor of the Property Appraiser and Tax Collector. [See "For Whom Bells Tolls: Portofino Taxes"]
Unlike Geeker, Bell provided no explanation for his ruling. He also made this ruling prior to the outcome of the appeal of the commercial case. Bell’s decision has been appealed. Oral arguments are scheduled for July 30th at the DCA in Tallahassee.
Pensacola Beach Residential Leases
The case involving the most plaintiffs and properties is also being handled by Shell, Fleming, Davis & Menge. There are over 2200 residential properties, both single family residences and condominiums, and more than 3400 individually named plaintiffs involved in this case. All leases are for 99 years, but there are variations on lease provisions that range from the very first leases on the Beach to the most recent residences and condos.
A hearing was held on May 2, 2008 in front of Circuit Court Judge Michael Jones. Both sides presented there arguments for Summary Judgment and provided the court with volumes of paperwork.
Judge Jones seemed very knowledgeable of the issues and law relevant to this case. He asked a lot of questions during the 3 hour hearing. This was very different than the manner in which the hearings in front of Judges Geeker and Bell were conducted. The attorneys were instructed to come [together] to work out which facts in the case both sides agree to and to submit their recommended conclusions to Judge Jones by May 16th.
The judge indicated that he would review all the materials submitted before making his ruling. His order is of course subject to appeal by either side.
The Family Trust Lawsuit
The remaining 2 lawsuits involve the residential and commercial holdings of a family owned company that has leasehold interest in 25 residential condominium units and 2 commercial hotel properties on the Beach. In the case involving the condominiums, Judge Jan Shackelford has ruled in favor of the Property Appraiser, agreeing with the “equitable ownership” argument.
Shackelford also wrote in her summary “The Florida Constitution requires that the Plaintiffs pay ad valorem taxes at local government rates at parity with other citizens of Escambia County.” This decision has been appealed. The case involving the former Dunes and Holiday Inn properties is still open in the Escambia County Circuit Court. No hearing has been scheduled.
Conclusion: New Beach Tax Threatened
Of the 5 Escambia County cases, the commercial case has concluded. Those commercial leaseholders are subject to ad valorem taxes on their improvements and lease fees. Two cases involving residential property are on appeal. One case is awaiting a ruling and another has yet to be heard in the Circuit Court.
I will end with a word about the situation in Navarre Beach. Property taxes on improvements were upheld in the Ward v. Brown case.
In 2006, the Santa Rosa County Property Appraiser also appraised the land [which is owned by the county] as real property and [new] tax bills included tax on the land. A group of leaseholders has filed [a new] suit. They are being represented by Shell, Fleming, Davis & Menge.
Obviously, the outcome of this case is of great interest to leaseholders on Pensacola Beach, as Property Appraiser Jones will follow the lead of his counterpart.
I hope this has set the stage for the other presenters to get you thinking about the issues stemming from the litigation. There are several other members of the Residential Liaison Committee here tonight. * * * If you chose to ask questions during the speakers forum, we will do our best to answer them.