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Keys News- To Pay or Not to Pay Back Taxes

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By Timothy O'Hara

Federal Congressman Joe Garcia believes that a private company that partners with the military on housing projects in Key West should be subject to local property taxes and $11.3 million in back taxes and interest, he said Monday.

The Monroe County Property Appraiser's Office has placed $11.3 million in liens on five military properties in Key West that the Navy owns in partnership with Southeast Housing, a division of the multimillion-dollar company Balfour Beatty. The Navy owns the land, and Southeast Housing owns the buildings.

The lien amounts represent property taxes, interest and penalties dating back to January 2007.

Southeast Housing is fighting the liens and revocation of the tax-exempt status and has since sued the Appraiser's Office in local circuit court. There are also two state legislative bills -- House Bill 531 and the companion Senate Bill 354 -- that would exempt private companies that partner with the military on housing projects. The state bills would make the exemptions retroactive to January 2007.

Garcia, a U.S. House Democrat whose district includes South Florida, said he plans to write a letter to the secretary of the Navy and to Gov. Rick Scott expressing his concerns and arguing that the properties should be subject to Monroe County property taxes, he told The Citizen on Monday.

"This is a for-profit company that engaged in a for-profit venture," said Garcia, who has consulted with property owners about the issue. "I am not anti-military. Everyone should be treated fairly .... This isn't what the city (of Key West) bargained for."

Garcia was also critical of the state Legislature for proposing the bills, arguing that the bills usurp the authority of the courts.

"It's unfortunate that Tallahassee decided to step in," Garcia said.

Attorneys for the Property Appraiser's Office and Southeast Housing went before Circuit Court Judge David Audlin on Monday to argue their sides of the case. Both sides have filed for what is known as summary judgment, which would allow the judge to determine which side prevails.

The fact that one of the housing complexes, Peary Court, is currently being rented to civilians was not lost on Audlin. The judge asked why those units should be tax exempt, arguing they are "competitive with the private market." Also, Southeast Housing and the Navy are in negotiations to sell Peary Court to a group of private developers.

Southeast Attorney Jim Spoonhour argued that the number of units rented to civilians is small compared to the total number of units at all five properties. Spoonhour also contended that 80 percent of rental profits go back to the military.

Spoonhour argued that the Property Appraiser's Office simply changed its mind, despite there never being a "change in use or change in ownership," Spoonhour said.

Property Appraiser's attorney John Dent argued that when Southeast Housing first responded to the Navy request for proposals, it agreed to pay local taxes, a point that House Rep. Garcia, also cited as well.

On Monday, Audlin added some levity to the court hearing by making a joke about being unaware of the pending state legislation. Audlin asked about the status of the bills.

Legislators could vote on the Senate bill as early as Thursday, according to a spokesman for State Sen. John Thrasher, R-St. Augustine, who sponsored the bill.

Former City Commissioner Harry Powell attended Monday's court hearing.

In 1994, Powell took over a construction trailer with what he claimed was "dynamite with a dead man's switch" in an attempt to stop construction of the Navy housing project at Peary Court. After a nine-hour standoff, he was taken into custody and charged with armed burglary and possession of a destructive device.

Powell seemed to foresee the future, as he said in 1994 that Peary Court was not zoned for residential use, so when the Navy completed the construction of residences there and then pulled out, a private developer could purchase the property and develop newer residential units, despite not having the proper zoning.

Audlin will most likely not rule in the case for more than a month. The judge gave both sides 20 days to file written motions and a proposed summary judgment order.

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