After the Sarasota County property appraiser lost a ruling against Selby on a technicality, its lawyers went all-out to take away its tax exemption.
Let’s not get personal here, but there must be something about Sarasota restaurateur Michael Klauber and Marie Selby Botanical Gardens CEO Jennifer Rominiecki that makes people want to take them down.
What is it: their success? Envy? The New York fighter in Rominiecki? Their business partnership?
You can’t help but leap to those thoughts, especially after the stunning ruling July 1 by Sarasota County Property Appraiser Bill Furst. He issued a total denial of Selby’s tax-exempt application and status on its 15-acre campus near downtown Sarasota.
In effect, Furst has ruled that Selby Gardens’ use of its land first and foremost is a for-profit venture and not predominately dedicated to what Selby states: “the only botanical garden in the world dedicated to the display and study of epiphytic orchids, bromeliads, gesneriads and ferns, and other tropical plants.”
This was a major smackdown, the second major setback in less than a year for Selby, following the Sarasota City Commission’s rejection of Selby’s master plan.
And this was especially a smackdown when you compare Furst’s treatment of two other of Sarasota’s not-for-profit gems — Mote Marine Laboratory and Florida Studio Theatre.
In Mote’s case, Furst is reducing the marine laboratory’s ex-emption from 100% to 96.4% of its property to account for Mote’s gift shops and restaurant, each of which is operated by the for-profit Event Network LLC. In FST’s case, Furst challenged, then backed off, FST’s ownership of homes that it provides for visiting actors, a practice it has employed as an economical strategy to meet the requirements of equity actors.
Furst also challenged FST’s restaurant, which it has in its premises exclusively for patrons attending shows. FST has operated the restaurant for 25 years without a problem.
But for Selby, Furst went full bore.
If Selby loses its appeal to the Sarasota County Value Adjustment Board, it could face a tax bill close to $1.5 million.
That is huge. And shocking. In the midst of a national coronavirus pandemic that is decimating not-for-profits and tourist-related organizations, Furst makes the decision to do this. For decades, Selby, Mote, FST and other similar institutions have been doing without questions what Furst all of a sudden now decides to challenge. And he especially goes after Selby and Michael’s On East, two of the most prominent institutions in Sarasota.
There’s a backstory.
Doing his job
In Furst’s defense, his job is to enforce the law, in this case determine whether not-for-profits’ properties meet the state requirements for tax-exemption.
Taxpayers want this oversight. For one, the more properties are exempt from being taxed, the higher the property taxes everyone else pays. It’s about fairness.
Here’s another part of the fairness: Is it fair that Jungle Gardens, a for-profit tropical garden tourist attraction up the road from Selby, pays property taxes, while Selby, which also attracts tourists, does not?
It’s similar to the dilemma in banking: Banks and credit unions do the same thing — lend money to consumers. Banks pay taxes; credit unions don’t. Bankers fume over what they say are credit unions’ unfair advantage.
Then there’s the matter of the interpretation of the law. To no surprise, Florida statutes are not altogether precise, and trying to interpret case law can make the matter clear as mud.
For instance, read the passages from Chapter 196 of the Florida Statutes in the accompanying box. The property appraiser says that when Selby rents out its gardens for, say, a wedding and is paid rent, that’s a for-profit venture unrelated to Selby’s mission. Furst furthermore says Selby’s business agreement with Michael’s On East — by which Michael’s On East manages and operates events in Selby’s ballroom — is a for-profit venture and not an activity related to the mission of Selby Gardens.
Furst argues the property devoted to these ventures should be deducted proportionally from Selby’s tax-exempt status the way the appraiser reduced Mote’s status.
But from Selby’s perspective, all of those activities — 130 of them in 2019 — amounted to less than 50% of the use of the property. Selby interprets those nonresearch activities as incidental to its mission and that its property still was “predominately” used for Selby’s mission.
The term “incidental” is crucial. That word and its meaning have created confusion for more than a century in Florida when you examine tax-exempt case law. For instance, here’s a passage from Chapter 196.196(2) on whether an organization is entitled to an exemption:
“Only those portions of property used predominantly for charitable, religious, scientific or literary purposes shall be exempt. In no event shall an incidental use of property either qualify such property for an exemption or impair the exemption of an otherwise exempt property.”
