BRADENTON, Fla. Florida’s Third District Court of Appeal has ruled that property taxes cannot be assessed against privatized military housing at the Key West Naval Air Station.
In upholding a Monroe County Circuit Court decision, the Third District said March 11 that the Navy is immune from ad valorem taxes in Florida because it retained ownership of the property where housing complexes were improved and operated by Southeast Housing LLC.
Should the appellate ruling stand, Southeast Housing will not be responsible for an estimated $11.3 million in tax liens and $2 million in annual property tax expenses sought by the Monroe County property appraiser.
The genesis of the case grew from tax liens imposed in 2012 by the appraiser on 890 military housing units in Key West.
Southeast Housing, which was in the midst of restructuring debt and selling some property due to high vacancy rates, filed a lawsuit challenging the appraiser’s decision.
A lower court sided with Southeast Housing in early 2014 but the county property appraiser appealed. There is no word yet if the appraiser will pursue the case further.
In 2007, Southeast Housing issued $526.7 million in taxable military housing revenue bonds to renovate units at bases in Florida, Georgia, Mississippi, and Texas.
Moody's Investors Service in July 2013 downgraded its rating on the bonds to Ba3 from Ba1, and maintained a negative outlook, because of continued elevated vacancy rates at some bases and uncertainties related to the property tax litigation.
Moody’s revised the outlook to stable from negative in August 2014 while affirming its Ba3 rating on $416.4 million of outstanding bonds.
The outlook revision was based on a $35 million reduction in debt using proceeds from the sale of units in Key West and Jacksonville, and improving occupancies.
Moody’s also noted the favorable lower court ruling on the property tax litigation.
