Senior complex, town in tax fight

Although none of its residents send children to the public schools, the 85.5-acre Dunwoody Village complex has been one of the Marple-Newtown Area School District's biggest benefactors.

But in a case that could have implications for schools and towns all over the state and elsewhere in the nation, it is a role that Dunwoody is seeking to end.

If Dunwoody, a "continuing care retirement community," or CCRC, has its way, it will no longer have to pay a $506,000 annual tax bill to the district, and $232,000 to Newtown Township.

It also wants the schools to give back $1.5 million - about the size of the district's 2010 deficit - in old taxes, and that tab could grow to $2 million if the case isn't settled by July 1.

In briefs filed in Delaware County Court, Dunwoody contends it should be exempt from property taxes because it is a "purely public charity," providing community services and relieving the government of some of its health-care burden.

Dunwoody, said attorney Donald Wieand, "met the test for a charitable enterprise."

The school district and township counter that Dunwoody is stretching the definition of charity, since it caters to "well to do" residents; charges entrance fees of up to $408,300, and boasts "luxurious accommodations" that include a beauty salon and a masseuse.

The county estimates that the property is worth $43.2 million.

The case is pending before Judge George A. Pagano.

As senior-care centers proliferate, and schools and local governments continue to scratch for revenue, expect the tide of CCRC-related tax litigation to swell during the next several years, said lawyer Denise Elliott, a tax specialist with Kegel, Kelin, Almy & Grimm, in Lancaster.

"It's just going to continue to get bigger and bigger," she said. Thus, Dunwoody, she said, "is a case that people will take notice of."

Exemption criteria vary from state to state, and Pennsylvania uses "vague definitions," said Steve Maag, director of the American Association of Homes and Services.

In New Jersey, typically the facilities get exemptions for skilled-nursing and assisted-living components and pay taxes on the rest, said Lisa Ryan, spokeswoman for the Department of Community Affairs. Decisions are made by local assessors, but they invoke statewide "technical grounds," said William Quinn, a Treasury Department spokesman.

In Pennsylvania, which has about 200 CCRCs - about half of those in the Philadelphia region - the requirements vary from county-to-county. "There's a lack of uniformity," said Wieand.

Most facilities pay taxes on at least part of their real estate, but a 2007 state Supreme Court decision may have a cosmic impact on the CCRC tax landscape, said Elliott. The court essentially decreed that facilities should be either entirely taxable or entirely exempt.

Since then, she said, taxing authorities and senior centers have been like fighters circling each other. "It's a matter of who is going to throw the first punch," she said. Schools and towns fear that in challenging a partial exemption, they could lose everything. Similarly, the CCRCs risk losing partial exemptions, thus they would have to pay more.

Dunwoody is the first case she is aware of that has gone to trial since the Supreme Court decision. It is not the first to file a challenge, however.

Pennswood Village, one of 13 CCRCs in Bucks County, appealed to the county and won an exemption, said Richard Brosius, the county's chief assessor. But Pennswood announced that it had agreed "to voluntarily pay a significant portion of the taxes."

Over 80 percent of the 1,961 senior facilities nationwide, including Dunwoody, are incorporated as nonprofits, said Maag, and the majority don't pay property taxes.

In Pennsylvania, however, even if it is a nonprofit, a CCRC has to meet the state's "purely public charity" standard to qualify for an exemption, said Doug Hill, executive director of the Pennsylvania County Commissioners Association.

In a 2009 case, New Jersey Superior Court ruled that a Garden State facility didn't have to provide "charity care" in order to qualify for an exemption so long as it met other criteria.

Dunwoody argues that it "subsidizes" medical care for "financially unable" residents, and also donates volunteer services to the community.

Entrance fees range from $82,000 for a studio to $408,300 for two-bedroom "country house," and Dunwoody said the higher-end units help subsidize residents of the less-costly ones.

The school district and Newtown contend that only 10 of the 425 residents receive any kind of aid.

Newtown Township Manager James Sheldrake testified at a nonjury trial that Dunwoody has been responsible for "inordinate" emergency calls to police for lockouts, suspicious noises, and unattended deaths.

Regardless of the outcome, legal experts said, more appeals are all but inevitable.

Brosius said he's aware of at least two other facilities that have filed for exemptions in Bucks County, and is surprised the traffic hasn't been brisker since the high court's decision.

"I thought they would all come out of the woodwork at once," he said, "but they've been coming one by one."