Manteno Cmty. Unit Sch. Dist. No. 5 v. Ill. Prop. Tax Appeal Bd.

• Decision Date: 17 August 2020
• Docket Number: Appeal No. 3-18-0384
• Citation: 179 N.E.3d 797,449 Ill.Dec. 512,2020 IL App (3d) 180384
• Parties: MANTENO COMMUNITY UNIT SCHOOL DISTRICT NO. 5, Petitioner, v. The ILLINOIS PROPERTY TAX APPEAL BOARD; DSI Manteno Owner, LLC; and The Kankakee County Board of Review, Respondents.
• Court: United States Appellate Court of Illinois

2020 IL App (3d) 180384

179 N.E.3d 797

449 Ill.Dec. 512

MANTENO COMMUNITY UNIT SCHOOL DISTRICT NO. 5, Petitioner,

v.The ILLINOIS PROPERTY TAX APPEAL BOARD; DSI Manteno Owner, LLC; and The Kankakee County Board of Review, Respondents.

Appeal No. 3-18-0384

Appellate Court of Illinois, Third District.

Opinion filed August 17, 2020

Modified Upon Denial of Rehearing September 22, 2020

Scott L. Ginsburg and Jessica L. Knox, of Robbins, Schwartz, Nicholas, Lifton & Taylor, Ltd., of Chicago, for petitioner.

Thom Moss, of Bickes, Wilson, & Moss, of Decatur, for respondent DSI Manteno Owner, LLC.

Kwame Raoul, Attorney General, of Chicago (Jane Elinor Notz, Solicitor General, and Carl J. Elitz, Assistant Attorney General, of counsel), for respondent Illinois Property Tax Appeal Board.

No brief filed for other respondent.

JUSTICE WRIGHT delivered the judgment of the court, with opinion.

¶ 1 DSI Manteno Owner, LLC (DSI), appealed the Kankakee County Board of Review's (Local Board) 2013 property tax assessment of its supportive living facility, Heritage Woods of Manteno (Heritage Woods), to the Illinois Property Tax Appeal Board (PTAB). Manteno Community Unit School District No. 5 (School District) intervened in the PTAB proceedings. After a hearing, the PTAB reduced Heritage Woods's 2013 property tax assessment. The School District seeks our direct review.

¶ 2 I. BACKGROUND

¶ 3 Respondent, DSI, owns Heritage Woods, a certified supportive living facility in Manteno, Illinois, that houses Medicaid-eligible and private-pay residents. Under the Illinois Public Aid Code, 305 ILCS 5/5-5.01a (West 2012), a supportive living facility is a "free-standing facility or a distinct physical and operational entity within a nursing facility." Such facilities "integrate[ ] housing with health, personal care, and supportive services and is a designated setting that offers residents their own separate, private, and distinct living units." Id. The Illinois Administrative Code (Administrative Code), 89 Ill. Adm. Code 146.200(b) (2006), defines a supportive living facility as:

"a residential setting in Illinois that provides or coordinates flexible personal care services, 24 hour supervision and assistance (scheduled and unscheduled), activities, and health related services with a service program and physical environment designed to minimize the need for residents to move within or from the setting to accommodate changing needs and preferences; has an organizational mission, service programs and a physical environment designed to maximize residents' dignity, autonomy, privacy and independence; and encourages family and community involvement."

The Illinois Department of Healthcare and Family Services (Department) established and now oversees the "program of supportive living facilities." 305 ILCS 5/5-5.01a (West 2012).

¶ 4 Heritage Woods is situated on 3.49 acres of land and has 37 studio, 44 one-bedroom, and 6 two-bedroom apartments, each of which has a private bathroom, kitchenette, and separate heating and cooling unit. Residents of Heritage Woods receive housekeeping, 24-hour access to staff, and laundry machines free of charge. Common areas at Heritage Woods include a reception lobby, game room, salon, media room, library, and fitness center.

¶ 5 Pertinently, under section 1-55 of the Property Tax Code ( 35 ILCS 200/1-55 (West 2012) ), Heritage Woods's property taxes were based on: "One-third of the fair cash value of property, as determined by the Department[ of Revenue]'s sales ratio studies for the 3 most recent years preceding the assessment year, adjusted to take into account any changes in assessment levels implemented since the data for the studies were collected." Respondent, the Local Board, used a fair cash value of $5,098,656 to assess Heritage Woods's 2013 property taxes at $1,688,165.¹

¶ 6 On February 3, 2014, DSI appealed the Local Board's assessment of $1,688,165 to respondent, the PTAB, under section 16-160 of the Property Tax Code (id. § 16-160), arguing that the Local Board erred when calculating Heritage Woods's fair cash value under section 10-390 of the Property Tax Code (id. § 10-390 ), which states:

"(a) Notwithstanding Section 1-55, to determine the fair cash value of any supportive living facility established under Section 5-5.01a of the Illinois Public Aid Code, in assessing the facility, a local assessment officer must use the income capitalization approach.

