October 27, 2009 Update

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Danny Kepner with Shell, Fleming, Davis and Menge spoke about the residential tax litigation at the annual meeting of Pensacola Beach Advocates (PBA) on October 21^st. There were over 150 people in attendance. Mr. Kepner was invited to the meeting by Lila Cox, a member of the liaison committee that has been assisting with communications between the law firm and the plaintiffs since property taxes were first assessed in 2004. She explained that PBA came into existence in 2008 in large part because of the need for an organization to keep Beach stakeholders informed and able to respond to important issues affecting the Beach. For more information go to www.pbadvocates.org

Mr. Kepner also represents the Navarre Beach leaseholders, who are being taxed on the land as well as the improvements. The Navarre Beach leases have language that sounds like the leases automatically renew. This is not the case with the leases on Pensacola Beach. He hopes to have a hearing on the taxation of the land before Judge Bergosh in Santa Rosa County in January.

There were three law suits on Pensacola Beach that have been heard and ruled upon by the Circuit Court and affirmed by the Appellate Court. The commercial leaseholders, Portofino and American Fidelity’s residential leaseholds were not successful in these cases. Because the First District Court of Appeal upheld the lower court ruling with the single word “Affirmed”, these cases could not be appealed to the Florida Supreme Court.

There are two other Escambia County cases involving taxes on leasehold improvements that are still pending. The law suit involving most of the residential leases on the Pensacola Beach (approximately 2400 parcels) was argued by Danny Kepner on May 2, 2008 before Judge Michael Jones. It has been nearly 18 months and the judge has not yet issued a ruling on this case. The other case is being handled by Attorney Larry Hill and involves two commercial properties owned by American Fidelity (the old Holiday Inn and the Dunes). This case was just argued before Judge Terry Terrell in the Circuit Court earlier in October.

A couple of changes to the law have occurred since Mr. Kepner argued his case in May of 2008.

In the past, if the assessment of the property was challenged, the amount of the assessment was given a presumption of correctness and the challenger was required to prove their case. That is no longer the case due to a change in the Florida Statute making for a more level playing field. To the best of Mr. Kepner’s knowledge, the Portofino suit is the only one that challenged the amount of the taxes assessed. That challenge is still pending. The other change in the law relates our lawsuit. The Florida Supreme Court has ruled that a Property Appraiser cannot challenge the constitutionality of the law, since the Property Appraiser has taken an oath to uphold the law. Attorneys representing the Escambia County Property Appraiser have argued that the statue governing taxation of leasehold property is unconstitutional. Mr. Kepner contends that the Florida legislature says that a 99 year lease will be taxed as intangible personal property.

Mr. Kepner assured the crowd that “we have been brainstorming to see how we can move this along.” He has sent letters to the judge when a ruling is made in another case that has similar legal issues as this case. A new law suit is filed every tax year as required by law. A challenge to the 2009 taxes will be filed in December and those plaintiffs involved in prior years will be included as long as the improvements on their leasehold are taxed in 2009.

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Time was allotted for Mr. Kepner to take questions. Here are some of the questions and answers from the meeting.

If a plaintiff is already represented by Shell, Fleming Davis & Menge in this law suit, is it necessary to sign up again for 2009?

No. If you were a plaintiff in a prior year and you are being assessed a tax on your improvements, you will be named in the 2009 complaint. New parties who are interested in joining the law suit should look for information on what is required and the timeline on the web site www.pbeachtaxsuit.com

If we lose, will it change our leases or will be get fee simple title to the property?

No, the ruling by the court will not change the leases. It will take legislative action to get fee simple title.

What would happen if the judge leaves office without ruling in this case?

This is not likely, but the case would have to be reargued in front of another judge.

Is there anything we can do as a group to be sure the judge issues an opinion so that the case can be appealed to the Florida Supreme Court?

No. A couple of the Circuit Court judges wrote brief opinions. It is the “Affirmed” opinion at the Appellate Court that precludes an appeal to the Supreme Court.

Do you recommend paying the taxes?

No, but if you do it doesn’t hurt the law suit.

With so many tax years now involved in this matter, a little more explanation is in order.

Tax bills for 2009 will come out around November 1^st. These taxes are not due until March 31, 2010, although you get a discount for paying early.

As far as back taxes are concerned, Mr. Kepner said that if you chose or are required by your mortgage company to pay prior years taxes, the interest rate is 18% since the taxes are considered delinquent. However, if we lose the taxes are not paid until ordered by the Court at an interest rate of 12% simple interest per year. Mr. Kepner has spoken with County Attorney Allison Rogers and was told that the county portion of the property taxes that have been paid are being held in Escrow.

Can we get a refund of paid taxes if we win?

There is a statute that says you can apply for a refund and after a review by the State, the County would be directed to reimburse you. Mr. Kepner recounted that the last time this issue was successfully litigated in the 1980’s by M.J. Menge, leaseholders did not receive a refund.

Anyone with additional questions was asked to direct them to the liaison committee or to send them to pbts@att.net