Big TAX problem for House Corps

[Texas Sig]

The Univeristy of Texas and the City of Austin worked together to re-zone land where the Greek houses are located. Most tracts are zoned Multi-Family BUT the city applied an "overlay zoning" they call the University Overlay Ordinance. This ordinance allows property to be developed as condos and mixed use up to 120 feet tall.

The Sigma Chi property taxes went from $12,000 to more than $61,000 in a two year period. Obviously we cannot pay these taxes for long.

So, we are faced with 1. selling the property, 2. getting the city to let us opt-out of the overlay or 3. getting the state legislature to step in.

All Greeks everywhere need to wake up and address this strategy ASAP.

The problem is that your county appraiser appriases your land based on its development potential, NOT the use. This could happen anywhere if Austin gets away with it. It is a slick way to push Greeks off of their property and make their location much less pedestrian oriented.

So, we all need to work on this wherever you are.

[Tom Earp]

WOW! This is above and beyond the call of appraisals as I get raised yearly!

I hate to say it, but sounds like a way to grub on property.

I am not sure if there is a way to get a re appraisal on this type of property.

This could be a death knell for may GLOs.

Let us know what is happening here and good luck!!!!!

[EE-BO]

Texas Sig,

PM me if you would like to discuss further, but I am painfully aware of the situation in West Campus as an advisor and Housing Board officer for my chapter.

Just so you know, the UNO is part of a city-wide initiative that will impact all of Austin in the coming years. The rationale, and a wise one I must admit, is that if you re-zone certain areas of the city to allow very dense population then you will make it easier to preserve the integrity and affordability of many in-town neighborhoods.

All over Austin, re-zoning is permitting and encouraging the development of high rise buildings with a residential-commercial mix along major city streets and highways. This not only makes it easier to keep more people close to the city, but it also focuses the concentration of population growth along major roads where rail and other environmentally friendly mass-transit planning can be used to greatest effect.

And to be honest, West Campus is long overdue for re-zoning. And I do not forsee any situation, regardless of the political prowess of the alumni, where a Greek House in West Campus can get an exemption from the UNO going forward. ATO is the only house right now that is in West Campus and outside of the UNO, and I think that is how it is going to be forever.

Personally, I hate it. West Campus as I remember it will never be the same.

But keep in mind that under existing zoning laws, even moderate growth was not possible. What is happening now was inevitable, but the speed with which it is taking place is due to the fact that West Campus was prevented from a more gradual redevelopment for far too long. And many Greek chapters are being caught in this. I just found out today that yet another fraternity is planning to sell their house.

The University has grown the student body in recent years. In addition, massive growth in Austin in general (stronger and more sustainable now than during the tech bubble) has created a lot of competition for housing outside of West Campus.

Areas like Riverside, Far West and Hyde Park that used to be largely populated by students are now unaffordable because there has been a huge influx of professionals competing for that real estate.

And despite UT's student body growth, the University still only provides on-campus housing for a single digit percentage of the student body.

This creates enormous pressure to redevelop West Campus so that more students can live nearby. And the scary reality is that there is so much demand for West Campus housing that even as the number of new complexes and apartments rises dramatically, rents are still going up.

Let me give you an example. In December a newly build complex at 27th and Rio Grande- very close to the Sigma Chi house- was up for sale for $21 million, or just over $360,000 per apartment.

Just 10 blocks away at 35th and Duval another newly built (2003) apartment complex of similar caliber is on the market right now for about $77,000 per apartment.

Property taxes are bad now, but they will get worse. I have seen detailed market reports on many properties in West Campus and in the past 3 years many have had their appraised values double or worse.

Texas might be reducing property tax rates to keep the voters happy, but the downside is that properties are more frequently and aggressively re-appraised to make up for the loss of revenue due to reduced rates. In most areas this does not have an impact, but in West Campus the impact is quite noticeable.