Huh? Confusing, to be sure. So confusing that Selby’s lawyers spent hours researching the history of property-tax exemptions and subsequently sent a six-page memorandum to Furst and his office’s lawyers, attempting to explain how it applies. The memorandum’s conclusion:
“Accordingly, property that is owned by an exempt entity and, except for incidental non-exempt uses, is otherwise used for an exempt purpose, is entitled to a complete exemption.”
Furst and his lawyers didn’t buy it.
Out to get Selby?
Back to “why now?”
Typically, when something as momentous as denying the tax-exempt status of one of the more revered institutions in the community occurs, it’s not a sudden decision. It usually is the culmination of events.
And that’s the case here.
According to Sarasota County ordinances, not-for-profit organizations with long-standing tax-exempt status have annual automatic renewal privileges, with an exception. If something significant changes in their operations, they are obligated to reapply for tax-exempt status.
But in November 2018, according to the property appraiser’s legal bills with the Sarasota firm of Icard Merrill, Cullis, Timm, Furen & Ginsburg, the two parties earnestly began to “work on questions regarding renewal of or continuing its tax exemption.”
We were unable to reach Furst or Icard Merrill lawyer Jeff Pflugner on what triggered their interest in Selby’s tax-exempt status. But in a brief Pflugner submitted to the Sarasota County Value Adjustment Board in November 2019, Pflugner stated: “The property appraiser, through news releases, became aware that substantial commercial activity was occurring on the Selby property.”
Two years earlier, Selby and Michael’s On East negotiated a contract, making Michael’s On East Selby’s exclusive catering provider. Surrounding that was the remodeling of a Selby ballroom, which Rominiecki and the Selby board saw as a way to generate revenue to take some of the burden off of its annual fundraising efforts.
Mind you, that strategy had become an accepted practice for decades in the nation’s not-for-profit museums, botanical gardens and scientific research centers.
But from November 2018 through July 2019, Pflugner and a team of Icard lawyers spent 83.8 hours and $18,448 in legal fees paid by the property appraiser preparing to challenge Selby’s tax-exempt status.
As part of this research, Pflugner gave Selby in December 2018 a list of 45 items to examine, including donor names and a request for the contract between Selby and Michael’s On East.
Surprised and puzzled, Selby requested the appraiser reduce its request. But Furst’s office and Pflugner insisted on seeing the Michael’s On East contract.
Selby sent the contract but redacted the terms showing what percentage of income it would receive from the catering. It argued that was a private matter and would lose negotiating leverage if that became public.
The fight began.
In July 2019, Furst’s office issued a notice of denial of Selby’s tax-exempt status on 10.3% of Selby’s property. Selby’s law firm, however, noted that Selby received the notice after a state-mandate July 1 deadline.
Selby challenged the denial, and a magistrate judge ruled in Selby’s favor. Furst and Pflugner lost their case on a technicality: missing a deadline.
That did it.
After that ruling, Furst and the team of Icard lawyers began the process all over again. If you read the entries on 15 months of legal bills from Icard Merrill — totaling $82,906 and 375 hours, from November 2018 to January 2020 — you can clearly conclude there was an all-out, high-level strategic effort to go after Selby.
A Selby official told us how on one occasion when representatives from Furst and Pflugner’s offices toured Selby, when they reached the ballroom, one of their team members exclaimed: “There’s the money shot.” When Selby had its hearing before the Value Adjustment Board, Selby’s legal team consisted of Shutts & Bowen lawyers John Patterson and Leah Zammit; Furst appeared with six lawyers from Icard Merrill.
Now an expensive war
As it turns out, the property appraiser’s denial of Selby’s tax exemption occurred according to the state’s required July 1 dead-line. That, unfortunately, also happened to be in the middle of a pandemic. You could say Furst’s office was not being intentionally vindictive.
Nevertheless, the optics and consequences are bad.
Rather than take steps to help the region’s not-for-profits maintain their tax-exempt status, which Furst could have done through seminars or one-on-one meetings with not-for-profit executives, Furst — and his Icard Merrill lawyers — have created an expensive legal war with one of the longest-running and beloved not-for-profits institutions in Sarasota.
Furst can say he was just doing his job. Or, he could have taken the higher road: become a leading advocate in Tallahassee for clarifying the state’s confusing tax-exemption laws and helping the not-for-profits survive and thrive. That is what is needed.