Think "Hilton" and what comes to mind? Hotels? Paris getting shagged in lo-res on the Internet? Tree farms?
Yes, yes and no. Hilton is certainly a household name for many reasons; however, farming trees isn't one of them. But right here, in Orange County, that's one of their businesses — at least that's what they want the tax man to believe.
On March 23, Rida Development Corp., in partnership with Hilton Hotels Corp., announced their intention to build a massive Hilton right next door to the Orange County Convention Center. Plans call for an 18-story hotel with 1,400 rooms and 130,000 square feet of meeting space. The new hotel will be so integral to the convention center that the two will be connected via an elevated walkway.
Hilton's desire to build a hotel on the 26.4-acre site has been a poorly kept secret for years. The company bought the plot for $26 million in June 2000. In a June 8 letter to the county planning office, the developer tipped Hilton's hand as to their ultimate intentions. "In conjunction with the sale, the parties have agreed that the use of the property be for a convention hotel with up to a maximum of One Thousand Four Hundred (1,400) hotel rooms." They asked for, and received, permission from the Orange County commission in May 2001 to build the walkway.
But after Sept. 11 sent tourism into a nose dive, Hilton's plans changed. And the tax bill on the land adjacent to the convention center was steep; valued as commercial property, Hilton would be on the hook to pay taxes on the full value of the land.
So they took the same route other developers have and got into the agriculture business. Hilton planted 19,000 slash pine seedlings on the acreage and applied for an agricultural exemption under Florida law. There was big money at stake; if Hilton received the exemption, their tax bill would drop by about 90 percent. It was a good time to get into the tree-growing business.
It's worked for other companies. A 1,166-acre tract purchased from Universal Orlando in 2003 by a Georgia developer qualified as a tree farm, a circuit court judge ruled, even though it was probably planted only to lower the tax bill. The developer's tax bill went from $1.8 million to $390,000.
At the end of 2001, Hilton paid $388,000 in taxes on the property, then assessed at $18.9 million. At the end of 2002, they paid another $386,000, even though the value of the land was, by then, raised to $21.1 million. That was the year the company got into agriculture, based on the notion that the 26.4 acres they had purchased for almost $1 million per acre was a tree farm. (Landowners who want the ag exemption must first pay their entire tax bill, then ask the Value Adjustment Board for a refund every year.)
Orange County's VAB granted Hilton the exemption, reassessed the property at $1.9 million and sent Hilton a refund of $351,000. Orange County property appraiser Bill Donegan, the original appraiser, sued to overturn the VAB's decision and denied the company the ag exemption, claiming the land isn't a bona fide tree farm.
Donegan has railed for years against what he deems are abuses of the agricultural exemption by large corporations banking land. In a Jan. 29 article in the Orlando Sentinel, Donegan states abuse of the agricultural exemption costs Orange County $2 million a year in lost revenue.
Marcos Marchena, the attorney handling the suit for Donegan, says the idea that Hilton could realistically be in the business of growing trees on the this property is nonsense. The land was a retention pond before Hilton bought it, he notes, and it's in the middle of a tourist development district. What's more, it came with the rights to develop a hotel, and it cost almost $1 million per acre. "When people pay that kind of money, they generally are not going to engage in agriculture on that property," says Marchena.
Factoring in the price of the land times the number of years it would take for the trees to reach maturity, there is no way Hilton is ever going to see a dime from its timber operation, he adds. "I asked `Hilton` what percentage of their revenues worldwide comes from timber, and they said ‘zero.'"
Hilton apparently never did much beyond planting the trees that would indicate they were serious about harvesting them. The acreage is weed-choked and poorly drained, according to notes from the VAB hearing, and the trees are stunted. There is no irrigation system, dead trees have not been replanted and there is no provision for access to the property in case of a fire.
Attorneys for Hilton did not return phone calls for this story. But notes from the VAB hearings reveal their argument. In May 2001, Hilton attorneys met with Donegan regarding the agricultural exemption. They left that meeting believing they had done all they needed to do to qualify as a bona fide farming operation.
Marchena says that meeting did indeed take place, but that Hilton was never guaranteed an exemption. "It was the first step, it wasn't the end step."
Donegan's suit challenging the VAB-granted exemption, filed in 2003, has yet to be decided by a judge. In every year since 2002, Hilton has applied for an agricultural exemption on the land, and in every year the VAB has turned it down. Every time it is turned down, Hilton files suit against the property appraiser, Donegan, in circuit court, claiming they are bona fide tree farmers and that, by declaring otherwise, Donegan is denying them equal protection guaranteed under the U.S. Constitution.
If Donegan wins, Hilton could have to pay back the $351,000 refund. If Hilton wins, Orange County would have to grant the exemption for tax years 2003, 2004 and 2005, which would mean a refund to the company of more than $1 million of tax money paid.
"This is an example of someone trying to get an exemption they are not rightfully entitled to," says Marchena. "If Bill Donegan were to grant it, he would not be acting in the best interest of the citizens of Orange County, and he is just not going to do that."
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