Sigma Chi is somewhat lucky since you guys are in the 75 foot maximum building height zone of the overlay (I think- you might be in the 60 foot zone depending on which tract you have on your block, the map in front of me is not clear on that), but you are also basically across the street from campus. If you were one block away in the 3 block wide belt where zoning is 175 feet, you would be in far worse shape.

But there is no doubt that property taxes and decreasing (now nearly non-existent) availability of existing Greek houses or places to build such a home in the traditional manner are going to threaten the ability of all of us to live as we have in decades prior.

And just so you know, the current going rate for a piece of land in West Campus in a 50-75 foot zone is close to double the appraised value for tax purposes. So chapters in West Campus in those zones would be wise to do their long term housing cost planning with the expectation of property taxes doubling from current rates in the next few years.

[Texas Sig]

It sounds like EE-BO knows quite a lot about what is going on.

Let me add this information:

I have contacted Greg Guernsey at the city to ask his staff to re-evaluate the unintended consequences of the overlay zoning. See below:

"Dear Greg:

Hope you had a wonderful Spring Break.

I sent you a map and addresses of the primary properties affected and an Excel chart showing the amount of tax increase at 2701 Nueces. Did you get these?

Art Cory (Travis County Appraiser) explained that he looks at the restrictions to help determine the value. Unfortunately, the UNO granted rights which we do not need. And when evaluated in the context of the Sorority-Fraternity Houses and I believe conflict with some of the "Top Ten Priorities".

Some conflicts are Items:
2. Historical protection - Sigma Chi Fraternity (2701 Nueces) has been at UT since 1881 and would soon cease to exist due to the taxes
4. Force us further from the campus - doing away with our pedestrian oriented functions. Moving is not an option.
5. Conflict with the buffering of project size. MF-4 zoning is more in scale with single family and town houses.
8. New housing should be of similar scale and massing. However, 75' to 120' tall condos are much taller and more massive than the existing development on the subject tracts.

As I see it, we need some options:
1. Opt-out of the UNO, which would revert us to our underlying zoning.
2. Possibly, create a Restrictive Covenant on each tract.
3. Possibly use the MF-4, CO Club or Lodge classification.
4. Since, the not-for-profit House Corporations hold title to the land, align tax status with the IRS classification 501 (c) 2

Meanwhile we property owners are getting organized so we can improve our communications, etc."

We have also begun conversations at the legislative level with Kirk Watson's office and plan to involve other legislators if we can.

We must take the position that the Greek's property is an asset to campus life. Food services and housing located near enough to campus to actually walk. Selling the property will not make the situation better... The city has also passed a specific ban on Greeks moving to the north campus area. So we cannot move north, east is too remote, south is not pedestrian and west of Lamar is high priced residential.

So, if you sell you have no feasible location to move to.

Some have suggested developing a high rise with a chapter house on the ground floor--this is obviously incompatible with other functions.

A single high rise Greek tower is a possibilty, but who controls the street level. I suppose we could work that out.

Maybe we could develop a Greek Street somewhere, but where? We would need about an acre for each house.

It seems to me we must not sell unless we intend to dramatically shrink into not much more than a campus club that would meet in the Student Union.

This is like WWII, we did not pick this fight, but the anti-Greeks are on a mission to get us off campus. We must get off our butts and wage a smart war to survive.

If all else fails, we may need to take serious legal action. This overlay zoning is essentially a condemnation and the remedy is NOT simply MONEY.

FYI: I am an architect, planner, development consultant, project manager. I have acted as an expert witness on about 20 right of way cases.

[EE-BO]

Originally Posted by Texas Sig

Some have suggested developing a high rise with a chapter house on the ground floor--this is obviously incompatible with other functions.

It seems to me we must not sell unless we intend to dramatically shrink into not much more than a campus club that would meet in the Student Union.

Regarding the first piece of your post that I have quoted above- I think that is the ultimate solution for many chapters down the road. Buy a small piece of land, put in a level or two of parking, have common areas on floor 2 or 3, and then either bedrooms or apartments for 3-4 floors more.

