Conneaut Lake Park to take case to court for tax-exempt status
If Conneaut Lake Park is to be declared tax-exempt and get a pass on a sheriff's sale for $900,000 in back taxes, it must meet a five-point test from the state Supreme Court to determine its tax status, a Duquesne University law professor said.
People pay to use the amusement park, which Nick Cafardi, dean emeritus of Duquesne's School of Law, cited as one reason the park won't meet the five-point standard, even though it's owned by a charitable trust.
“Just because a charity owns it, it doesn't make it charitable,” he said. “I don't even think retroactive tax exemption is possible under the law in Pennsylvania.”
Attorneys representing Crawford County taxing bodies and the Attorney General's Office are scheduled to present arguments Monday to President Judge Anthony Vardaro in a case that could seal the fate of the storied amusement park and possibly have statewide impact.
“We're concerned if this is possible for someone to avoid property taxes by means of declaring something a public trust. That could have some pretty far-reaching consequences,” Crawford County Solicitor Theodore Watts said.
The park had been scheduled for sheriff's sale Nov. 7 because of taxes, penalties and interest owed to the county, Sadsbury and Summit townships, and Conneaut School District. The sale, delayed until Dec. 5, could be postponed again until objections by the attorney general are settled.
The Attorney General's Office, as guardian for the state's nonprofits, intervened in October.
Because a charitable trust oversees the park, it's considered a tax-exempt entity that can't be sold “without continuing the park's charitable purposes,” Senior Deputy Attorney General Gene J. Herne wrote in the court filing.
“That's a very novel argument,” Butler County Solicitor Mike English said. “The line's not always as clear as you would think to say something is tax-exempt. This could affect every county and municipality around the state.”
Pittsburgh attorneys Ira Weiss and James P. McGraw III, who serve as special counsel to Crawford County, responded that a decision in favor of the attorney general's argument would disrupt local tax laws and “produce an absurd outcome.”
“To suggest that (the trustees) are somehow immune from a valid, statutorily provided for methodology for collection of delinquent taxes is, in reality, to say that certain taxes can be owed, but can never be collected,” their filing stated.
Even if the court decided the park is tax-exempt, that status would start at the time of the ruling and wouldn't be retroactive, they wrote.
Cafardi said the park must meet the HUP test, which the state Supreme Court established in 1985 to determine tax-exempt status.
Among criteria: an entity must donate a substantial portion of its services, relieve the government of a burden and benefit people who are legitimate subjects of charity.
The amusement park fell on hard times in recent years. Two fires destroyed buildings.
In 2013, the Attorney General's Office demanded the removal and reorganization of the park's board of trustees, saying it failed to insure the destroyed buildings and fell behind on taxes.
The board resigned June 12 under a consent decree. A new board formed, led by executive director Mark Turner, the executive director of the Economic Progress Alliance of Crawford County, which oversees park operations.
The board has said that it would seek Chapter 11 bankruptcy protection to avoid a sheriff's sale so it can work out a plan to reorganize and pay off debts. The trustees want to convert the park from a summer attraction to a year-round venue.
No one has challenged the tax status of Conneaut Lake Park, Watts said. He traced the current problems to a 2003 Crawford County Court ruling that the park was a charitable trust. Trustees began overseeing the park in 1997.
“When this thing was designated a charitable trust, it was very loosely done,” Watts said. “It wasn't much more than a declaration and a deed.”
Cafardi said the trustees should have sought tax-exempt status previously.
“If they didn't take the steps to claim it, I don't see how they could do it now.”
The attorney general points to a 1952 state Supreme Court ruling involving Northampton County's Bangor Park, in which the court overturned a sheriff's sale, saying that even if the park were sold, the proceeds had to go to a similar charity and not creditors.
Other communities have battled tax-exempt status, including Pittsburgh.
Mayor Bill Peduto in July dropped a lawsuit challenging UPMC's tax-exempt status, and said he wants nonprofits to collectively help pay for services such as fire and police protection and street paving.
“We're confident we can work with the city's four major nonprofits on shared commitments to the city,” mayoral spokesman Timothy McNulty said.
The four nonprofits are UPMC, the University of Pittsburgh, Carnegie Mellon University and Highmark.
Bill Vidonic is a staff writer for Trib Total Media. He can be reached at 412-380-5621 or firstname.lastname@example.org.