Stanford information lawsuit towards Santa Clara County, needs ‘academic’ tax exemption for school properties

Stanford filed a lawsuit towards Santa Clara County earlier this February in search of a partial tax exemption for school properties on campus amidst criticisms that the College may do extra to assist school who’re going through “surprising and substantial monetary issue” as a consequence of elevated property taxes.

Housing at and close to Stanford is already costlier in comparison with different college cities within the nation. At the moment, school properties are taxed at buy value identical to the property taxes paid by all different California owners. Nonetheless, the lawsuit argues that on-campus school properties are completely different from most different properties and ought to be taxed accordingly.

The College’s lawsuit states that the property worth of campus properties ought to be break up between “school curiosity” and “school curiosity.” The property utilized by Stanford for “academic functions” is the faculty curiosity. At current, there isn’t any distinction: each school and school pursuits are included within the county’s property tax evaluation of the campus properties. School curiosity, which the College alleges is price about 25% of every campus dwelling’s property tax, ought to qualify for tax exemptions, the lawsuit argues. The College is in search of a refund on the property tax paid on its school curiosity.

The authorized case particularly seeks a tax refund for one home within the School Subdivision, which some proponents say they hope will set up a landmark case of types, enabling the precept of tax refunds to be utilized to all school housing.

In accordance with the authorized grievance, in 2017, the county assessor reassessed newly bought school properties to effectively above the college buy value — typically greater than 35% increased than their buy costs. This excessive evaluation of newly bought properties created a “vital monetary uncertainty and hardship” for a lot of school members who personal long-term leasehold pursuits in properties on campus, the authorized grievance says.

The topic of college housing affordability has come up repeatedly, together with in a latest school senate assembly. Concurrently, the difficulty has attracted the eye of many native residents, together with Jenna Mains, who criticized the College for not doing sufficient to assist school deal with affordability considerations.

In accordance with a College assertion in February, the Stanford has “exhausted all cures on the administrative stage” to enchantment property tax reassessments, together with unsuccessful appeals to the Evaluation Appeals Board, Board of Supervisors and County Assessor’s Workplace. The College filed the lawsuit towards Santa Clara County to hunt readability on “differing authorized interpretations.”

College lands dedicated to tutorial makes use of are tax-exempt underneath the California Structure, underneath which pupil dorms, libraries and tutorial buildings fall. Stanford’s lawsuit argues that school properties must also depend as academic services.

The California courts have “constantly granted this faculty curiosity exemption on university-provided school and workers housing” as a result of, in keeping with the lawsuit, it’s effectively acknowledged that such housing is essential to the achievement of a college’s academic mission. In accordance with Stanford’s assertion, a residential campus, wherein school can host dinners, conferences and social occasions, strengthens the educational cloth of the College and thus ought to qualify for a partial property tax exemption.

Nonetheless, the county has argued that school properties ought to be handled like some other properties within the county and assessed based mostly on their market worth. County Counsel James Williams disputed Stanford’s definition of “on campus” in an interview with Palo Alto Weekly, arguing that the college residences — except for not having the identical academic standing as libraries, tutorial buildings or pupil dormitories — usually are not positioned within the core tutorial campus.

Steve Staiger, a historian with the Palo Alto Historic Affiliation, informed KQED that Stanford is a serious employer on the Mid-Peninsula, each for school and workers. A 1999 Stanford Journal article famous that school recruitment traditionally suffered on account of hovering home costs within the native real-estate market. The lawsuit seeks to deal with many school members’ worries about whether or not or not the College will be capable of home new school who may not be capable of afford excessive property tax costs. 

In 2021, roughly $15.9 billion of the College’s holdings have been tax exempt on account of Proposition 13, California’s property tax legislation, which held down the reported worth of many Stanford properties. This was the most important tax exemption within the county, Williams informed the Palo Alto Weekly.

Nonetheless, the lawsuit is about assuaging the monetary burden confronted by school, somewhat than saving the College cash, in keeping with James Sweeney, President of Stanford Campus Residential Leaseholders (SCRL) Board of Administrators. All school residing in campus properties pay their property taxes themselves with out help from the College, Sweeney defined.

The College confirmed this, writing that “Stanford derives no monetary profit from the property taxes paid by on-campus owners. The taxes are paid on to Santa Clara County by way of the Division of Tax and Collections.”

The lawsuit makes an attempt to get a reimbursement of the tax distinction for one particular home on 838 Cedro Approach, whose unique truthful market worth of $2.97 million in 2018 was raised to $3.06 million after a county reassessment in 2021. Sweeney mentioned that he’s hopeful that, if the refund is profitable, this authorized case will set up a precept of requesting tax refunds for different homes additionally impacted by excessive reassessment charges.

