Tax measure on Georgia ballot would benefit private operators of dorms

Abraham Baldwin Agricultural College (Tifton) / 1,324 / 0

Armstrong State University (Savannah) / 1,239 / 0

Columbus State University (Columbus) / 444 / 500

College of Coastal Georgia (Brunswick) / 352 / 200

University of North Georgia (Dahlonega) / 314 / 400

East Georgia State College (Swainsboro) / 200 / 200

Dalton State College (Dalton) / 350 (new housing)

Georgia Regents University (Augusta) / 650 (new housing)

Source: University System of Georgia, Public Private Partnerships

The Board of Regents of the University System of Georgia selected the following three qualified bidders to operate the first group of campus housing:

Georgia voters will consider a tax exemption proposed by the University System of Georgia for private companies operating on-campus dorms in a referendum on the general election ballot. Here’s what you’ll see on the ballot:

PROPOSED STATEWIDE REFERENDUM

Allows property owned by the University System of Georgia and operated by providers of student housing and other facilities to remain exempt from taxation.

House Bill No. 788

Act No. 613

“Shall property owned by the University System of Georgia and utilized by providers of college and university student housing and other facilities continue to be exempt from taxation to keep costs affordable?”

The Board of Regents of the University System of Georgia selected the following three qualified bidders to operate the first group of campus housing:

Georgia voters will consider a tax exemption proposed by the University System of Georgia for private companies operating on-campus dorms in a referendum on the general election ballot. Here’s what you’ll see on the ballot:

PROPOSED STATEWIDE REFERENDUM

Allows property owned by the University System of Georgia and operated by providers of student housing and other facilities to remain exempt from taxation.

House Bill No. 788

Act No. 613

“Shall property owned by the University System of Georgia and utilized by providers of college and university student housing and other facilities continue to be exempt from taxation to keep costs affordable?”

Toward the bottom of the general election ballot, Georgia voters are being asked to consider whether a property tax exemption should be extended to private companies that operate dorms on the campuses of the state’s public colleges and universities.

The statewide referendum is one component of the University System of Georgia’s plan to ultimately get out of the student housing business, turn the work over to private industry and at the same time clear some of the almost $4 billion in debt on its books.

The University System’s privatization plan follows a national housing trend in higher education, with states such as Kentucky and Florida already operating dorms this way.

But while the model may be popular with some colleges, the extra incentive of extending a property tax exemption to private operators is not universally accepted.

Where the model has been employed, school officials say the partnerships help them develop infrastructure the universities may not be able to afford on their own.

“We get to a point as institutions where we don’t have the land, finances or debt capacity (to increase housing stock), so the only option for expansion is one of these public-private partnerships,” said Norbert Dunkel, an associate vice president for student affairs, auxiliary operations, at the University of Florida.

In Georgia, the University System’s plan involves existing or new residential facilities at nine of its 31 schools. The system would still own the buildings and land, and the private companies would operate the dorms and collect rents under leases that would extend up to 65 years. They would also have first rights on new projects at the institutions.

If the portfolio were taxed, it would be in the $6 million to $7 million range, said Susan Ridley, the University System finance officer leading the project. The debt on the existing properties is just under $300 million, she said.

To keep rents manageable for students, the system has included a 3 percent cap on annual rent increases that a private company can charge, Ridley said. Discussions on that limit are ongoing, but the cap could be adjusted to keep in line with what competitors charge.

State Rep. Earl Ehrhart, the chairman of the House higher education budget subcommittee, has said in the past that the University System got in financial trouble by approving housing that colleges, in some cases, struggled to fill.

“You’ve got a lot of campuses where it was an unqualified success, but there were several schools where they had maybe 34 percent occupancy rates, and these were blights on the campus with no hope of getting turned around,” said Ehrhart, a Republican from Powder Springs.

A selected company cannot cherry-pick campuses within the project, University System officials said. It must take on all the campuses in the offering, including those with lower occupancy rates. The University System has selected three qualified bidders for the project, and it will select a winner after the tax exemption question is decided in November.

“If a private company wants to take the risk, more power to them,” Ehrhart said, and without the tax exemption, “it is very unlikely you’d get a taker.”

Property tax exemptions for private companies involved in similar projects vary from state to state. In Kentucky, for example, the tax exemption extends to private companies operating dorms at the University of Kentucky and Eastern Kentucky University. At the University of Florida, one of its housing projects was completed with a nonprofit housing firm that receives the tax exemption, but that exemption is not in place for another project completed by a different company.

If the votes in Georgia’s Legislature are any indication, the tax question will likely pass come Election Day. Only a handful of lawmakers in each chamber voted against the tax exemption. One of them, state Sen. Lindsey Tippins, said the exemption would give the selected private company an unfair advantage over other companies offering student housing.

Those other private businesses offering off-campus student housing do not receive an exemption and have to pay property taxes.

“I have no problem whatsoever with privatization,” said Tippins, R-Marietta. “The concern I had was those operating entities are in direct competition with other for-profit entities, and I don’t believe government should be picking winners in the free market.”