A three-pronged approach by NTC Foundation executives could help ease an assessed tax on some of the nonprofit tenants at Liberty Station. The city stepped in earlier this year to pay about $1.1 million in back taxes going back to 2006, according to the San Diego County Tax Assessor’s Office. In addition to appealing the tax at the county level, NTC Foundation officials are also lobbying state Sen. Christine Kehoe’s office to change legislation that would partially exempt some tenants from paying. NTC Foundation officials are also asking private donors to help offset some of the cost to those tenants. “The biggest challenge is, how do we make sure the community vision is still realized in such a way that we can make sure quality tenants can still afford to be here?” said NTC Foundation Executive Director Alan Ziter. The problem stems from when the nonprofit NTC Foundation created the for-profit entity Liberty Station, Inc. to qualify for federal tax credits to renovate the first six buildings of the massive historical renovation project, Ziter said. Since nonprofits qualify for certain federal property tax credits for historical renovations, it was understood that the NTC Foundation would benefit from the credits, Ziter said. The strategy was to help avoid bank financing and to keep costs down for tenants, he said. “More debt service would have meant more interest and increased annual costs, which would have meant higher rents … and we would not have the stellar roster of resident groups we have,” Ziter said in an email. But when county tax assessors discovered that the for-profit status of the Liberty Station Inc. subsidiary did not qualify NTC Foundation for the exemption in the middle of last year, it raised the issue – and the taxes. “A few years later, when further inquiries were made with regards to our for-profit tenants, it triggered the county to re-look at the situation. That’s when the bills started coming … going all the way back to 2006,” Ziter said. Because the NTC Foundation could not afford the liability, and since the former Naval Training Station property is technically owned by the city of San Diego, the city stepped in to pay the tax. However, now NTC Foundation officials are scrambling for ways to possibly reduce the tax hit to some of the nonprofit and small business tenants in the future. One option is to appeal the tax bill at the county Tax Assessor’s Office. The NTC Foundation and county officials have met in recent weeks to work on the issue. “We’re going to be working that for the next few months for them. If [the assessment] is not correct, we’re going to correct it,” said Jeff Olsen, division chief of San Diego County’s Tax Assessment Services. The property value of Liberty Station was assessed at about $22 million in 2010, Olsen said. While the NTC Foundation cannot appeal the fact that it owes the tax, it can appeal the amount assessed. The foundation has about 40 different appeals open with the county. The NTC Foundation is also working with Kehoe’s office on SB 797. The legislation would provide that when the use of federal tax credits to finance the rehabilitation of a building is the sole purpose of the holding of the ground lease by a wholly-owned for-profit entity controlled by NTC Foundation, the property would be considered owned by NTC Foundation. As such, this would qualify the foundation for the tax credits, officials said. NTC officials have also approached a private donor in hopes of subsidizing some of the tax liability for the estimated 38 nonprofit tenants the NTC Foundation is fighting for. The private donor has not been named since the proposal process is in the early stages, Ziter said. What remains in question is: “How do we make sure that we can bring in quality and on-mission tenants at rates they can afford, and overall implement the community’s vision for an arts district?” Ziter said. Since plans started almost a decade ago, the NTC Foundation has been in charge of the renovation of 27 buildings occurring over several phases that transformed the Former Naval Training Center into a burgeoning premier arts and cultural district that include on-site housing, lease space for both for-profit businesses and nonprofits, several schools and the Rock Church. The long-term project has changed the face of the area bringing an influx of dance, karate, gymnastics, various restaurants and office leasing space.