Capfa Capital Corp. 2000A v. Donegan

• Decision Date: 13 April 2006
• Docket Number: No. 5D04-2726.,5D04-2726.
• Citation: Capfa Capital Corp. 2000A v. Donegan, 929 So.2d 569 (Fla. App. 2006)
• Parties: CAPFA CAPITAL CORP. 2000A etc., Appellant, v. Bill DONEGAN, etc., et al, Appellee.
• Court: Florida District Court of Appeals

Page 569

929 So.2d 569

CAPFA CAPITAL CORP. 2000A etc., Appellant, v. Bill DONEGAN, etc., et al, Appellee.

No. 5D04-2726.

District Court of Appeal of Florida, Fifth District.

April 13, 2006.

Rehearing Denied May 23, 2006.

David K. Miller of Broad & Cassel, Tallahassee, and Michael S. Davis of Bryant, Miller & Olive, P.A., Tampa, for Appellant.

Kenneth P. Hazouri of DeBeaubien, Knight, Simmons, Mantzaris & Neal, LLP, Orlando, for Appellee Bill Donegan.

No Appearance for Appellee Earl K. Woods.

SHARP, W., J.

CAPFA Capital Corp. 2000A ("2000A"), a Florida non-profit corporation and instrumentality of the City of Moore Haven, appeals from a final summary judgment which determined that as the owner of an apartment complex in Orange County, Florida, it was not entitled to an ad valorem tax exemption. The trial court concluded that although the apartment complex was equitably owned by Moore Haven, a city located in Glades County, Florida, it was not being used for a "municipal or public purpose" and thus it did not qualify for the tax exemption provided for city-owned property in Article 7, section 3(a) of the Florida Constitution. We affirm.

Article 7, section 3(a) provides:

§ 3 Taxes; exemptions:

(a) All property owned by a municipality and used exclusively by it for municipal or public purposes shall be exempt from taxation. A municipality, owning property outside the municipality, may be required by general law to make payment to the taxing unit in which the property is located. Such portions of property as are used predominately for educational, literary, scientific, religious, or charitable purposes may be exempted by general law from taxation.

Although this apartment complex is located outside the city limits of Moore Haven, there is no general law existent that imposes a tax on it or like situated properties owned by cities in Florida. Thus, this fact makes no difference in this case.¹ Nor does 2000A claim an exemption based on "used predominately for educational, literary, scientific, religious, or charitable purposes." Accordingly, the issue in this case is whether the apartment complex is being used for "municipal or public purposes" within the meaning of Article 7, section 3(a).

The record establishes that Moore Haven enacted an ordinance which created the Capital Projects Finance Authority (CAPFA) for the purposes of issuing tax exempt revenue bonds to finance and acquire qualified projects in Glades, as well as in other Florida counties, with the approval of the host county. The City of Moore Haven's council sits as CAPFA's governing Board. In 1998, the ordinance was amended to allow Moore Haven to act through non-profit corporations to administer CAPFA projects.

CAPFA entered into an Interlocal Agreement with Orange County, pursuant to section 163.01, in order to issue bonds to finance acquisition of an apartment complex located in Orange County, known as Jefferson Commons. The Agreement declared that the project met "public uses and purposes" and "governmental functions of public concern" and that it served "the overriding public purpose of the county." The bonds issued for financing the acquisition of the project satisfied the requirements for federal tax exemption, as well as state tax exemption.

CAPFA loaned the bond proceeds to 2000A, a non-profit instrumentality of CAPFA, whose governing board is composed of the same persons who serve on CAPFA's Board. The Florida Department of Revenue recognized 2000A as a municipal organization exempt from sales and use taxes.

On August 1, 2000, 2000A acquired Jefferson Commons, the apartment complex at issue in this case. It is located close to the University of Central Florida. The project must be used for student housing, although university faculty and staff are eligible tenants. Students may attend colleges or universities other than UCF. This project is not affiliated in any way with UCF. 2000A charges market rents for the apartments. The original intent was to use excess revenues to grant students scholarships in the form of rent reductions, although this program was not implemented because of financial difficulties. There are no UCF programs, required student codes, or faculty oversight of the students who are tenants in the complex.

When the project was in the planning stages, CAPFA's administrator, Phillip Bennett, told the CAPFA board that 2000A could expect to receive $90,000 to $100,000 per year in owner fees. The owner fees were capped at one-half of one percent of gross revenue. 2000A passes any revenue through CAPFA to Moore Haven. It is paid in descending order as follows: operating expenses, bondholders' interest and principal payments, reserve and replacement fund, trustee fees, owner's fee and an educational scholarship program.

