Complex tax issue has two sides
By JENNIFER WILSON
News editor
One 90-year-old woman lives in a small house in central Hillsboro. She's a widow, lives on a fixed income, and expenses are tight.
She owns her home, so making a monthly mortgage payment isn't the problem — it's paying the property tax that seems to go up every few years.
Another 90-year-old lives in a Hillsboro duplex. She's also a widow, also on a fixed income.
Each month she makes a lease payment — but she does not pay property taxes. Her duplex is affiliated with a local nursing home.
Neither woman is rich. Both watch their money. And both benefit from services from the City of Hillsboro — services such as police, fire, and EMS protection.
But only one of the women pays for the services: the one who pays property taxes.
These women don't have names; they're scenarios that represent many of the living situations for elderly people right here in Hillsboro.
And they're smack-dab in the middle of an emotional issue that has been debated in the Kansas Legislature and will be debated again:
Should the independent living units of not-for-profit assisted-living facilities, or nursing homes, be required to pay property taxes? Right now, they're not required to. Or should they pay for city services in another way?
Senate bill 161 addressed that issue in the 2003 legislative session. It passed through the Senate and onto the House before the session ended — but it's far from dead, say a local senator and a nursing home administrator.
Put in simple terms, SB 161 would take away the property tax exemption that these independent living units now enjoy. It applies even if a road separates the units from the main nursing home building.
Such a change would directly impact Hillsboro's Parkside Homes. Administrator Lu Janzen has been following the issue closely.
The organization has several classes of independent living facilities: seven duplexes, three four-plexes, a few individual apartments, and 38 apartments in the congregate living building. Right now all of these units are property tax exempt.
The seven duplexes, located on the Park Avenue loop drive, were all built within the past seven years, Janzen said. The congregate building was constructed in 1997, and the four-plexes along Ash were built in the 1960s.
If the tax exemption were revoked, the blow would hit Parkside directly since it owns all its independent living units, Janzen said. Individuals or couples only lease or rent the units — never technically buy. Parkside still holds the titles.
And if Parkside were forced to pay property taxes, they couldn't afford to swallow the extra fees, so they would pass them along to the residents in the form of rent or lease increases.
If that happened, Janzen estimates that at least 20 people would be forced to leave because they couldn't afford the increases, she said.
"It would really hurt," Janzen said.
Some of them would enter the nursing home, which is much more expensive, she said.
According to the Marion County Appraiser's office, Parkside's congregate building is currently valued at $3,941,720. The combined value of its duplexes is $1,614,200 — that figure does not include the four-plexes or individual apartments on Willow Road and a house at the end of Washington Street that Parkside also owns.
Altogether that's nearly $5.5 million dollars that's not on the tax rolls.
Now figure that into the mill levies that Hillsboro home owners paid in 2002 — 41.012 for the City of Hillsboro, 48.899 for USD 410, and 52.401 for Marion County. If the independent living units in question were charged property tax, that would yield $26,000 to the city, $31,000 to the school district, and $33,000 to the county (these figures have been rounded to the nearest $1,000).
Other local organizations which also have independent living facilities include Bethesda Home of Goessel and the Hillsboro Community Medical Center.
HCMC has 11 apartments on the ground floor along Ash Street that are not a part of the nursing home. People can only rent these, not buy them, said administrator Mike Ryan.
He did not know if HCMC would be affected if the property tax exemption were revoked. But the bill applies to non-profit groups, and Ryan said HCMC is a non-profit entity.
According to the county appraiser's office, the value of these apartments is calculated with the entire hospital facility, not separately.
One state legislator who has been pursuing this issue is Sen. Jay Emler, who represents Marion County.
He acknowledges that the situation has heated up passions.
"It's a very emotional issue for a lot of people," Emler said.
When SB 161 passed the Senate on Feb. 28, 2003, Emler was a part of that — he voted in favor of the bill.
Emler said that this year's version of SB 161 will most likely not pass in its current form. The chairman of the tax committee acknowledged that but wanted to get the bill moving. It could undergo changes in the Senate.
"I'm positive it will not pass the way it is right now," Emler said.
The bill text says that property taxes would be applied to contiguous property excluding roadways — that means that even if living units were separated from the main nursing home by a road, they would still be taxed, Emler said. He's already seen an example of this at Bethesda Home.
So how did the entire issue come about? Originally it affected just a few communities, but now it's spread statewide, the senator said.
One prime example is the City of Inman. In that town, more than 30 percent of its property is off the tax rolls, Emler said. And when the owners of those properties want fire and police protection, the remaining 70 percent of the residents have to pay higher taxes to cover the cost.
"When you have taken one-third of the base off the tax roll, it is an issue," Emler said.
It's a situation that affects small towns much more than a big city like Wichita, he said. Testimony in the legislature has clearly shown this.
The solution the bill proposes, Emler said, is that the nursing home organizations would make a single payment instead of the property taxes. For example, in the case of city services, representatives from the city and the nursing home would sit down and discuss an amount agreeable to both sides — probably an amount based on what the normal property taxes would be.
"Cities and counties are not getting enough money to cover their essential needs," he said.
It's about fairness — dividing fees fairly between the elderly couple living in a regular house and the elderly couple living in a nursing home-owned house.
But nursing home staff say that the independent living facilities are more than just regular houses. They offer optional services such as meals in the main building, nursing care, help with laundry, and transportation.
And in the leasing/rental fees charged at Parkside, living expenses such as utilities, telephone, and satellite television are included, Janzen said.
What's the solution?
Paying a set amount per year for services is one option that the League of Kansas Municipalities favors.
Parkside's Lu Janzen has spoken with Hillsboro Mayor Delores Dalke about how the nursing home could pay for city services, both women said.
But no concrete amounts have been discussed, Mayor Dalke said.
Dalke said the two have talked about a "Good Neighbor" program that would have Parkside voluntarily paying for police and fire. It's a proposal that they've talked about for several years, and Parkside has brought it up, Dalke said.
But the payments would cover just the City of Hillsboro fire and police, she said. Parkside would need to hold discussions with the county and USD 410 school district as well.
Dalke knows the situation has been around for some time and won't be solved quickly.
"The issue has become rather divisive," she said. Some residents think Parkside should pay for services; others have no problem with the situation as is.
"There are people on both sides of it," Dalke said.
