- Erie School District, Town of Erie challenged property tax exemptions for two resorts connected to the Bayfront Convention Center
- The case began in 2016, when the county assessment board ruled in favor of the authority of the Erie County Convention Center and said Sheraton and Marriott were exempt.
- The school district and city lost new challenges in Erie County Court in 2019 and Commonwealth State Court on Wednesday
A state appeals court upheld property tax exemptions for Sheraton and Marriott resorts on Erie Bay, adding to the defeats of the Erie School District and the Town of Erie in the fight for nearly five years for some of the region’s most valuable properties.
In a unanimous decision on Wednesday, the Pennsylvania Commonwealth Court rejected the school district and city’s arguments and ruled that hotels and their parking lots must remain tax-exempt.
The decision saves hotels and the Erie County Convention Center Authority, which owns the interconnected hotels and the Bayfront Convention Center, on Presque Isle Bay, from having to pay hundreds of thousands of dollars in property taxes to the school district, the city and county of Erie. .
A panel of seven of nine Commonwealth Court judges upheld an October 2019 ruling by Erie County Senior Judge John A. Bozza. He found the hotel properties to be exempt under state law in a decision he described as the first of its kind statewide in his assessment of the law of the ‘State in question.
The Commonwealth Court and Bozza found that state law clearly classifies hotels as exempt or exempt from property taxes, as they are “convention center facilities” that are part of the adjacent Bayfront Convention Center. , whose exemption has never been contested. The school district and city have challenged the applicability of the law and said use of hotel properties should determine their tax status.
Hearing of the appeal:Appeals court takes unusual step by arranging hearing in tax case over Erie Bay hotels
As Bozza did, the Commonwealth Court also rejected the school district and city’s argument that hotels should pay taxes based on the number of its tenants who do not attend events at the Bayfront Convention Center. and the three other properties that the Convention Center Authority owns: UPMC Park, Erie Insurance Arena and the Warner Theater.
The city and school district used authority documents to claim that at least 63% of annual hotel guests were in Erie for events unrelated to Convention Center Authority properties. Guest activities do not affect the tax status of hotels, according to state law, Bozza wrote in his ruling, in which he dismissed the case of the school district and the city.
The Commonwealth Court followed this reasoning in its 13-page decision, in which he refers to the Bayfront Convention Center as BCC.
“The mix of general public use of Sheraton and Courtyard hotel rooms with those used for BCC-related functions in no way affects the immunity of hotel properties from the Convention Authority,” according to the decision, written by Commonwealth Court Judge Michael H. Wojcik. âAll of these uses are a necessary and essential component of, and directly related to, the statutory objective of the Convention Authorityâ of promoting tourism and related activities in the public interest.
Reactions to the decision
Casey Wells, executive director of the Erie County Convention Center Authority, known as Erie Events, said “we are pleased with the unanimous decision of the court.” Erie’s attorney, Patrick Delaney, handled much of the case for authority.
Judge Bozza’s decision:Two hotels along Erie Bay will remain tax-exempt
Although the Erie School District and the City of Erie contested the exemptions together, the school district led the effort, with the district retaining Erie’s attorney Michael Agresti for the case.
“The court’s decision is very disappointing,” Erie Schools Superintendent Brian Polito said. “We could have permanently added much-needed supports for our students with the additional tax revenues.”
Agresti said: âThe Erie School District is disappointed that it did not prevail in Commonwealth Court. The Bayfront Sheraton and Courtyard (by Marriott), which generate nearly $ 20 million in annual revenue, continue to thrive on activities that have nothing to do with conventions or the convention center. The Erie School District is reviewing its options. “
The school district pays Agresti a fixed fee of at least $ 10,000, with fees capped at $ 15,000 if the case ends with a final order from the state Supreme Court. The city’s in-house lawyers handled the case for the city.
The General Assembly adopted the law at the heart of the matter in 2000 and amended it in 2004 to include hotels in the facilities of convention centers and therefore at the same level as convention centers. Convention centers and their facilities are exempt or exempt from property taxes by law. By law, the Erie County Convention Center Authority exists “for the public purpose of promoting, attracting, stimulating, developing and expanding business, industry, commerce and tourism in this Commonwealth. “.
The Bayfront Convention Center opened in 2007, the 200-room Sheraton Resort in 2008, and the 192-room Marriott Resort in 2016.
The Sheraton and Marriott resorts, including their parking lots, are valued at a total of $ 49 million. If they were fully taxable, their combined property tax bills would be around $ 1.8 million, according to tax records. The Erie school district would get about half of the tax revenue annually, or about $ 900,000; the city about 34%, or about $ 612,000 per year; and the county about 16%, or about $ 288,000 per year.
The Erie County Tax Assessment Appeals Board ruled in December 2016 that hotels and the convention center were exempt under the state’s Convention Center Act. The school district and city appealed the decision to Erie County Court in January 2017.
The case stalled as parties argued over disclosure of filing information. With that data in hand, Bozza ruled for the Convention Center Authority on October 11, 2019. The school district and city appealed in November 2019 to the Commonwealth Court, which held an oral argument in the case in October.
Hotels as “essential functions” under the law
The city and school district could ask the state Supreme Court to hear an appeal of the Commonwealth Court decision, although unanimity in the Commonwealth Court decision limits the chances of the Supreme Court. agrees to hear the case.
The school district and the city continued their challenges in the hotel business as part of a strategy to seek more revenue and reduce the number of tax-exempt properties in the city, where about 30% of the assessed value of all properties is exempt or exempt from property tax.
The Convention Center Authority argued that a requirement to pay property taxes on the hotel would hurt its finances, and that the law clearly insulated properties from property taxes.
In its ruling, the Commonwealth Court focused on the Convention Centers Act and how it favors hotels, rather than how the tax revenues would benefit the Erie School District and the town. from Erie.
The Commonwealth Court ruled that the law makes no distinction between rooms that hotels rent for purposes related to Convention Center Authority events and for other purposes. In both cases, the court said, the hotels were operating under the Convention Center Authority.
Citing the language of the law, the Commonwealth Court said in its decision: âThe operation of hotels falls within the broad definition of ‘convention center’ or ‘convention center facilities’, so the rental of rooms to the general public does not fall outside the core functions of this “Commonwealth agency and instrument”. “
Bozza, according to the ruling, “did not err in law or abuse of discretion” in ruling against the school district and the city.