House Sale Q&A. A1. As a privately owned fraternity but NOT a 501 c 3 corporation, we are zoned commercial

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Christine Nicholson
6 years ago
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1 House Sale Q&A Q1a. Are all of the other Vanderbilt Greek houses subject to Davidson County property taxes? Or are they exempted because of their ownership status? Q1b. If the problem is increased property taxes, has anyone looked into contesting the valuation or whether the chapter as a non-profit might qualify for some sort of exemption? Q1c. If the House Corporation was a 501(c)3 - if so, we should not need to pay Property Tax. A1. As a privately owned fraternity but NOT a 501 c 3 corporation, we are zoned commercial and pay the highest possible property tax rate. Nashville/Davidson County revalued the House (land and improvements) at approximately $2.65 million for The last tax appraisal, done in 2013, valued the House at approximately $792,000. The annual tax bill for 2016 was $14,314 and is now $33,485. This tax is expected to go up more when Metro passes a tax increase to pay for soccer stadium, light rail (one line is downtown on Broadway out to White Bridge road) and other necessary expenses. The House Corporation hired a Nashville lawyer, Brother David Kleinfelter, who practices in the areas of real estate law and property tax valuation issues. He filed an administrative appeal. There have been a number of sales of properties in the last 18 months that may be viewed as comps (many by Vanderbilt buying up strategic properties), all in amounts significantly in excess of the new House valuation. It was determined by the attorney that the best arguments to make were 1) since the House was surrounded by Vanderbilt and was intimately a part of the university, we should be eligible for the same tax exemption that Vanderbilt enjoys and 2) the 501(c)(4) status of Phi Kappa Psi provides us the basis for exemption. The first level of appeal was denied. The hearing officer found that the House was not eligible for Vanderbilt s exemption and was essentially a rooming or boarding house. Vanderbilt s exemption is based on their status as a nonprofit educational institution, which is a status Phi Kappa Psi does not have under the applicable law. Our attorney is pursuing an appeal but is not hopeful Q2. If the house was sold, where would the money go? The amount of money we are talking about, even at a low ball offer, is a lot. If it goes to the chapter, what would be the plan for it? Is there an option to buying a new house, perhaps near campus? A2. The money will be held by the House Corporation for the long-term interest of Tennessee Delta. As a VU tenant and in accordance with the Greek Facility Management Program (GFMP) the details are on the VU website, HC will still be responsible for any major repairs, or replacement and any renovations, subject to approval by Vanderbilt. We could use the money to update the living quarters to be comparable to living in new Residential College dorms. We could also provide for merit scholarships for undergraduate and graduate schools, funds for training and education of chapter members and officers and more. Vanderbilt does not allow off campus chapter houses.

2 Q3. I saw in Rob's initial that there needs to be a vote. Who votes on this? All the past members? I hope I have a vote. A3. This will require the approval of the 2/3 majority of the members present at the meeting or voting by proxy. Any living TN Delta in good standing as of 4/4/2018 is a voting member of the House Corporation. Q4. If whoever has a say decides not to sell, how would the increased operating expenses in Rob's be addressed? A4. The current property tax amount exceeds the ability of the undergraduate chapter and the House Corporation to cover the cost of the tax increases in future years. Based on a typical 50 men chapter, the House Corporation gets about $30,000 in income each year from the residents and member through the Greek Facility Management Program (GFMP). For 2018, our expenses for property tax and insurance has approached $40,000 which leave the House Corporation with no reserves and no long terms means to sustain ownership of the property. Q5. Has anyone given any thought into leveraging this to insure the survival of the chapter? I am of the option that Vanderbilt intends to deal a death blow to all Greek organizations in the near future for a variety of reasons (not the least of which is the fact that the administration views the Greeks as drinking clubs with no redeeming values) and effectively replacing them with the "college" concept that it is building out. It seems to me that if we want to continue the chapter's viability, the greater value of the property to us maybe getting an agreement that sets us apart from the doomed pack. Perhaps some type of leasing the land to Vanderbilt as opposed to a sale with a clause requiring Vanderbilt to do whatever we want or the property reverts to the chapter. A5. The real issue will come if Vanderbilt administration decides to close Fraternities and Sororities. We are not anywhere near there yet. The current West End Neighborhood plan is to tear down four existing Greek houses and replace them with six new houses. The three Greek groups who will lose their House (one of the four is not specifically leased to a Greek org) will be relocated into one of the new houses. Vanderbilt is investing over $55 million in just the Greek area, as part of a $650 M VU Vision project. The Vice Chancellor for Admin who is driving this redevelopment spoke, in detail, about the plans at our Founders Day banquet in February and asserted that VU does not have any plan to end Greek life. Q6. The House Corporation did hold title to the real and personal property at TN Delta, but that may have changed in the past decade due to extensive renovations that had to be done. Seems like we might have worked something out with VU like a trade of title for improvements, but I may be dreaming that. A6. We did the entire renovation project on our own and Vanderbilt did not contribute anything nor did they obtain any additional leverage as a result of the project. We did do the project in coordination with VU's Office of Greek Life and consistent with OGL rules relating to all other Fraternities.

