Holland Home v. City of Grand Rapids

• Decision Date: 11 October 1996
• Docket Number: Docket No. 187280
• Citation: 219 Mich.App. 384,557 N.W.2d 118
• Parties: HOLLAND HOME, Petitioner-Appellant, v. CITY OF GRAND RAPIDS, Respondent-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 118

557 N.W.2d 118

219 Mich.App. 384

HOLLAND HOME, Petitioner-Appellant, v. CITY OF GRAND RAPIDS, Respondent-Appellee.

Docket No. 187280.

Court of Appeals of Michigan.

Submitted Sept. 5, 1996, at Grand Rapids.

Decided Oct. 11, 1996, at 9:20 a.m.

Released for Publication Dec. 23, 1996.

Mika, Meyers, Beckett & Jones, P.L.C. by John M. DeVries and James F. Scales, Grand Rapids, for petitioner-appellant.

Janice F. Bailey, Assistant City Attorney, Grand Rapids, for respondent-appellee.

Before DOCTOROFF, C.J., and HOOD and NEFF, JJ.

PER CURIAM.

Petitioner appeals as of right the Michigan Tax Tribunal's judgment denying it a property tax exemption for certain of its properties. We affirm.

This tax appeal arose from the tribunal's conclusion that certain of petitioner's properties were not entitled to a property tax exemption for charitable use under the General Property Tax Act, M.C.L. § 211.1 et seq.; M.S.A. § 7.1 et seq. Petitioner is a Michigan nonprofit association, based in Grand Rapids, that owns and operates the following facilities:

(1) Fulton Manor, located in Grand Rapids, consists of a unit that is a licensed home for the aged, a skilled care unit, a supportive care unit, and an Alzheimer's/dementia care unit. It serves a resident population of 445 persons.

(2) Brown Manor, located in Grand Rapids, offers thirty-five residents supportive care.

(3) Breton Manor, located in Kentwood, offers seventy-three residents skilled care.

(4) Raybrook Manor, located in Grand Rapids, consists of a unit that is a licensed home for the aged and a supportive care unit. It serves a total of 278 residents.

(5) Raybrook Manor Estates I (RME I) is physically connected with Raybrook Manor. It offers seventy-five independent care apartments that housed 110 residents as of December 31, 1991.

(6) Raybrook Manor Estates II (RME II) is adjacent to RME I and Raybrook Manor. It was completed and occupied on December 31, 1992, and consists of 108 independent care apartments that housed seventy-five residents as of December 31, 1992.

Petitioner's state-licensed homes for the aged provide room, board, heat, electricity, water, and laundry facilities. They also have housekeeping services available and provide access to higher levels of care through petitioner's continuing care plan. The supportive care units provide the same services as offered in the homes for the aged, in addition to bedmaking, housekeeping, and personal services such as assistance with grooming, dressing, mobility, and other daily activities. The Alzheimer/dementia unit provides supportive care facilities and specialized care designed to meet the special needs of the particular residents. The skilled care units offer supportive care services and twenty-four hour skilled nursing care.

The independent living apartments are not state-licensed facilities. They are designed to accommodate the elderly who can live independently and who do not require active monitoring by petitioner's staff. The apartments permit residents to enjoy the privacy of living independently with the comfort of having certain services available on an as-needed basis. The services are available for an additional fee. The services include social activities, in-apartment dining, homemaking/housekeeping, nursing care, home health aides, medical social workers, and physical, speech, and occupational therapists.

Under the continuing care plan, residents enter the facility most appropriate for that individual's physical and mental needs. As a resident's needs change, the resident may transfer between facilities providing greater or lesser levels of care. Through this program, petitioner promises to care for its residents for the remainder of their lives without regard for the resident's ability to pay.

Petitioner has provided elder care in the Grand Rapids area for more than one hundred years. To finance its operations, it relies on charitable contributions, resident payments, insurance programs, and governmental programs. Approximately four thousand people contribute a minimum of $15 and are considered members. The members do not receive preferential treatment for admission to a facility or any other monetary benefit. Unpaid volunteer directors serve on petitioner's board of trustees, and petitioner does not attempt to influence legislation or provide financial or other support to political candidates.

