The Morning Report
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In the past few weeks, there’s been little achievement in alleviating the tax ordeal in the former Naval Training Center’s arts district.
Last month, the city picked up the $1.25 million tab for unexpected taxes, back taxes and penalties for the NTC Foundation. The nonprofit, which is trying to turn 26 buildings there into the city’s next arts, culture and nonprofit district, ran into trouble after unexpectedly triggering property taxes by creating a for-profit company to help finance the rehabilitation of historic buildings.
It asked the city to bail it out. The foundation has promised to pay the bills starting next year, a wrinkle that threatens the site’s affordability for the very arts and culture organizations it is supposed to host.
Now the foundation is pursuing a couple of ideas to try to lift some of that burden going forward. Alan Ziter, the foundation’s executive director, said yesterday the foundation’s staff and board members are working daily with the county and the state to find a solution, though he doesn’t have one yet.
An update on the foundation’s proposed remedies:
• State legislation: The foundation got Sen. Christine Kehoe to introduce a bill (here’s the preliminary version) that would specifically exempt the NTC historic properties from property taxes. Yesterday was supposed to be the first day that bill could be acted upon.
But there really isn’t any movement yet on this bill, Kehoe spokeswoman Myrna Zambrano said. She said the senator is waiting for the NTC Foundation to get a letter of support from the county tax assessor and the Board of Supervisors. The county stands to lose property taxes if such an exemption is applied, so Kehoe would want to make sure it wouldn’t fight the legislation.
Even with those letters, the measure could face an uphill battle. The state constitution requires that for-profit companies pay property taxes. Some lawmakers might fear the legislation would establish a slippery precedent for other for-profit companies that would deem their work as deserving of a tax break as NTC’s arts and historic preservation goals.
Representatives from the offices of supervisors Greg Cox, Bill Horn and Dianne Jacob said they haven’t heard from the foundation seeking this letter.
“They haven’t asked us for it, but I think it would be something that would be problematic,” said Pam O’Neil, chief of staff for Cox, whose district includes the NTC. “You’d be doing a very special favor for one group of people. And there are probably people all over the state, and the county that would like to not … pay property taxes.”
• The County Assessor: The foundation has asked the assessor to review a couple of versions of wording it wants to submit to Kehoe’s office. Assessor Ernie Dronenburg does not consider it his job to get involved in a matter of state law, said Jeff Olson, the office’s division chief for assessment services.
“We’ll apply the law as the state Legislature considers it to be,” Olson said. “He doesn’t support or oppose this bill.”
The burden going forward:
Some of the arts groups, retail outlets and nonprofits that are tenants in NTC must begin paying higher rents to cover property taxes starting April 1, a prospect several groups said could threaten their ability to stay in the district.
I’ve considered this to be one of the biggest points of this story: Going forward, these bills — the byproducts of the foundation’s decision to create for-profits — could price out the very arts organizations the buildings are being rehabbed to house.
Ziter said yesterday the foundation is trying to work with its tenants.
“The NTC Foundation board is committed to working with all our 38 Resident Groups to assure that we don’t lose them at NTC Promenade, nor lose the groups that are making a commitment to come to Phase 2 when renovations are complete later this year,” he said.
I’ll keep you posted as this story continues to unfold.
(Previously: My original story, TV and radio interviews.)
Please contact Kelly Bennett directly at firstname.lastname@example.org or 619.325.0531 and follow her on Twitter: @kellyrbennett.