FAYETTEVILLE — The University of Arkansas and Washington County Assessor Jeff Williams are at odds over property tax exemptions for commercial ventures on campus.
After a nearly three-hour hearing Thursday, the issue is in the hands of the county Equalization Board, which must decide within 10 days to allow the exemptions or require the university to pay $139,758 in real estate property taxes.
At A Glance
Equalization Board
The five-member Equalization Board reviews and equalizes overall county assessments as determined by the assessor and hears assessment appeals by property owners. Members represent the county, Quorum Court, schools and cities. Wesley Cannon is chairman. Members are Joe Bailey, Carl V. Johnson, Mildred Runkle and Luther Freeman.
Source: co.washington.ar.us.
Scott Varady, associate general counsel for the university, argued the institution is an extension of the state and is tax exempt. The businesses in question, such as Arsaga’s in the law school, TCBY, Subway and Walmart on Campus in the Garland Avenue Center, are on campus as a service to attract and retain students as the university and the state try to increase college graduates.
At issue are 46 parcels of real property, including 25 houses owned by the university and rented at market cost. Some are rented to students; other tenants aren’t associated with the university.
Varady described the situation as a “historical crossroads” because numerous state courts over the years determined the university is part of the state, which has constitutional immunity from local property taxes.
If the board upholds the exemptions, Varady said the cost of the tax bill would be passed on to students, causing a hardship for many.
The parcels, some of which have been tax exempt in the past, are all used to carry out the university’s educational mission, even green spaces on campus, as a modern public university, Varady said.
Don Pederson, vice chancellor for finance and administration at the university, said, “Students today are much different, to the extent we can provide basic needs is conducive to student learning.”
Williams said he denied the university’s request for an exemption on the properties because the spaces in question aren’t used as a school or a space for learning. A second reason was that businesses operating on the campus have an unfair competitive advantage over similar businesses operating nearby if no property taxes are paid.
If the exemptions stand, he questioned the impact on tax revenue if the university decided to buy the Northwest Arkansas Mall or George’s Majestic Lounge as places for students to shop or relax.
To pass the amount of the property taxes on to students would amount to about two cents a day per student, Williams said.
Williams maintained the university owned the houses with an eye on making a profit. Varady said the houses were purchased for expansion and would eventually be torn down to make way for new campus facilities.
In an email sent after the hearing, Michael White, associate controller at the university, said the university usually pays property taxes for newly purchased property for the year in which it was purchased and requests an exemption after that.
The denial of the exemptions cover the tax years of 2010, 2011 and 2012, Varady said.
Rudy Moore, an attorney who represents the Fayetteville School District, told the board allowing the exemptions to stand would have a financial impact on schools. The district receives about 80 percent of property taxes collected in the district.