Between 1987 and 1992, petitioner's annual deficit ranged from $422,837 to $1,700,186. During those same years, donations to petitioner ranged from $503,384 to $1,115,588. In addition to donations to cover operational deficits, petitioner has also received nearly $2,000,000 in capital improvement donations, including $117,500 for constructing RME I and $1,071,000 for constructing RME II. Petitioner also received approximately 97,000 hours of volunteer services from 1990 to 1992. Without donations and volunteer service, petitioner could not continue its operations.

RME I was exempt from property taxes until December 31, 1990, when it was returned to the tax rolls. RME II was under construction on December 31, 1990, and December 31, 1991. Petitioner received the 1991 and 1992 property tax assessments for RME I and RME II, paid the taxes, and appealed those assessments to the Grand Rapids city assessor. Petitioner claimed that it was entitled to a tax exemption under § 7o of the General Property Tax Act, M.C.L. § 211.7o; M.S.A. § 7.7(4l ). The assessor and the board of review denied the exemption. Petitioner then appealed to the tribunal, and that appeal was limited solely to whether RME I and RME II qualified for property tax exemptions for tax years 1991 and 1992.

On appeal before the tribunal, petitioner presented stipulated facts and argued that RME I and RME II were charitable endeavors, either individually or as part of its entire operation, and in keeping with its purpose as a charitable institution. The stipulated facts referred to the entrance fees and monthly fees paid by residents. The entrance fees are lump sums paid upon admission, consisting of two parts: sixty-five percent is referred to as the refundable portion and thirty-five percent is referred to as the endowment portion. Under the agreement, a resident is entitled to a return of the refundable portion upon leaving RME I or RME II. The endowment portion is recognized as operating revenue over the average estimated remaining life of the resident. The monthly fee reimburses petitioner for maintenance and other similar costs, but does not meet the actual operating costs of RME I and RME II.

In 1990, the entrance fees for RME I ranged from $69,200 to $116,000 without a garage, and from $76,200 to $123,000 with an interior garage, and monthly fees were $160. In 1991, the entrance fees for RME I ranged from $72,700 to $121,000 without a garage, and from $80,100 to $129,200 with an interior garage, and monthly fees were $170. Before July 17, 1991, RME II entrance fees ranged from $79,400 to $180,800 with no parking space, and from $98,400 to $199,800 with two parking spaces. After July 17, 1991, entrance fees for RME II ranged from $87,300 to $198,900 with no parking space, and from $108,300 to $219,900 with two parking spaces. In 1992, monthly fees were increased to $200 a month.

Petitioner admits residents on a first-come, first-served basis; however, former employees receive preference. It also admits residents on a nondiscriminatory basis and requests only limited financial information for billing purposes. Petitioner has never refused to admit a person because of an inability to pay either the entrance fees or the monthly fee. Petitioner granted four RME I residents partial waivers of entrance fees, totaling $51,900. If a resident's only asset consists of the refundable portion of the entrance fees, petitioner deducts the monthly fee from the refundable portion. When a resident exhausts all financial resources, including the refundable portion, the resident is required to apply for whatever public assistance the resident may be entitled to receive. Residents of RME I and RME II are not eligible for either Medicaid or supplemental security income benefits because these programs are designed for residents of licensed facilities.

Petitioner has never transferred a resident who could not pay fees to a different facility with lower rates unless one of three specific exceptions applied. When a resident's health necessitates a transfer to a facility offering more care, the transfer is made without payment of additional entrance fees. The resident, however, must pay the applicable board and care fees charged by the facility to which the resident is transferred. If a resident transfers and the resident has exhausted all other financial resources except the refundable portion of the entrance fees, the facility's charge is subtracted from the refundable portion. The refundable portion is thereby exhausted in one year to fourteen years, depending on the amount of the initial entrance fees paid and the level of care required. When the refundable portion is exhausted, residents must apply for whatever public assistance may be available.

As of December 31, 1991, three residents who entered RME I had exhausted their financial resources, leaving a shortage in the amount of $33,850 after Medicaid reimbursement. Of the four RME I residents who were granted partial waivers of the entrance fees, two still resided in RME I in 1992.

On appeal to the tribunal, respondent argued that, because petitioner had granted partial waivers to only Christian Reformed Church ministers or missionaries, or their spouses, petitioner did not benefit an indefinite number of persons or the general public. Respondent noted that no African-American or persons of the Jewish faith resided in RME I or RME II. Respondent further argued that many poor and minorities would be willing to accept petitioner's charity by moving into RME I and RME II. Re...