As for the second part- don't sell that house if you can help it. You will never again have a property like that if you do.

The zoning between the Drag and San Antonio and going back to Rio Grande beyond 26th is mostly 60-75 feet max. height. This gives you and 4 of the major sororities the best protection you have against an increase in the speculative and appraised value of your land.

Beyond that zone is pretty much 4 solid blocks of 90-175 foot zones which is being torn up daily to make room for new apartments. So if you sell where you are now, your only shot at another piece of land is to go way to the back of West Campus along Lamar- and even back in there already there are many new high rises.

When it comes to large Greek Houses with big yards like Sigma Chi, I think within 20 years there will be 2-3 such houses left- if that- in West Campus.

It is a hard reality, but we have to fundamentally rethink our long term housing at Texas.

And it's not just about property values- but noise ordinances and privacy. A 2 story fraternity house with a fenced in yard that is surrounded by high rise condos is just going to have trouble existing. Already in the wake of a lot of citations last fall, fraternities (and other campus organizations which have been targeted) are learning that loud music and parties have to happen indoors now.

In the past, West Campus was small and expensive enough that a significant number of the residents- especially right around the fraternity houses- were either Greek or Greek-friendly. With a larger and more diverse population coming in, that is going to change.

Greeks used to essentially rule West Campus. It was our playground. That is just not the case anymore.

[Tom Earp]

Originally Posted by EE-BO

Regarding the first piece of your post that I have quoted above- I think that is the ultimate solution for many chapters down the road. Buy a small piece of land, put in a level or two of parking, have common areas on floor 2 or 3, and then either bedrooms or apartments for 3-4 floors more.

As for the second part- don't sell that house if you can help it. You will never again have a property like that if you do.

The zoning between the Drag and San Antonio and going back to Rio Grande beyond 26th is mostly 60-75 feet max. height. This gives you and 4 of the major sororities the best protection you have against an increase in the speculative and appraised value of your land.

Beyond that zone is pretty much 4 solid blocks of 90-175 foot zones which is being torn up daily to make room for new apartments. So if you sell where you are now, your only shot at another piece of land is to go way to the back of West Campus along Lamar- and even back in there already there are many new high rises.

When it comes to large Greek Houses with big yards like Sigma Chi, I think within 20 years there will be 2-3 such houses left- if that- in West Campus.

It is a hard reality, but we have to fundamentally rethink our long term housing at Texas.

And it's not just about property values- but noise ordinances and privacy. A 2 story fraternity house with a fenced in yard that is surrounded by high rise condos is just going to have trouble existing. Already in the wake of a lot of citations last fall, fraternities (and other campus organizations which have been targeted) are learning that loud music and parties have to happen indoors now.

In the past, West Campus was small and expensive enough that a significant number of the residents- especially right around the fraternity houses- were either Greek or Greek-friendly. With a larger and more diverse population coming in, that is going to change.

Greeks used to essentially rule West Campus. It was our playground. That is just not the case anymore.

From A Poster who knows his stuff, heed and listen!

Land is dirt, well, dirt is getting expensive as I know and EE-OB know only to well!

If your school and many others like mine were built near campus with no problem, but, schools expand and where do they look? Not to upset the local Citizens so, then where next? Greeks!

[Texas Sig]

If your fraternity no long owns property or you are trying to buy property near campus your issues are not the same as those of us who now own property.

I think this is the Beta's situation and will be yours if you sell your property.

You won't be able to afford the purchase or the taxes that go with it.

[EE-BO]

I am not going to discuss our current situation on a message board, but the property tax issue affects us all.

As you surely have sorted out- it makes occupancy more expensive and diverts rent revenues towards taxes that need to be saved for repairs and renovations over time.

[Tom Earp]

Originally Posted by Texas Sig

If your fraternity no long owns property or you are trying to buy property near campus your issues are not the same as those of us who now own property.

I think this is the Beta's situation and will be yours if you sell your property.

You won't be able to afford the purchase or the taxes that go with it.