(b) When assessing supportive living facilities, the local assessment officer may not consider:

(1) payments from Medicaid for services provided to residents of supportive living facilities when such payments constitute income that is attributable to services and not attributable to the real estate; or

(2) payments by a resident of a supportive living facility for services that would be paid by Medicaid if the resident were Medicaid-eligible, when such payments constitute income that is attributable to services and not attributable to real estate."

¶ 7 On April 16, 2014, petitioner, the School District, filed a request to intervene in the PTAB proceedings. The PTAB granted this request on April 29, 2014.

¶ 8 A. The PTAB Hearing

¶ 9 On April 11, 2017, the PTAB held a hearing on the 2013 property tax assessment of Heritage Woods. The hearing focused on the fair cash value of Heritage Woods as of January 1, 2013, under section 10-390. The PTAB received testimony from David Mitchell, Chief Financial Officer and Vice President of Gardant Management Solutions, Inc. (Gardant), which manages Heritage Woods, and three certified general real estate appraisers—Keith Honegger, Michael MaRous, and Eric Dost. We recount each witness's testimony below.

¶ 10 1. David Mitchell

¶ 11 Mitchell began his testimony by distinguishing supportive living facilities, such as Heritage Woods, from assisted living facilities. Mitchell stated assisted living facilities are market rate facilities that do not follow the same statutory guidelines as supportive living facilities. According to Mitchell, for Medicaid-eligible residents, supportive living facilities "agree to accept rent *** from the resident *** [in an amount equal] to their Social Security income less $90" and to "accept in full the Medicaid payment that is paid [for services] based on *** seven different regions" in Illinois. While assisted living facilities can have asking rental rates that are similar to those of supportive living facilities, an assisted living facility's service rates vary according to the market. Further, assisted living facilities, generally, are not reimbursed for Medicaid-eligible residents.

¶ 12 Next, Mitchell reviewed the Department's 2013 schedule of estimated monthly revenues for a supportive living facility (Department's schedule). The purpose of the Department's schedule is "to give estimated monthly revenue for operational supportive living facilities for providing housing and services to Medicaid-eligible residents." The estimated monthly revenues adopted by the Department vary according to Illinois region and include "funds paid by a resident for room and board, the Supplemental Nutrition Assistance Program (SNAP) allocation from a resident, and funds paid by the Department *** for services rendered to a Medicaid-eligible resident."

¶ 13 The Department's schedule estimated that the monthly revenue received for room and board from a single Medicaid-eligible resident of a supportive living facility was $620. Mitchell said this amount represented the minimum Social Security income ($710) minus a personal expense allocation ($90). Although a resident's Social Security income may exceed $710, the Department caps the room and board charge at $620 for that single resident of the supportive living facility. Excess social security funds are "applied to the Medicaid services portion of their stay." Service rates can be higher for private-pay residents, since, for Medicaid-eligible residents, the supportive living facility agrees to accept the rate provided by Medicaid. Nevertheless, the exact same services are provided to Medicaid-eligible and private-pay residents.

¶ 14 Mitchell was asked about the package price quoted to prospective residents of Heritage Woods. He stated the quoted package price would depend upon the type of apartment selected by the prospective resident. However, the quoted package price would include both room and board and services. Often, the prospective resident and his or her family have questions about financing, namely, whether the prospective resident will qualify for Medicaid or pay privately. Mitchell stated the quoted package price of a studio apartment at a supportive living facility, depending on that facility's location, might be around $3200.

¶ 15 Payments from residents of Heritage Woods are processed electronically and allocated between room and board and services. For example, if a resident receives $750 from social security each month, then $620 would be allocated as room and board, $90 would be allocated as a personal expense, and the excess of $40 would be allocated as services. Thus, all residents have the same room and board allocation, with any excess funds after the personal expense allocation going towards services.

¶ 16 On cross-examination, Mitchell was asked how a supportive living facility is permitted to apply funds exceeding the mandated $620 room and board rate to "the Medicaid services portion of their stay." Mitchell cited part 146.225(c) of Title 89 of the Administrative Code, 89 Ill. Adm. Code 146.225(c) (2018), which states: "Any income remaining after deduction of the protected minimum of $90 and room and board charges shall be applied first towards medical expenses not covered under the Department's Medical Assistance Program. Any income remaining after that shall be applied to the charges for *** services paid by the Department."

¶ 17 Mitchell agreed that there is a real estate component contained in Heritage Woods's total package prices that is not covered by the...