3 We operate under the terms of the Vanderbilt s GFMP. Separate and apart from issues of property ownership, per the PKP Constitution, TND cannot operate as a Chapter without formal VU "recognition" and in compliance with their rules. This leverage is not new. Q7. Did they offer some new twist as to why buy, after all these years, it might now make sense for Phi Psi? A7. Vanderbilt needs the property to fully implement the West End Neighborhood plans. A goal of Vanderbilt is to eliminate all undergrad students cars. The elimination of Greek Row parking and making it available at inconvenient locations furthers that goal Someone mentioned a few old dorms still standing. A 20+-story dorm is going up at SE corner of 25th and West End (currently a parking lot). Next comes a solid line of dorms all the way to 23rd, which means the removal of all four of the towers. These are the new modern era residential college dorms. They look more like hotel rooms than what is currently in use. The rooms Phi Psi offers will become much less desirable. In the next 20 years or so all dorms will be replaced or upgraded to residential college buildings. Q8. It seems plausible that the Deke and Pi Phi houses are being consumed because the university controls those plots and ended those leases. Did they accommodate those chapters elsewhere on campus? A8. The neighboring Deke and original Pi Phi House were always owned by VU. Pi Phi house is now located next door to the TN Delta house, in what used to be the Pike house. Currently, the Dekes are permanently expelled for selling/making drugs in the chapter house. No accommodation is needed for them. Q9. I assume this is a matter for the House Corporation - who are the other sitting members of the board? A9. Board of Directors are: Robert I. Ayerst Jr., Delta 902 John E. Dredge, Delta 717 Doug Hirt, Delta 685 Byron W. Cain, Jr., Delta 716 Ross A. Rainwater, Delta 634 Sidney P. Wright, Delta 872 John W. Schwenker, Delta 672 Q10. From what I recall from fraternity lore selling the house would run counter to H. Fort s wishes when he funded the purchase of the property. It would certainly take away whatever limited leverage we may have in dealing with VU. A10. We have spoken with the grandson of H. Fort Flowers, John Murray, and he understands the financial dilemma the House Corporation is in. Although not happy about it, he is not actively opposing the sale of the chapter house to Vanderbilt given all the circumstances we are in.

4 Q11. If the house is sold to the University, in the future could not Vanderbilt renew/cancel the lease and we would no longer have a house? A11. Vanderbilt has proposed a 32-year lease, with a 32-year renewal term and the house is ours to use as longs as TN Delta is recognized by the university. If the chapter is kicked off campus, Vanderbilt has the right to use the vacated house for another chapter on a temporary basis, but the P&SA insures our right to return to the House when TND recolonizes with VU recognition Q12. Why is that a good idea for us? A12. The Vanderbilt plan calls for a walking campus, closing off 24 th and Kensington and other interior alleys and side streets, with access being limited to Vanderbilt and other service vehicles. Part of the House property is the ownership of part of 24 th Ave S and Kensington from our eastern and southern property lines to the center point of the road that was deeded to the House Corporation when the city stopped maintaining it, allowing it to become a private road. We have argued to Vanderbilt that as a private landowner, we cannot be landlocked from the public right of way and that have a right to vehicular access to and from the House for the use of the members/invitees, etc. Vanderbilt was interested in obtaining the Kensington and 24th Ave right of way access, but the House Corporation has taken the position that it is not for sale separate from the house, because we would have limited access to the House and would still have the higher valuation/property taxes. Given the long term effect of the property tax increase, and the possibility that Davidson County/Nashville may increase the valuation of the House over time to match recent sales referenced below, a long term ownership strategy is limited to our ability to have a significant annual supplement from the alumni in the amount of the $30,000 and increasing each 4 years. Q13. I thought owning our house gave us a sense of pride. A13. It did in the old days. However, today it is costing the Chapter thousands of dollars and the undergraduates see no value to it. They want to be like everyone else. All rules imposed on the Greek by Vanderbilt also apply to Phi Psi whether or not they own the house. In addition, the income from the Greek Facility Management Program that is no longer needed for property insurance and tax can be used for ongoing house maintenance and enhancements, which are subject to approval by both the House Corporation and Vanderbilt. Q14. What is to prevent Vanderbilt from eliminating fraternities without us owning our house? A14. It is the same as when we own our house. If Vanderbilt refuses to recognize Phi Psi as a fraternity, National will not allow us to exist, which almost happened in Jan What keeps Greek Life open is fraternity men graduate at a higher rate than non-fraternity mem with higher

5 grades and fraternity men donate at a higher rate and write bigger checks to Vanderbilt than non-fraternity men. Q15. If we don t sell now and Vanderbilt shuts down the entire Greek system, doesn t that mean we can sell the house on the open market, and might get much more money for a prime location? A.15 The deed to Phi Kappa Psi includes a provision that if the property ever ceases to be used as a fraternity house, then Vanderbilt has a first right of refusal to purchase the property at the appraised value. Based on research, the Board believes the current amount offered by Vanderbilt exceeds the market value of the property.

Commission members present were: Bruce Lee, Larry Hepworth, Nelson Boren, Brad Crookston and Casey Moriyama. (Robert Burt was excused).

Commission members present were: Bruce Lee, Larry Hepworth, Nelson Boren, Brad Crookston and Casey Moriyama. (Robert Burt was excused). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Minutes of the North Logan City