Well, the thing is as EE-OB said The owning of a house paying all of the bills falls on the House Corporation, of course it also falls on the chapter. They have to pay the bills to the HC?

If the House is owned, the appraisesel will still go up!

But, taxes are a small part of the toatal outlay. While it may seem small, it is still a cost.

The costs of repairs or fix ups that are need are extreemly expensive.

If you have a H C they get bunt out. They then get tired of seeing Chapters act silly and tear things up! They then leave and then the chapter wonders why?

Too will offer you to PM me!

[Texas Sig]

Divide $61,000 by your active bill payers over 9 months.
What do you get for your APO chapter?

[EE-BO]

No doubt- it is a scary cost.

For any non-UT folks reading this- it is important to note that West Campus has always been very expensive. When a fraternity buys a large house on a decent sized piece of land, it is almost always necessary to raise the entire purchase price since it is not economically feasible to carry a mortgage. This is not only true now- but it was true 20 years ago.

Guys living in the house paying rent are not paying off a mortgage- they are paying property taxes, maintenance, utilities and- sometimes- money towards a fund for periodic major renovations.

So a 400% jump in property taxes can easily double or triple the rent you would have to charge residents in a Greek house in West Campus. And good luck getting guys to pay $500-600 a month to share a bedroom and be in the house when that would be the going rate for your own room in a 2 bedroom apartment. This is what makes this whole situation scary.

Looking over your earlier posts Texas Sig- I like the idea of somehow aiming for relief under a different IRS tax setup if possible as you noted. There is legislation somewhere in Congress that could potentially allow capital donations to Greek organizations to be tax deductible. Do you see a way a positive outcome there could be used to our advantage in dealing with property tax?

I am a CPA, but not a tax expert- so I am not sure what kinds of property tax concessions, if any, are available to IRS-exempt organizations.

[Tom Earp]

Originally Posted by Texas Sig

Divide $61,000 by your active bill payers over 9 months.
What do you get for your APO chapter?

You cannot figure over a 9 month period as the cost of the house runs for 12 months.
Yes, the payment still continues and the bed cost still goes on , along with utilities, along with insurance, taxes, rent or house payments!

But, the members forget about the summer months. Do the H Corp. not have to worry about that? Hell Yes!

$$$ Oh Yes!

[EE-BO]

Tom,

Just to clarify- he is talking about something most of us do here. People living in the house get the room for 12 months, but the total cost for the year is spread over 9 months so that everything gets paid up before the guys go home for the summer. It can be very difficult to track down 30-50 rent checks each month during summer break.

[Tom Earp]

Originally Posted by EE-BO

Tom,

Just to clarify- he is talking about something most of us do here. People living in the house get the room for 12 months, but the total cost for the year is spread over 9 months so that everything gets paid up before the guys go home for the summer. It can be very difficult to track down 30-50 rent checks each month during summer break.

Excellent post and while we would love to do that, the cost of our new house would really add on costs as we are below house full.

When we get the beds full, I am sure that will change as you and I have discussed this.

Parlor fees do not cover the full costs as it would take away from so many other parts of the budget.

While one would think each school is different, I guess it really isnt in the big picture.

But, as long as Greeks have houses near campus and the school wants to buy them, we are in the squeeze.

[AA1038]

... to the whole zoning issue.

How are other not-for-profit organizations dealt with regarding zoning and property taxes? Are the Salvation Army, YMCA, various social/country clubs, with housing units taxed? What about churches?

Fraternal organizations are generally considered not-for-profit groups, and housing is not generally considered something that is not part of the core business of the group (if you had a bookstore or coffee shop, that would be a taxable enterprise, for example). We church leaders face this all the time, as folks want to take our tax exemptions away, or make it cost-prohibitive to build new churches because of greedy zoning rules.

Just a thought...

Art Hebbeler
Chapter Advisor, Phi-Delta Zeta of Lambda Chi Alpha
AA 1038 (Butler '82 -- Go Dawgs!)