Condo Tax Rebate Sought

CHANNELSIDE, FL - The banner draped across the top ledge of Seaport Channelside reads: "Apartment Homes." Leasing specialists who work at this five-story, 422-unit complex tell visitors that if they're looking to buy a condominium here, they're out of luck. Apartments only. So why are the developers of Seaport Channelside Apartment Homes applying for tax rebates as just that — a condo building?

Look no further than a lucrative tax refund that developers say they need to make the $70 million project feasible. "We feel wholeheartedly that we did everything we were supposed to do, so we are due these credits," said Doug Weber, owner of Synergy Properties, which built Seaport Channelside.

But whether Seaport will qualify, potentially saving more than $1 million, depends on a complex process involving county and state officials. At the heart of the matter is a Florida law that was created to encourage development in blighted areas such as Channelside and which in the last few years has become an ever larger drain on state coffers.

In 2003, Tampa officials searched for developers willing to build on 7.5 acres of city land that had been used for years as a fueling station for city vehicles. Synergy, a family-owned development company that specializes in assisted living facilities, won the bid and began cleaning up the site along E Twiggs Street.

The cleanup lasted four years — three years longer than expected — because of the additional waste, including old railroad tracks and a 19th century stormwater system, said Michael DeMarcay, Synergy's vice president.

The plan, DeMarcay and Weber say, is to lease their project's units as apartments, but convert them to condos as the market improves.

They always counted on getting a tax subsidy that was created for industrial zones like this one, the developers say. It gives them a refund on taxes spent on building materials — a rebate that developers are tapping with greater frequency.

In 2001, the tax refund cost the state about $456,000. By last year, the refund cost $25.6 million, according to Robert Babin, legislative services director for the Florida Department of Revenue.

Condo projects represent about 95 percent of the rebates. That's because the law refunds the sales tax per property identification number.

Property appraisers issue identification numbers for each condo unit because they are owned by different entities. If a project has 100 condos, then 100 identification numbers are assigned. Even though an apartment building has 100 units, however, it will only be assigned one identification number because the units typically belong to one owner.

So while condos multiply the tax rebate by each unit, an apartment building only gets up to $5,000 for the entire project. In Seaport's case, an apartment project designation would mean $5,000 back tax refunds. A condo designation would mean $1.5 million. That's a big difference, and yet, the tax rebate law never mentions apartments or condos specifically, only the property identification numbers.

DeMarcay and Weber think it should be up to Florida's Department of Revenue to decide whether they get the tax refund, as well as the intent of the law.

But first, the Hillsborough County Property Appraiser's Office must decide if each of Seaport's apartments gets its own identification number. "We don't think these are condo units in reality," said Will Shepherd, the legal counsel for the Property Appraiser's Office. "The problem is, we realize that. We didn't want to appear to go along with this deception."

Last June, DeMarcay told a tax consultant his plan to apply for the rebate. An attorney told him to put the "bare minimum" condo documents in place to create the separate identification numbers, while making sure only one tax bill would be sent to the owner of the building, DeMarcay wrote in a June 19 e-mail. The Property Appraiser's Office later obtained this e-mail.

"(That e-mail) made it seem pretty obvious to us that the only reason they were setting up these condos was to get a larger sales tax rebate than they were entitled to," Shepherd said. Shepherd contacted an official with the Department of Revenue and alerted him of his suspicion, including his belief that Synergy would dissolve the condos once they received the tax rebate.

Babin, of the Department of Revenue, said his agency needs Synergy's tax rebate application before it can decide. "I can certainly see how the local authority has a question there," Babin said. "But I also don't think the rebate specifies apartments or condos."

DeMarcay said that Shepherd misinterpreted his e-mail. "Bare-minimum" only referred to preliminary condo documents that had to be filed, he said, adding that there are no plans to dissolve the condos.

The company always intended to convert the apartments to condos when the market improved. Synergy's February 2003 report to Tampa officials confirms that its strategy was to convert to condos later.

Still, condos aren't practical now. Even if Synergy wanted to sell its units, it would need permission from its lender, which could take time. But just because condos may not happen for years, that doesn't mean they should forfeit the rebate, DeMarcay said.

Meanwhile, with the condo documents in place, property appraiser Rob Turner said there isn't much choice for his office. "We are charged with following the law, and if we don't, the court can find us at fault," Turner said. "I just hope this gets attention in Tallahassee."