Key West The Newspaper

by Rick Boettger…

The Third Court of Appeals has ruled that private corpations owning rental housing located on federally owned land associated with a military base do NOT have to pay local real estate taxes. This costs us here in Monroe almost $8 million/year in educational costs for those children, costs the rest of us shoulder, to say nothing about police, fire, roads, etc.

The reasons the court gave were simply wrong. They say the Navy retains control over the property. But the point of privatization is to have the private sector provide its expertise in areas in which our fighting force is not expert. That is part of the reason the Navy forces Base Allocation of Housing (BAH) funds to be spent on private housing, knowing how the government doesn’t do as good a job—remember your barracks, fellow Vets?

The judges say the Navy gets most of the profits, citing the famous 90% of the investment and 90% of the return figures. These are also simply wrong. They write that the Navy contributed $73 million and Balfour Beatty (BB) only $7.5 million. That looks like a 90% contribution, but it ignores the $557 million BB raised in the private capital bond market ONLY because they could say they owned the housing they were in effect mortgaging.

Worse, the profits are non-existent. The Navy gets 90% of nothing. The rent money goes first to pay off the bondholders of the $557 million, then to various BB subsidiaries: continuing maintenance, property management incentive and other fees, asset management, and brokerage fees. Not only are there no profits left to go back to the Navy, but the Navy had to bail them out in 2012 with an extra $8.4 million.

When you get deeper in the weeds on this ruling, it only gets worse. The IRS requires normal income taxes to be paid by BB in these cases. The contract requires BB to pay all local taxes. The bondholders expect BB to pay specifically local real estate taxes. Three other court rulings in similar cases held that similar military-private contractors had to pay property taxes.

These justices stand on their heads to say all of that doesn’t count, nobody really meant it when they signed those contracts or made those other rulings. Their most invidious argument is that such language had to of course be written in for BB to get that $557 million out of private hands, that bondholders had to essentially be fooled into thinking their money was secured by a private entity that really did own the property they were making a giant construction loan to so they build hundreds of rental homes.

A further extension of the subterfuge is their main reason to require private rentals: it allows the BB/Navy partnership to collect up to e.g., $3,040 for an apartment based on the pay grade of the member, even if fair market rentals were much less.

So BB and the Navy want their housing to be military to get out of paying local taxes for services they use every bit as much as we do, while saying they are private in order to get private sector loans and receive private sector BAH rents. This smacks of the shenanigans big banks did to cause the housing crisis. The final irony is that BB is a British firm. Our US and Monroe tax dollars go to pay the executive salaries and shareholder dividends in a foreign country. Way to go, Navy! Huzzah, Third District Court!

It really shocked me that judges at this high level could be so, frankly, stupid, given how smart our local Judge Mark Jones was in handling my relatively trivial but complicated cemetery gates case. So I looked up all of their backgrounds.

And I am embarrassed for the State of Florida. All three were appointed by Rick Scott. The guy who wrote the opinion, Judge Logue, was an assistant D.A. in Miami before being elevated all the way to the 3^rd Circuit with no previous judicial experience, based on “Tom’s abiding commitment to judicial restraint,” according to Scott. His distinguishing opinion before ours was pro-Porsche, overturning a lower court’s support of a class-action against them. His other major bio item is being an adjunct professor. I have been such, only in retirement, as a hobby. It is a shit job, way below that of high school teachers. He has kept his first eight years out of law school hidden from his bio, everywhere on the internet.

The other two are equally mediocre. The only one with prior judicial experience was a founding managing partner of a law firm that collapsed in 6 years due to greed, i.e., over expansion.

Mark Jones, on the other hand, was a cum laude graduate of an Ivy, Dartmouth. My own background at Yale Law makes me think a lot more like him than the 3^rd District justices. I guess I just got lucky.

My last hope in the American system was our court system. But I am not sure it is worth a cent to think the next level up would be any smarter, since it would take such a quantum leap in legal insight. One partial hope would be that the ruling did recognize the sale of a subset of the properties, Peary Court, due to the large number of civilian rentals there. If we could only get them to pay their share of the property taxes they owed before they sold it and the new owners promptly began to do so, I’d feel a bit better.

I chased down a rumor that the County had already sold its tax certificates on the private market. That would have been brilliant! But it turned out not to be true: of course, they couldn’t be sold while the matter was in litigation. Now, of course, they may be worthless.

Thank you, Governor Scott, for having your own Attorney General Pam Bondi, paid by our tax dollars, argue on behalf of the British company sending those dollars overseas. And for appointing judges who will always take the side of Big Business, foreign or domestic, against the citizen property owners and landlords like myself whom you give the shaft to on their behalf.