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decided: April 22, 1975.


Appeal from the Order of the Court of Common Pleas of Dauphin County in case of In Re: Appeal of Presbyterian Apartments, Inc. from Real Estate Taxation Assessment, No. 1017 September Term, 1973.


Francis B. Haas, Jr., City Solicitor, for appellant.

Robert W. Barton, with him John D. Killian, and Killian & Gephart, for appellee.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Rogers. Dissenting Opinion by Judge Kramer. President Judge Bowman and Judge Mencer join in this dissent.

Author: Rogers

[ 18 Pa. Commw. Page 430]

The City of Harrisburg has appealed from an order of the Court of Common Pleas of Dauphin County sustaining the appeal of Presbyterian Homes, Inc. from the denial by the Board of Assessment and Revision of Taxes of Dauphin County of the application of Presbyterian Homes, Inc. for exemption from local real estate taxes.

Since the law is that one claiming exemption from taxation must bring himself clearly within constitutional and statutory allowances (Ogontz School Tax Exemption Case, 361 Pa. 284, 65 A.2d 150 (1949)) we here record the facts presented in the City's brief, which quite properly omits none which tend to support the Board of Assessment and Revision of Taxes' denial of an exemption.

"Appellee Presbyterian Apartments, Inc. is a Pennsylvania nonprofit corporation formed in 1960 by Presbyterian Homes of Central Pennsylvania to provide apartment living for elderly middle-income persons in downtown Harrisburg. Presbyterian Homes utilized this subsidiary corporation for the purpose of acquiring Federal funds to construct an apartment building which was thereafter to be operated from rental income, with the tenants to pay off the mortgage, including interest.

"Presbyterian Apartments, Inc. constructed a twenty-three story apartment building at 322 North Second Street, Harrisburg, Pennsylvania. Construction was financed in its entirety by a mortgage from the United States Government, Department of Housing and Urban Development ("HUD") pursuant to Section 202 of the National Housing Act of 1959 (12 U.S.C.A. ยง 1701q). The mortgage equaled 100% of the cost of construction ($2,515,000), and has a term of fifty years with interest at the rate of 3% per annum. The difference between the 3% interest rate and the rate that would be paid on conventional mortgage financing is subsidized by the Federal Government.

[ 18 Pa. Commw. Page 431]

"Prior to the opening of the apartment building, Presbyterian Homes of Central Pennsylvania contributed $20,000, including the purchase of movable furniture for the office and seven public rooms. This donation was originally intended to be a loan in the amount of $10,000. Other private donations consisted of a $5,000 oil-fired generator, a new piano, and other items of furniture. All of these contributions were made in connection with the original start-up of the project and amounted to approximately 1% of the capital cost. Since that time, the apartment project has paid its own expenses, including the salary of its resident manager.

"The Presbyterian Apartments have been fully occupied since the day they opened. Approximately 181 persons currently occupy the 165 living units. Admission preference is given to residents of the City of Harrisburg; between 55% and 60% of the tenants were originally residents of the City, and others formerly had ties here.

"All applicants for apartments must be 62 years of age, or may be younger if they have some type of physical handicap. Although the apartment building is designed for middle-income persons, Appellee's policy of maximizing Federal rent supplement payments has resulted in a tenant population consisting largely of persons who could be classified as low-income. Federal law does not impose an upper income requirement for admission. There are no legal or policy limitations with reference to wealth, affluence, income, or resources, and the Board of Trustees has no written guidelines for admission. There are no mandatory tenant income levels applicable to the apartment building. It is legally possible that a tenant could have $100,000 in a checking account, and an income of $20,000 per year, and still be eligible for admission as a tenant. Appellee's admissions policy does not impose any firm requirements with respect to resources or income for admission to the apartment building.

[ 18 Pa. Commw. Page 432]

"In determining the eligibility of applicants for admission, Appellee accepts the income figure given by applicants on the admission form, and makes no further investigation of the accuracy of the figures given. If a tenant applicant had assurance of outside support, that would not appear in the income figure given on the admission form. No inquiry is made concerning any assets which an applicant may have. Although there exists a general admissions policy that preference be given to persons of middle income, the vast majority of tenants are low-income persons.

"Basic rentals at Presbyterian Apartments (after a 2.5% rent increase) range from $96.40 per month for efficiencies, to $112.75 through $148.65 per month for one-bedroom apartments. . . . Of the fourteen available parking spaces, nine are rented by tenants, one is reserved for the resident manager, two are rented to nontenants, and the remaining spaces are used for delivery and related purposes. Parking rental and special services produced $10,620 in additional income to Presbyterian Apartments, Inc., as reflected in the 1971 budget. All income derives from rent and additional charges paid by tenants, and all expenses, including debt service, are paid from this rental income. Appellee's accountant had no knowledge of any private donations made toward the operating income of Appellee.

"Appellee pays Presbyterian Homes of Central Pennsylvania a 6% management fee for accounting and management services, and pays approximately $6,500 annually to a resident manager ...

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