Judge rules Scranton low-income housing complex is exempt from property taxes

Terrie Morgan-Besecker, The Times-Tribune, Scranton, Pa.
·2 min read

Oct. 10—A Lackawanna County Judge denied the Scranton School District's challenge to a city housing complex's tax exempt status, finding it qualifies as a purely public charity.

Judge Terrence Nealon said Midtown Apartments on Adams Avenue proved at an August nonjury trial that it meets each of five criteria required to qualify as a charity, therefore it's not obligated to pay property taxes.

The school district filed suit against the Lackawanna County Board of Assessment Appeals, challenging its 2019 decision to grant the low-income housing complex's application for tax exemption — a decision the district says cost it about $78,000 yearly in tax revenue, according to court papers. The city and county did not join the case.

The complex was built around 1970, and is owned by TCSI, a nonprofit organization overseen by a board of directors made up of Roman Catholic, Presbyterian, Jewish and Episcopalian religious leaders. It provides housing at rents below market rate to people who meet low-income guidelines set by the federal Department of Housing and Urban Development.

To qualify as a charity an organization must show that it advances a charitable purpose, donates a substantial part of its services, benefits a legitimate class of people subject to charity, operates free of profit motive and relieves the government of a burden.

In court filings, attorneys for the district acknowledged the complex provides discounted rent to low-income residents, but argued that is not sufficient to meet the guidelines. They also questioned Midtown's use of surplus funds, noting it provides some assistance to renters who are in arrears, but will evict tenants who are not making an effort to pay delinquencies.

Nealon rejected the district's position. He noted expert testimony presented at trial showed the complex's rental rates are about 40% below market value, which cost it $962,808 in lost rent potential annually. The complex also showed it does not operate for profit, with any surplus being reinvested in maintaining and improving the buildings.

"It cannot be seriously disputed that, by providing affordable housing to the working poor ... Midtown Apartments advances a charitable purpose that affords some relief of poverty and achieves a purpose that is considered to be important and beneficial to the public," Nealon said.

Contact the writer: tbesecker@timesshamrock.com; 570-348-9137; @tmbeseckerTT on Twitter.