Charter council projects budget shortfall because of tax payment
May 30, 2013 11:27 PM | 2402 views | 5 5 comments | 11 11 recommendations | email to a friend | print
By Michelle Babcock

mbabcock@cherokeetribune.com

CANTON —The Georgia Charter Education Foundation Local Governing Council for Cherokee Charter Academy has projected a shortfall for this year’s budget due to an unanticipated property tax payment.

“The tax payment was a property tax payment that our landlord had to make for the building in which we reside,” LGC Treasurer Danny Duke said Thursday. “And in our lease, which is customary with all leases, is we have to pay any out of pocket costs as it relates to taxes, et cetera, et cetera.”

At the LGC’s May 22 meeting, the council said the payment of $109,215 was unbudgeted.

“It was not budgeted because we were operating under the opinion, (that) because we were a nonprofit operating out of the building that we would be tax exempt and that we would not be subjected to property taxes as most non-taxable, tax exempt are not subject to those property tax,” Duke said. “Our (building) owner is a taxable organization, is a for-profit taxed organization, so as a result we had to pay.”

The Cherokee Charter Academy is funded by the nonprofit Georgia Charter Educational Foundation, and leases its school building from a for-profit real estate arm of Charter Schools USA called Red Apple Development.

“It was unexpected, unbudgeted, based on what’s customary across the United States and state taxation,” Duke said. “And we discovered there was a difference in the state statute that caused us to have to reimburse our landlord for property taxes, due to the fact that they are a taxable entity and we are not.”

Based on the CCA’s budget for FY 2013, available on their website, the school had projected a $144,885 surplus.

The property taxes have been paid and Duke said in the future the LGC will include the payment in their normal budget.
Comments
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Business 099
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May 31, 2013
So their CPA and board was operating under an "opinion" instead of facts and it cost them over $100,000. And this is for one school? Guess what Cherokee? As charter school supporters will tell you, "charters are public schools too." That means this cost taxpayers $109,000 and some change. If Danny can wreck a budget with one school thank goodness he didn't win the election for school board chair! As any CPA should know, much less one that ran for public office not once but twice, the OWNER is charged property taxes, not the person or organization leasing property. The landlord is in the business of making money and typically passes this cost on to the tenant, nonprofit or not.
Giggle
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May 31, 2013
Come on Dukes. This is two years in a row with six figure shortages. You would think that the Local Governing Council would not stand for this. Or is this how you do business in Forsyth County???
Cherokee Parent
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May 31, 2013
"Etc., Etc.?" Using that is fine if you're listing your garage sale items in the newspaper. It's NOT ok for a CFO and accountant to use to explain away a budget shortfall. Pretty common knowledge that for-profit companies have to pay property taxes, and that landlords pass on their costs to lessees.
Susan L.
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May 31, 2013
The Cherokee School District pointed out this liability to CCA over two years ago after reading the lease that clearly stated Cherokee Charter Academy would be responsible for paying the property taxes owed in Cherokee County. How on earth could this come as a surprise to the financial officer at CCA? To assume that a for-profit entity would be exempt from property taxes because they rent a building to a non-profit is a huge joke. Red Apple knew that the taxes were real, and they wrote the lease so that CCA had to pay those taxes. Failure to budget for this expense was completely irresponsible. This is just another example of the folks at CCA not being good stewards of the taxpayers' money.
Danny Math
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May 31, 2013
Gee,why would Charter Schools USA/Red Apple, which operates schools in 10 states, specifically state in its leases that the school pays the property tax (not the corporation) if it's so "customary" that the taxes are not charged? Remember last year when Mr. dukes gave the public three different explanations on why the school didn't meet budget? And even promised in a letter to the editor in March of 2012 that it would meet budget by June (but still ended up a million dollars short)?
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