Bennett acknowledged the predominant purpose of 2000A's ownership and operation of the complex was to generate revenue for Moore Haven. The City passed a resolution restricting the use of any revenues received from Jefferson Commons to "quality of life" projects in the City, such as construction of community parks, purchase of a fire truck, and drainage control.

2000A applied to Orange County for, and was denied, a municipal tax exemption for Jefferson Commons for partial year 2000, as well as for years 2001, 2002, and 2003. 2000A then filed lawsuits against Bill Donegan, the Orange County Property Appraiser, and Earl Woods, the Orange County Tax Collector, to establish its entitlement to an exemption from ad valorem taxation for those years. The cases were consolidated and both sides moved for summary judgment.

The meaning of the words "municipal or public purposes" as used in Article 7, section 3(a) in Florida's 1968 Constitution has been broadly defined by some cases, and more narrowly in others, over the years.² For example, this court has stated that "municipal or public purpose" encompassed "all activities essential to the health, morals, protection and welfare of the municipality," that municipal functions are ones created for the "special benefit and advantage of the urban community embraced within the corporate boundaries," and functions which "promote the comfort, convenience, safety and happiness of the citizens of the municipality rather than the welfare of the general public." Greater Orlando Aviation Authority v. Crotty, 775 So.2d 978, 980-981 (Fla. 5th DCA 2000), rev. dismissed, 790 So.2d 1103 (Fla.2001). We quoted from older cases which predate the 1968 Florida Constitution. However, in that case, we held that the profit motive and lack of benefit to the municipal public as opposed to the general public at large, were key factors in our determination that a hotel property located at the airport in Orlando was not being used for municipal or public purposes.

The door began closing on this broader definition of "municipal or public purpose" with the revised 1968 Florida Constitution. Ownership of the property by the municipality was required and if the city leased its property to a private, for-profit entity to perform a profit-making or proprietary function, the exemption was lost. See Sebring Airport Authority v. McIntyre, 783 So.2d 238 (Fla.2001); Sebring Airport Authority v. McIntyre, 642 So.2d 1072 (Fla.1994). Compare Dade County v. Pan American World Airways, Inc., 275 So.2d 505 (Fla.1973); Canaveral Port Authority v. Department of Revenue, 690 So.2d 1226 (Fla.1996). Only when a lessee serves or performs a governmental function is the property entitled to an exemption. Ibid. Further, the Florida Supreme Court ruled that the body of case law surrounding Article 8, section 2(b), Florida Constitution, regarding the power of municipalities to issue bonds to perform municipal functions and services has no application to the ad valorem tax issues and Article 7, section 3(a) cases. Florida Department of Revenue v. City of Gainesville, 918 So.2d 250 (Fla.2005).

More recently the Florida Supreme Court further narrowed the definition or concept of municipal property owned and used for municipal and public purposes, which is exempt from taxation under Article 7, section 3(a). In Florida Department of Revenue v. City of Gainesville, the court reviewed the history of this constitutional provision, and determined that a statute that imposed ad valorem taxes on property owned by a city and used by the city to provide telecommunications services to the public did not violate (on its face) Article 7, section 3(a). It held that providing telecommunications services is not always a municipal or public purpose and that a court must consider the availability of such services through other providers and answer the question: Is this service essential for the welfare of the community?

The court explained that the concept of municipal and public purpose under Article 7, section 3(a) only included activities which are "essential to the health, morals, safety, general welfare of the public within the municipality." Id. (emphasis added) It suggested that certain categories of services which have been traditionally provided by municipalities, such as public housing and utilities, are within the concept and thus remain exempt from taxation.

In this case, 2000A argues that its project is being used to provide housing for students and that public housing projects have been traditionally categorized as serving a municipal or public purpose. In some states, public housing projects have been granted tax exemptions under similar constitutional or statutory exemptions and some have not. See When is Property Owned by State or Local Governmental Body Put to Public Use So As To Be Eligible for Property Tax Exemption, 114 A.L.R.5th 561, § 11, § 18, and § 19.

As the court pointed out in the City of Gainesville case, public housing facilities owned by a municipality may be entitled to a tax exemption under Article 7, section 3(a), if the project was undertaken to address issues essential to the health, safety...