SARASOTA – A special judge has recommended that most of the land on the 15-acre campus on the Bay of Marie Selby Botanical Gardens remain tax-free.
That decision came this week after Special Magistrate Lori Rutland said she believed the nonprofit could retain most of its long-standing tax-exempt status. This recommendation could reduce the original $ 1 million tax burden by approximately $ 900,000.
The Value Adjustment Board, a five-person body that acts as a decision-maker in the event of a disagreement between a property owner and a property appraiser, has the final say.
Nevertheless, the leadership of the non-profit cultural attraction celebrated quickly.
“We see this as an overwhelming victory,” said Jennifer Rominiecki, President and CEO of Selby, in an email to supporters on Thursday.
Sarasota County’s real estate appraiser Bill Furst had focused on a company agreement between Selby and Michael’s On East, a not-for-profit, to manage the catering services in the gardens and decide that the gardens were not entirely tax-free. The deal raised $ 4.5 million in 2019, according to court documents.
Rutland’s decision is only slightly higher than what the real estate appraiser originally rated Selby’s land in 2019. Fürst tried to reach an agreement with Selby three years ago, but the leadership of the non-profit organization refused.
“We’re exactly where we should be and we think everything went perfectly,” Prince told the Herald-Tribune. “We are very happy. This could have been settled three years ago and we would have been a little lower.”
At the center of the dispute is a state law that gives Selby and other nonprofits the ability to generate income as long as it supports the institution’s mission.
Selby believes it only follows industry best practices to diversify sources of income – something that is common across the county and Florida.
“The special judge agrees with the needs of nonprofits to generate revenue from non-traditional sources in order to stay financially secure,” Rutland said. “However, this need to diversify sources of income is not a basis for an exemption under Florida law.”
Senator Joe Gruters has filed laws that could potentially protect Selby and other nonprofits from losing tax-exempt status. Nevertheless, the legislation (SB 1214) and the corresponding house bill for Selby’s purposes could be controversial. Rutland has determined that portions of the property primarily used for events are not exempted.
The bill states: “Parts of property that are not predominantly used for charitable, religious, scientific or literary purposes are not exempted.”
Fürst said the bill would probably not change anything.
What is excluded and what is not
Last year, the real estate appraiser completely denied Selby’s tax exemption status for the location on the bay. During a hearing in January, the property appraiser admitted that only portions of Selby’s property used for events should be taxed. These include the gift shop, Selby Café, Michael’s on the Bay, and various parts of the property such as lawns, gazebos, gazebos, and patios.
In Rutland’s 40-page recommendation, she stated that the predominant use of Selby Gardens is for exempt uses for scientific purposes. Rutland also noted that the cafe and gift shop will continue to be exempted.
Rutland noted that portions of the property rented for events and serviced by Michael’s on East are not exempt. Under Florida law, this requires a pro ration. The calculation was 10.79%. Three years ago, the real estate appraiser’s calculation of the taxable value of the property was 10.29%.
Income from the rental of events
Rutland also reviewed evidence relating to the rental of Selby Gardens real estate and the provision of catering services.
Anyone looking to book an event at Selby Gardens must first sign a rental agreement with Selby Gardens before signing a catering contract with Michael’s on East, the exclusive caterer for the gardens.
At the hearing, Rominiecki testified that Selby Gardens is seeking to diversify its sources of income and that any income from the rental of events will benefit the Selby Gardens Mission.
In a 2019 article in the Business Advisor to serve as evidence, Rominiecki describes Selby Gardens’ new operating model and the need to run a nonprofit like a business.
The article states: “Since Selby introduced the Living Museum model in 2015, Selby has seen rental and catering commissions grow by 172% and retail sales by 57%.”
Rominiecki is quoted in the article as saying that Selby received a “significant percentage” from gastronomy.
Selby Gardens seeks to diversify revenues by renting its property for events such as weddings and receptions, lunches, sales meetings, galas, and various other events.
While these types of events are clearly not exempted uses of property, the non-exempted uses may be random as determined on a case-by-case basis, Rutland said.
“Here it is the nature of the relationship with Michael’s on East that results in the use of the Selby Gardens property and event center being non-exempt, non-random and therefore taxable for ad valorem tax purposes,” Rutland said. “The Event Center / Michael’s on the Bay was not built for scientific purposes.”
It has been renovated (funded in part by a $ 400,000 donation from Michael’s on East) to add aesthetic appeal and improve functionality for hosting events, Rutand said.
It is promoted and marketed (on both Selby and Michael’s websites) for hosting events such as weddings, not for academic purposes.
With regard to catering, the special judge found that the operating agreement between Selby Gardens and Michael’s provides that Michael’s be the exclusive caterer for the café and for events in the gardens.
For events, Michael contracts with third parties who rent Selby Properties from Selby Gardens for the provision of food and drink and other services such as valet parking.
As of January 2020, Michael’s on East will transfer an 18% commission percentage of food and beverage sales to Selby, a payment that Michael co-owner Philip Mancini attested to as a “percentage rent”.
In fiscal 2019, the amount Michael paid Selby as the exclusive event catering caterer was $ 166,124. This reflects the 141 events that took place in Selby that year.
Rutland noted that Michael’s On East bills its customers a “very significant amount of money – $ 922,911 based on the 18% commission – for event catering that Michael’s offers on the Selby Gardens property.”
The events were booked by individuals, companies, nonprofits, and community groups. Revenue for Selby Gardens in 2019, excluding donations, grants, and in-kind contributions, was $ 4.5 million.
Timothy Fanning covers the Sarasota government for the Herald-Tribune. Reach Timothy at tim.fanning@heraldtribune.com or on Twitter: @timothyjfanning. Support the Herald-Tribune by registering today.