All floor leases within the School subdivision are for 51 years, and about 25-30 single-family properties and condos are bought on campus yearly, in keeping with College spokesperson Joel Berman. If Stanford’s lawsuit is profitable, school owners will proceed to pay the total share of property taxes for his or her properties, nonetheless, for owners who bought their properties in 2017 or after, this price might be lowered by 25% as a result of tax exemption standing, in keeping with the College’s assertion in February.

Sweeney has lived in a college dwelling along with his household since 1985, and whereas his kids have since moved out, underneath Proposition 13, he mentioned that he nonetheless pays the property tax reflective of the house’s buy value 40 years in the past. Nonetheless, the newer school he works with can’t say the identical.

In accordance with a letter from SCRL’s Board of Administrators supporting the College’s authorized motion, excessive property taxes create the most important barrier to homeownership for first-time, typically youthful school. Nonetheless, all campus owners are impacted — together with school wishing to promote their properties, school deterred from residing on campus as a consequence of excessive prices and potential dwelling purchasers.

Elaine Treharne, a tenured professor of early English literature, mentioned that she was just lately in a position to afford to purchase a apartment within the School subdivision in direction of the top of 2021 after saving up for the previous 9 years.

School are alert to property taxes after they purchase, Treharne wrote in an e-mail to The Every day. School additionally depend on the College’s preliminary property tax estimate, which displays the worth that school paid for the home. Nonetheless, Santa Clara County conducts its personal appraisal of the home, someday after the sale, which overrides the College’s preliminary calculations.

“Our home took a 12 months for his or her appraisal and it got here again as being a 50% larger worth than we paid (which we may by no means promote it for),” Treharne wrote, explaining that their property tax was additionally reassessed to be increased than anticipated.

“In September 2022, we have been requested to pay virtually double what had been estimated; we additionally had (with no warning, because it have been) to pay the excellent equal retrospectively,” Treharne wrote.

These prices, Treharne wrote, proceed to impression many school members’ month-to-month bills, provided that these prices have been unanticipated firstly of the acquisition course of.

Residents of Peter Coutts, one in all two school condominium complexes, are an instance of how school have taken motion to raised perceive the impacts of tax burdens.

Kate Maher, Earth system science professor and senior fellow on the Woods Institute for the Surroundings, has been a campus house owner since 2008. As a part of an initiative to raised perceive the tax burden, she has collected data and information about affordability points confronted by school residents residing in Peter Coutts and mentioned that on the condominium advanced, “everyone seems to be combating affordability.”

In accordance with Maher, whereas school who’ve owned campus properties for longer pay property taxes in keeping with the preliminary property buy value, new owners are paying tax based mostly on what the present market worth could be in Palo Alto, not on campus. In some circumstances, that might double their tax invoice, Maher mentioned.

Maher mentioned that, due to the reassessments, which started in 2017 for newly bought residences, 60% of the overall taxes paid by Peter Coutts — a 140-unit advanced — is just paid by roughly 25 models. This, Maher mentioned, creates a “big discrepancy” between the median tax invoice and what a small variety of models are paying due to the tax enhance.

“There are people who usually are not certain of their capability to remain of their home, and that’s largely pushed by the tax state of affairs,” Maher mentioned, explaining that on high of property taxes, school should additionally pay month-to-month bills.

Maher mentioned that these month-to-month bills, a few of that are managed by the College, have additionally quickly elevated. “Month-to-month bills are, for lots of people, an unlimited concern,” Maher continued. “The value of water that’s managed by Stanford has gone up significantly … hearth insurance coverage has additionally gone up.”

The Every day has reached out to the College for touch upon whether or not the quantity school pay for these month-to-month bills is managed by the College, and if the College is doing something to lower the price of month-to-month bills as a consequence of elevated school considerations about affordability.

Nonetheless, in keeping with the lawsuit, campus owners don’t obtain the everyday advantages an off-campus house owner would when shopping for a home. The lawsuit argues that the county’s property reassessment doesn’t account for 2 essential ways in which school properties differ from properties in Palo Alto.

The lawsuit argues that first, the College restricts school gross sales, possession and use of those properties, and second, school properties are on floor leases. Which means whereas school might personal the house, Stanford owns the land. Campus owners don’t personal the total property curiosity in these properties, and due to these preparations with the owners, the College argues in its lawsuit that school curiosity is exempt.

“It’s essential to emphasise that to stay close to work and foster the residential nature of this campus, Stanford school purchase homes which can be tied up in ways in which different, exterior purchasers may not encounter,” Treharne wrote. “That is the unique tutorial mission of the college: to have the ability to have colleagues residing close to their workplace to boost the mental lifetime of Stanford and its college students.”