May 24, 2018
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Should a private Hebron school have to pay property taxes? Maine high court will decide

Russ Dillingham/Sun Journal | BDN
Russ Dillingham/Sun Journal | BDN
Hebron Academy Head of School John King looks out on to the ice at Robinson Arena on the campus. The arena is the subject of a tax issue that has threatened the public use of school facilities across the state.
By Tony Reaves, Sun Journal

HEBRON, Maine — The Maine Supreme Judicial Court on Wednesday will hear arguments on whether Hebron Academy should pay property taxes on Robinson Arena and other facilities the school rents to outside groups.

The results of that decision could be expensive for this private college-preparatory school, and could result in the school being closed to outside use.

In 2009, the town of Hebron began taxing Hebron Academy for Robinson Arena, a hockey rink that had been an outdoor arena for decades before it was capped in 1993. The tax bill for the arena came to $19,240.

Hebron Selectman Daniel Eichorn said the town was in the process of a revaluation when the assessor, John E. O’Donnell & Associates of New Gloucester, pointed out that nonprofit organizations that rent out facilities can be taxed on those facilities.

“Essentially, we are obligated to tax properties that are, under the rules of the state of Maine, subject to taxation,” Eichorn said. “We don’t get to pick and choose which properties we tax and which properties we don’t.”

The school balked at the bill and requested an abatement, going before the Oxford County Commission in October 2010. Commissioners determined Hebron Academy’s request was not filed in time and denied the request. The school filed a lawsuit about six weeks later.

In a November 2011 hearing, town attorney Bryan Dench argued that the school didn’t qualify as a “literary and scientific institution,” a distinction necessary for tax-exemption.

Active Retired Justice Robert W. Clifford, who presided over the trial, ruled in the school’s favor that the arena should remain tax-exempt but rejected the school’s claim to the 2009 taxes it paid. He said the town was relieved of property taxes on the arena from 2010 forward. Clifford also ruled that the school did qualify as a “literary and scientific institution.”

The town appealed the court’s decision, and Maine’s highest court is set to hear the case on Dec. 12.

The stakes are higher this time. During the discovery process, the town found that the school rents out several facilities, including the Lepage Center for the Arts, where the Oxford County Chamber of Commerce holds its annual awards dinner, and school dormitories, which are used for summer sports camps.

According to court documents, the school has been rented out for Norway Savings Bank functions and for weddings, offering food service and alcohol sales to patrons.

If the high court rules in favor of the town, any building that has been rented out in the past three years would be taxed for the year or years in which it was used, Eichorn said.

On the other side, the school is asking the court to overturn Clifford’s decision on the 2009 taxes and have those refunded to the school. Since the decision, the town has been levying property taxes on the arena. Hebron Academy Head of School John King said the school paid taxes on the building in 2010 and 2011.

King said that if the high court upholds Clifford’s decision, the town will owe Hebron Academy about $40,000 in taxes paid those two years. If the court awards the school the money it paid in 2009, that increases to nearly $60,000.

Maine law grants tax-exempt status to institutions such as schools, colleges, churches, veterans’ groups and “benevolent and charitable institutions, including nonprofit nursing homes and hospitals. Hebron Academy is mostly exempt from property taxes as a “literary and scientific institution.”

Not all of the school’s property is tax-exempt, though. Hebron Academy pays taxes on faculty housing and a building that houses the Hebron post office, part of which is rented to the U.S. Postal Service. According to Maine law, schools can be exempted from property tax only for property “owned and occupied or used solely for their own purposes,” meaning property essential for the running of the school.

The town contends that the school’s renting the properties out, especially to private entities like sports camps and banks, violates the requirements the school must meet to be tax-exempt.

The school has argued that rented properties are part of the school, and that any rental use and subsequent income is “incidental and intermittent” and doesn’t detract from those properties’ primary use in serving the school’s educational mission.

In the past five years, the school has earned an average of $137,000 per year from facility rentals and services. That’s about 1 percent of the school’s $14 million annual budget. In court briefs, attorney John Conway, who represents Hebron Academy, said the actual profit from those rentals is much lower.

Robinson Arena costs more than $370,000 a year to run, according to court documents, including general and administrative expenses. The school makes about $36,000 in income from renting it out.

According to King, paying taxes on those properties could raise tuition and maybe even force the school to stop allowing outside groups to use the rink and other facilities. He said expenses related to keeping the rink open would cancel out the money made from rentals. “Paying the people, and so forth, certainly added up to more than we would make,” King said.

Dench said that argument doesn’t hold water.

“If that were true, then why do it?” Dench said. He pointed out that the school made $686,234 from facility rentals between June 30, 2006, and Feb. 18, 2011. “I would not describe rental income of $686,234 … as incidental,” he said.

Dench argues that the school’s tax-exemption lets it compete unfairly with businesses that rent facilities and pay taxes on those properties. In briefs submitted to the court, he points out that Hebron Academy employs a person to manage facility rentals.

“We don’t run it as a competitive venture,” King said. “We run it essentially to cover whatever we can of the costs. We don’t particularly pay attention to what other facilities are available.”

King argues that renting the ice rink and other properties is a service to the community, as well as a source of income. “It was something good to do for the area, and a little bit of an offset to the expenses that went to operating that facility.”

He added, “The town hasn’t really taken into consideration, we don’t think, the amount that we do for the town.”

Hebron Academy students volunteer at the local elementary school and Hebron Academy groundskeepers help maintain the town’s fields on their off time, King said. “The kinds of people who teach at a place like this are really community-oriented people.”

He added that Hebron Academy has students from local towns, including 28 from Oxford County, which decreases the burden on those schools.

He said losing the rink would be a loss to residents of Hebron and beyond. “You couldn’t make it available to youth hockey groups or youth sports groups or other things without running a risk of losing the tax-exemption,” he said.

Eichorn said King is overstating the school’s benefit to the town.

“To be perfectly frank, it’s not 1980 anymore,” Eichorn said. “There was a time when the academy was far more involved with the town. Town programs would use their ball field.” He said there was a time when losing access to the campus would have been difficult for the town, but not anymore.

He said that in his 10 years living in Hebron, he hasn’t seen much contact between the school and the town.

“At this stage, other than the open skating during a few months in the winter, I don’t know of any other circumstance in which the residents of the town of Hebron in general are welcome on the Hebron Academy campus,” Eichorn said.

He said the school might be able to allow free skating without being subject to property tax if it asked for, but didn’t require, donations rather than charging admission to use the ice.

Even the name recognition Hebron holds as the host of the school has been overshadowed, he said. “If you go outside of the state of Maine, people are more likely to have heard of the town because of the Redneck Olympics.”

Oral arguments on the case are scheduled for 11:30 a.m. Wednesday at the Cumberland County Courthouse in Portland.

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