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Saturday, August 23, 2014 |  Madison, WI: 77.0° F  Fog/Mist
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Madison tax stance draws flak
Nonprofit housing providers say they can't afford to pay
Howard Mandeville: 'Nobody wins with this harsher, stricter
Howard Mandeville: 'Nobody wins with this harsher, stricter interpretation.'
Credit:Joe Tarr

Kristin Yelinek loves her parents but, like most 47-year-olds, doesn't welcome the prospect of having to move back in with them.

"I can't stand their nagging back and forth," she says. "I need to come here."

Yelinek, who has Down syndrome, shares an apartment with another developmentally disabled woman on Midvale Boulevard. But because of the city of Madison's interpretation of some recent tax law rulings, Kristin may be in danger of losing her home. She's not alone: Critics say the city's aggressive stance on this issue jeopardizes such living arrangements.

Yelinek and five other developmentally disabled adults live in a four-plex owned by Movin' Out. The nonprofit group is able to offer housing at less than market rate in part because the property is exempt from local property taxes. But that could change.

At last week's Common Council meeting, Assistant City Attorney Larry O'Brien explained that, to qualify for a tax exemption on rental property, nonprofits must use income from rental units only for maintenance or to pay off construction debt. If they use it for anything else - say, administrative costs, credit checks, bookkeeping, advertising or to pay off a mortgage - they must pay local property taxes.

The city says it has no choice, given a decision last fall by Dane County Judge Michael Nowakowski. O'Brien says the city did not anticipate the consequences for nonprofits when it raised the issue in court.

In October, the Wisconsin Department of Revenue sent a letter to assessors agreeing with Nowakowski's ruling. Then, in January, the Madison assessor's office sent letters asking nonprofit agencies how they use their rental income.

Howard Mandeville, executive director of Movin' Out, says the city's interpretation "would probably put some nonprofit rental programs out of business." Keith Yelinek, Kristin's father, finds that startling. "I just can't believe they'd impose property tax on a building like this," he says. "It's illogical."

The council, after a lengthy discussion, sent the issue back to the assessor, attorney and mayor's office for further review.

"A number of us aldermen are unhappy with the direction staff have started to take with this," says Ald. Mike Verveer. "I have to believe there is a middle ground and so much of this is discretionary." Other alders have suggested reimbursing nonprofits for any property taxes they pay.

Timothy Radelet, an attorney working pro bono on behalf of housing groups, says about 1,000 units may be affected, including those housing senior citizens, disabled and the poor. He believes the city's stance toward nonprofit housing providers is harsher than Nowakowski's ruling and the Department of Revenue letter require.

"I don't know why or what has been driving this," says Radelet. "I've never known, I've never understood why. And as long as reasonable people can interpret it a number of different ways, one would hope it would be interpreted in favor of [traditional] city policy."

Movin' Out has 21 rental units in the area, including 16 in Madison. (It also helps developmentally disabled people buy housing.) Rents are about $500 to $600. Having to pay property taxes would raise monthly costs by about $100 to $270 per unit.

"The tenants can't pay for that [increase]. And we can't pay for that," says Mandeville. "We don't have that money. Unless the city gives us more money."

Movin' Out worries it may have to shut down its rental operations and pay back grant money it received from the federal government through the city to buy the property. "It's like a big vacuum is sucking all this money out of the community," says Mandeville. "Nobody wins with this harsher, stricter interpretation."

State Rep. Terese Berceau (D-Madison) hopes to introduce legislation to protect nonprofit housing from taxation. But there is disagreement over which nonprofit providers should be exempt, with some hoping to be able to tax high-end nonprofit housing providers. "The difficulty," says Berceau, "is getting all legislators to understand that we need to fix this problem fast."

Will Bruer's reign go on and on?

On the Madison Common Council, the president and pro tem leadership posts have traditionally been revolving - nobody serves for more than a year, and usually the current pro tem is the next president.

But Ald. Tim Bruer, the council's current president and longest-serving member, has proposed shaking things up by seeking a second consecutive term.

After a new council is sworn in on April 21, the first order of business is electing leaders. Officers must be elected by a majority among the 20-member council.

"We've had a pretty productive year, working closely with the mayor's office and department heads," Bruer says. "I'm considering another term that would continue and expand upon the course of the last year."

Bruer thinks his colleagues may be amenable to this. "The last time, I was elected by unanimous consent," he says. "If you don't have the support of the majority members of the council, which is difficult even on a good day, you won't be effective, and it'll result in a political logjam at a time we can least afford it."

Ald. Larry Palm, who survived an electoral challenge by perennial candidate Will Sandstrom, is interested in either the president or pro tem position.

"I might put my name in there. It depends on who is running," he says. "I'm not enthusiastic about changing policy by having someone in the presidency two years in a row. It's not right to have people repeat, especially if there are other candidates interested in running."

Ald. Marsha Rummel would consider voting for Bruer but sees the need for some change: "I had been hoping to have some women leadership, so I'm eager to see how that will play out."

The current pro tem, Ald. Mark Clear, feels that "one year is a relatively short time to accomplish anything," and wouldn't mind "staying the course for another year." But he doesn't rule out seeking the top job over Bruer.

Green dream, join the team

Mayor Dave Cieslewicz's ambitions of building green neighborhoods took a step forward last week, when the Common Council approved goals for developing a 2,800-acre chunk of land on Madison's northeast side.

The council adopted the plan's four goals: reducing energy consumption by 25% of the citywide average, cutting water usage by 25%, capturing 25% of storm water, and having 25% of all trips taken by residents to be on foot, bike or mass transit.

City planners will now draft more concrete regulations and a development plan. But all agree the project's success will depend on whether the city can get developers to buy into it.

"If this set of plans doesn't work for developers, it doesn't work," says Andrew Statz, fiscal efficiency auditor for the mayor's office.

Mike Slavish of Hovde Realty thinks the project "has great potential," but wants to be sure the goals being set for the neighborhood are reasonable. He's concerned about accessibility. "Although [the area] is very visible from I-90 and 94, it's not easy to get to. There are no off ramps. If it truly proceeds as the mayor hopes, people need to be able to get there with relative ease."

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