With approval from the state House and Senate, privately owned military housing in Key West and throughout Florida will be exempt from local property taxes pending the signature of Gov. Rick Scott.
The one restriction to the legislation, adopted during session this week, is that active-duty military personnel and their families must live in the units for the exemption to stand.
The Key West scenario involves the 2007 transfer of 895 units of U.S. Navy-owned housing, not the land beneath it, to for-profit British company Balfour Beatty Communities' Southeast Housing LLC.
Then-Monroe County Property Appraiser Karl Borglum rescinded a property-tax exemption in 2011 and filed an $11.5 million lien for back taxes, penalties and interest on Southeast properties at Sigsbee Park, Trumbo Annex, Truman Annex, Peary Court and the Branch Medical Clinic.
Borglum's review was prompted by the increasing local trend of renting excess units to civilians with no ties to the military. Under the pending laws, those units would be subject to local taxes.
Florida Keys Rep. Holly Raschein, who lobbied for the legislation, said, "I believe this compromise provides the best policy on this issue and helps to strike the necessary balance between ensuring that our local schools and emergency services are properly funded and the need to provide excellent housing options for military families."
The proposed law mirrors a 2008 agreement between Balfour Beatty and the Santa Rosa County Property Appraiser's Office in Pensacola, except that deal swapped the term "tax" with "payment in lieu of tax" -- although the rate was equal to the applicable tax rates and the money was used to support the same services as property taxes.
Asked how making a payment in lieu of taxes is more advantageous to Balfour Beatty than simply paying taxes, spokeswoman Kathy Grim said, "Because we are involved in pending litigation that is related to these issues, we are not able to provide any comment at this time."
In fact, one piece of litigation involves Southeast Housing suing Monroe County Property Appraiser Scott Russell, asking Chief Monroe County Circuit Court Judge David Audlin to vacate the lien. Both sides are still submitting arguments to the court; no hearing is currently scheduled.
Russell's attorney, James Dent of Sarasota, said the Santa Rosa agreement was "cutting a deal" and he doesn't agree that tax rolls should be compromised.
Raschein's district executive director, Kate DeFoor, said the difference between Southeast getting a tax break for renting to military families differs from a private person renting to a military family in that Southeast pays 90 percent of "excess cash flow" to the Navy and that rent is determined by pay-grade housing allowances.
"Private landlords who rent to active-duty military have no such restrictions on what they can charge in rent or returning 90 percent of their profits to the Navy," she said.