Stanford information lawsuit towards Santa Clara County, desires ‘academic’ tax exemption for college properties

Stanford filed a lawsuit towards Santa Clara County earlier this February in search of a partial tax exemption for college properties on campus amidst criticisms that the College might do extra to assist college who’re dealing with “sudden and substantial monetary problem” 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. Presently, college properties are taxed at buy value similar to the property taxes paid by all different California householders. Nevertheless, the lawsuit argues that on-campus college properties are completely different from most different properties and must be taxed accordingly.

The College’s lawsuit states that the property worth of campus properties must be break up between “college curiosity” and “faculty curiosity.” The property utilized by Stanford for “academic functions” is the faculty curiosity. At current, there is no such thing as a distinction: each college and faculty pursuits are included within the county’s property tax evaluation of the campus properties. Faculty curiosity, which the College alleges is price about 25% of every campus house’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 faculty 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 college housing.

In keeping with the authorized grievance, in 2017, the county assessor reassessed newly bought college properties to nicely above the college buy value — usually 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 college 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 college 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 college handle affordability issues.

In keeping with a College assertion in February, the Stanford has “exhausted all cures on the administrative degree” to attraction 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 educational makes use of are tax-exempt below the California Structure, below which scholar dorms, libraries and educational buildings fall. Stanford’s lawsuit argues that college properties also needs to depend as academic amenities.

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

Nevertheless, the county has argued that college properties must be handled like another properties within the county and assessed primarily based 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 — apart from not having the identical academic standing as libraries, educational buildings or scholar dormitories — will not be situated within the core educational campus.

Steve Staiger, a historian with the Palo Alto Historic Affiliation, advised KQED that Stanford is a significant employer on the Mid-Peninsula, each for college and employees. A 1999 Stanford Journal article famous that college recruitment traditionally suffered on account of hovering home costs within the native real-estate market. The lawsuit seeks to handle many college members’ worries about whether or not or not the College will have the ability to home new college who won’t have the ability to 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 advised the Palo Alto Weekly.

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

The College confirmed this, writing that “Stanford derives no monetary profit from the property taxes paid by on-campus householders. The taxes are paid on to Santa Clara County by means 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 Manner, whose unique honest 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, college householders will proceed to pay the total share of property taxes for his or her properties, nevertheless, for householders who bought their properties in 2017 or after, this charge might be diminished by 25% as a result of tax exemption standing, in keeping with the College’s assertion in February.

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

In keeping 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, usually youthful college. Nevertheless, all campus householders are impacted — together with college wishing to promote their properties, college deterred from dwelling on campus as a consequence of excessive prices and potential house purchasers.

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

School are alert to property taxes once they purchase, Treharne wrote in an electronic mail to The Each day. School additionally depend on the College’s preliminary property tax estimate, which displays the worth that college paid for the home. Nevertheless, 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 yr for his or her appraisal and it got here again as being a 50% higher worth than we paid (which we might 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 nearly 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 affect many college members’ month-to-month bills, on condition that these prices have been unanticipated at first of the acquisition course of.

Residents of Peter Coutts, one among two college condominium complexes, are an instance of how college 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 home-owner since 2008. As a part of an initiative to raised perceive the tax burden, she has collected info and knowledge about affordability points confronted by college residents dwelling in Peter Coutts and mentioned that on the condominium advanced, “everyone seems to be combating affordability.”

In keeping with Maher, whereas college who’ve owned campus properties for longer pay property taxes in keeping with the preliminary property buy value, new householders are paying tax primarily based on what the present market worth can 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 entire taxes paid by Peter Coutts — a 140-unit advanced — is just paid by roughly 25 models. This, Maher mentioned, creates a “enormous discrepancy” between the median tax invoice and what a small variety of models are paying due to the tax enhance.

“There are people who will not be positive of their capacity to remain of their home, and that’s largely pushed by the tax state of affairs,” Maher mentioned, explaining that on prime of property taxes, college 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 infinite concern,” Maher continued. “The worth of water that’s managed by Stanford has gone up significantly … fireplace insurance coverage has additionally gone up.”

The Each day has reached out to the College for touch upon whether or not the quantity college 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 college issues about affordability.

Nevertheless, in keeping with the lawsuit, campus householders don’t obtain the standard advantages an off-campus home-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 college properties differ from properties in Palo Alto.

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

“It’s essential to emphasise that to reside close to work and foster the residential nature of this campus, Stanford college purchase homes which can be tied up in ways in which different, exterior purchasers won’t encounter,” Treharne wrote. “That is the unique educational mission of the college: to have the ability to have colleagues dwelling close to their place of job to boost the mental lifetime of Stanford and its college students.”