Property Tax Exemptions for the “Healthy Wealthy”
Last fall, I reported on a really outrageous assertion of tax exemption by a senior living community masquerading as a health care facility, but which only accepts healthy and wealthy seniors:
In the early 2000s the Georgia Medical Center Authority issued private activity bonds to help Columbus Regional Health Care System, Inc. a 501(c)(3) build Spring Harbor at Green Island. The Spring Harbor website pretty much depicts a plush retirement village with very healthy-looking wealthy residents. The “healthy wealthy” according to the Columbus Georgia Tax Assessor. Spring Harbor’s website says “as the first and only not-for-profit Continuing Care Retirement Community in the Columbus, Georgia area, we believe in living life to the fullest at every age. You’ve already put in the work, now it’s time to play!” The Columbus Georgia Board of Tax Assessors refused to recognize a property tax exemption for Spring Harbor, arguing that a “resort-style retirement community open only to the healthy and wealthy is not public property, as required by Georgia Law.” The Tax assessors proposed to tax the Medical Center Authority, even though it owns the land as a public agency.
With the bond proceeds, the Authority leased land from Columbus Regional and then promptly hired Columbus Regional to build and operate Spring Harbor on that land. All the improvements revert to Columbus Regional, by the way, after the expiration of the long term lease. Columbus Regional promptly built the retirement village. Columbus Regional then hired its own affiliated management company to operate Spring Harbor. That is essentially how private activity bonds are supposed to work, actually. A private, usually nonprofit entity borrows money from a public entity that finances the deal with tax exempt bond proceeds. And there are complex rules to ensure that tax exemption does not result in unnecessary private benefit. In this case, the bonds were even approved on two separate occasions by judicial process despite stated misgivings about private benefit. The problem is, Spring Harbor only accepts the healthy wealthy. That fact is undisputed. Residents have to meet strict financial requirements and can’t be sick, lest they become a drain on the retirement village.
Nobody seriously disputes that Spring Harbor is just a very well appointed retirement home available only to people with lots of money and relatively few health problems. Too little money and too many health issues will get you scratched off the list. Still, proponents argue with a straight face that the facility deserves tax exemption. Its almost vulgar, that’s my take. Well, the case is back before the Georgia Supreme Court for a second time. The Medical Center Authority dismisses the glaring lack of public benefit in its reply brief, instead labeling the Columbus Tax Assessor’s argument as one “dripping with populist animus:”
In a brief dripping with populist animus, the Columbus Board of Tax Assessors and the Tax Commissioner of Muscogee County (together, “Assessors”) assert a right to tax a leasehold interest in a retirement community called Spring Harbor owned by the Medical Center Hospital Authority (“Authority”). But in their haste to tax Spring Harbor and the Authority into submission, the Assessors’ argument ignores virtually all this Court’s prior jurisprudence regarding the public property tax exemption set out in O.C.G.A. § 48-5-41(a)(1)(A). Instead of engaging with that precedent, the Assessors just regurgitate their panoply of political/social grievances about Spring Harbor, hoping that this Court will write a new rule just for this case. Ultimately, however, the rule the Assessors seem to want cannot be reconciled with the holdings or outcomes of numerous prior cases construing the public property exemption. This Court should not upend that well-settled law. This Court should affirm the lower courts’ rulings that the Authority’s leasehold interest is public property because providing housing and healthcare to the elderly serves a public purpose and is a project squarely contemplated by the Georgia Hospital Authorities Law, O.C.G.A. § 31-7-70 et seq., and because the Authority keeps all income generated from Spring Harbor and uses it to repay the bonds issued to finance Spring Harbor’s construction. Those bonds were validated as having a public purpose, so the Authority may pay them down.
The Tax Authority’s brief contains more than just populist animus, though it should not spend a lot of ink and paper disputing that animus in any subsequent briefs. Because, yeah, you’re damn skippy this is about populist animus. Nobody is mad that a bunch of healthy wealthy people can afford to live on a resort during their golden years. Live it up! But why should the rest of us pay for that luxury, especially when the luxury is categorically denied to the taxpayers funding the resort. Anyway, here is the Tax Authority’s summary of the argument:
This case presents the question whether a resort-style retirement community open only to the healthy and wealthy is exempt from property taxation as “public property” notwithstanding evidence of gain and income to a private entity. The Medical Center Hospital Authority (“the Authority”) claims that the improvements consisting of Spring Harbor at Green Island (“Spring Harbor”) are tax-exempt “public property” on grounds that the Authority owns them through a ground lease from Columbus Regional Healthcare System, Inc. (“Columbus Regional”). The Authority also claims that Spring Harbor’s income supports only the Authority.
The facts, however, refute those claims. Bond proceeds were used to pay Columbus Regional. Columbus Regional can pocket 5% of Spring Harbor’s annual revenues. No money from Spring Harbor is used to support any indigent care in the county; it must stay at Spring Harbor. In the reverse of every other hospital authority case decided by this Court, once the bonds are repaid all ownership interest in Spring Harbor will revert to a private entity—Columbus Regional—and the Authority will retain no interest whatsoever. Underlying Spring Harbor is a circular structure created to benefit Columbus Regional with both tax-exempt bond financing and property tax exemption. There is nothing altruistic about the structure and financial arrangements underlying Spring Harbor. They exist only to benefit Columbus Regional. They do not benefit the Authority or the public.
The Court of Appeals’ majority opinion is based on the fact that the Authority holds a leasehold, and it accepts the Authority’s assertion that Spring Harbor is devoted to “public purposes” in furtherance of the Authority’s legitimate functions. See Columbus, Ga. Bd. of Tax Assessors v. Med. Ctr. Hosp. Auth., No. A23A0373, slip op. at 10-12 (June 28, 2023). However, as Judge Brown recognized in dissent, the majority opinion contravenes this Court’s prior direction that the Authority must “hold[ ] title to its leasehold interest only for the benefit of the State and the public,” and it cannot prevail if Columbus Regional receives any “private gain or income.”
If affirmed, this case will send a message statewide to private entities that they can use hospital authorities for their own private reward and serve only the citizens they choose—simply by following the same structure as here and claiming some amorphous “public purpose” despite substantial private gain. To allow private entities such as Columbus Regional to hide from property taxes under a hospital authority’s shell would extend the “public property” exemption to a far-reaching place this Court has never approved, and it would thwart both the law and policy underlying hospital authorities’ entitlement to the exemption. This Court should not permit tax exemption that benefits a private entity; absolves the private entity from its civic responsibility to pay for fire, police, schools, and other local government services; and increases the tax burden on all other property taxpayers.
That this case has taken more than 20 years is really preposterous.
darryll k. jones