The full story
In November 1974 County Manager Sam Gattis said county appraisers would begin assessing University property to see whether UNC must pay property tax. A state revision had opened to county taxation property not used wholly for public purposes, such as parking lots, rented faculty houses, vacant land and the Carolina Inn, and the University had been exempt for at least 105 years. In early January 1975 Chapel Hill and Orange County notified the University that property not used for public purposes, among it Horace Williams Airport, the Carolina Inn and the old Chapel Hill Country Club, had been assessed for taxes, about $3.9 million of it inside the town and $5.35 million in the county; the Daily Tar Heel called it the first property tax on the University in more than a century. By late January the state Attorney General's office advised that University property was exempt. On March 18 the county commissioners approved assessments of some 55 parcels of University land, among them Finley Golf Course and 601 acres at Mason Farm, and the University's state attorney, Myron Banks, arranged to take the dispute to the state Property Tax Commission.
On October 28, 1975 the Carrboro aldermen unanimously approved a tax assessment of the University's electric and telephone property in the town, over objections from the state and the University. Chapel Hill and Orange County had taken the same step in a joint effort covering an estimated $2.6 million in telephone and $2.9 million in electric installations for 1970 through 1975. In July 1976 county tax supervisor Bill Laws said the county was trying to collect taxes, with penalties and interest back to 1969, on University property that included downtown business buildings, rental property and the utilities. Vice Chancellor Claiborne Jones said the University would appeal to the Property Tax Commission and, if need be, the courts. Southern Bell bought the University's telephone system for $25 million in March 1977 and, through a loophole in the tax laws and by listing most of the property as personal, paid 1977 taxes on only $1,873,027 of almost $24 million in property. On February 27, 1978, on Alderman Robert Epting's motion, the Chapel Hill aldermen voted unanimously to ask the company to pay taxes on it; Carrboro's board endorsed the request the next night, and Mayors James Wallace and Robert Drakeford were to write the letter with the Orange and Chatham county commissioners.
On January 17, 1979 the state Property Tax Commission ruled that University property used for commercial rather than educational purposes could be taxed, making the Carolina Inn, the rented first floor of the Hill Building on Franklin Street and parts of the Horace Williams Airport property taxable by Chapel Hill, Carrboro and Orange County. It held only about $3 million of the property taxable, and Vice Chancellor John Temple estimated the tax on the Inn at $40,000 to $50,000. On January 23 the Carrboro aldermen decided to appeal the commission's ruling that University property in Carrboro, part of the electric and telephone systems the University had sold, was not taxable; the town was trying to collect taxes on it for 1974 through 1976. On January 30 the Chapel Hill aldermen also voted to appeal, Town Attorney Emery Denny Jr. saying the town most wanted taxes on the University's former off-campus telephone and electric systems. On June 8, 1979, on the appeals of the University and the three governments, Superior Court Judge Henry A. McKinnon Jr. ruled that the University must pay county and town property taxes on about $17.6 million of property whose main purpose was not educational: its former off-campus electric and telephone utilities, the Carolina Inn and the first floor of the Hill Building. He held Horace Williams Airport exempt. On July 15, 1980 the N.C. Supreme Court, reversing the state Property Tax Commission, held that state property cannot be taxed whatever its use, so the University owed no local taxes on the Carolina Inn, the Hill Building on Franklin Street or Horace Williams Airport. The decision ended a six-year effort by the county and the two towns to collect taxes for 1969 to 1974, which the commission had put at $2 million.
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