Va. high court finds in favor of Glebe
The Botetourt County retirement community will remain
exempt from local real estate taxes.

By Mike Gangloff, The Roanoke Times – 11/1/2008

Friday was a glad day for The Glebe.

In a ruling that shored up the Botetourt County retirement community’s wobbly finances, the Virginia Supreme Court, in a 5-2 ruling, said The Glebe can remain exempt from local real estate taxes.

“Our prayers have been answered,” said Randall Robinson, president of Virginia Baptist Homes, which owns The Glebe and several other retirement facilities.

The decision ends Botetourt County’s attempt to collect about $500,000 in back taxes and penalties dating from The Glebe’s opening in 2005, and removes what was estimated to be a $227,000 annual bill.

Botetourt County spent about $220,000 pursuing The Glebe’s taxes, County Administrator Jerry Burgess said. That was the right thing to do, he said, but the high court ruling ends it, and the county will now look forward.

“We continue to believe, as we always have, that The Glebe is an asset to Botetourt County and are ready to move on with them as a member of the community,” Burgess said.

The Daleville facility lost its tax-exempt status last year after a circuit court judge sided with Botetourt officials who argued that The Glebe was more of a resort for wealthy retirees than a religious or benevolent organization, and should not be covered by a decades-old tax exemption the state had given Virginia Baptist Homes.

The Glebe had appealed the circuit court decision to the Supreme Court, and attorneys argued the case there in September. The dispute was closely watched by local governments across the state, although the implications for facilities outside the Virginia Baptist Homes system seemed limited.

“I think this is a ticket for one train,” said Carl Tobias, a law professor at the University of Richmond. “Other institutions like this are going to have their own situations … and the courts are going to have to sort through them.”

At issue in the Supreme Court arguments: Whether Virginia Baptist Homes had changed the purpose upon which its tax exemption was based. The General Assembly had said in 1976 that it was granting the exemption so the nonprofit organization could run an institution described in its articles of incorporation as targeting “aged, indigent and infirm men and women.” The language of the articles of incorporation has since changed, and the county argued that The Glebe, at least, was not serving indigent residents.

Entrance fees at the facility range from $98,150 to $249,260, and monthly residence fees are $1,743 and up.

A majority of Supreme Court justices sided with Virginia Baptist Homes, however, writing that “VBH’s only purpose of providing and operating retirement communities has not changed.

“The only question to be answered,” the majority opinion said, “is whether The Glebe, in fact, operates a retirement community for the elderly on a nonprofit basis.” Finding that it did, the court ruled for Virginia Baptist Homes.

Two of the seven justices who heard the case argued that the court should have more closely considered a section of the language the General Assembly used in granting the tax exemption. In a dissenting opinion that was joined by Chief Justice Leroy Hassell, Justice Lawrence Koontz wrote that the exemption applied to property used “exclusively for religious or benevolent purposes.”

The circuit court already found that The Glebe does not meet this requirement, Koontz wrote. Its lack of a more formal, organized religious regime, and of religious requirements for admission or employment, mark it as not operating for a religious purpose, Koontz wrote. Similarly, its price structure and requirement that residents pay all their costs seem to disqualify it as operating out of benevolence.

Court watcher Steve Emmert, chairman of the Virginia State Bar’s Appellate Practice Subcommittee, agreed with the dissent, saying he was surprised other justices had not take a closer look at the legislative language.

“There has to be a religious component to this test,” Emmert wrote in a commentary posted on his Web site, virginia-appeals.com. “The trial court didn’t discern any such purpose, and neither can I.”

Friday’s ruling arrives as The Glebe continues to struggle to attract residents and resolve financial problems that came to light earlier this year.

In April, an audit of The Glebe’s 2006 and 2007 finances found it was operating at a loss and said there was “substantial doubt” about whether it could continue. In July, The Glebe defaulted on a payment tied to bonds issued to finance the facility’s construction. Virginia Baptist Homes said it was working with bond holders to gain more time for payment.

The Glebe owes $55 million for bonds it sold through the Roanoke County Economic Development Authority.

After the facility defaulted on bond payments, the Virginia State Corporation Commission stepped in to protect new residents from the possibility of losing their life savings and told The Glebe not to accept any more entrance fees until it fixed its bottom line.

Earlier this month, Virginia Baptist Homes announced that CRSA, a Memphis, Tenn.-based company that manages retirement communities, would take control of operations at The Glebe, as well as at VBH facilities in Richmond, Culpeper and Newport News. Robinson cited CRSA’s “experience in turnaround situations” as a reason for the change.

The Glebe has about 200 residents and 170 employees. Its occupancy rate is about 70 percent, and Robinson has said something closer to 90 percent is needed to be profitable.

In a statement issued after the Supreme Court posted its ruling online, Robinson wrote that the decision “will permit us to continue to meet the special needs of the elderly through all-inclusive services at the lowest possible cost.

“This case has been an expensive distraction.”