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http://hamptonroads.com/2014/06/yagen-m ... collection By Kathy Adams
The Virginian-Pilot
© June 16, 2014
VIRGINIA BEACH
Millionaire entrepreneur Jerry Yagen has loaned a portion of his vintage plane collection to the Military Aviation Museum in Pungo since it opened in 2008. It's where they're displayed, worked on and flown for air shows, fun and - for some visitors - a fee.
Yagen never received a personal property tax bill for the aircraft, for which he's now seeking a tax exemption, and could end up owing several years of back payments, Chief Deputy Commissioner of the Revenue Eric Schmudde said Friday.
City officials realized the oversight last fall after Yagen announced he was in financial trouble and would have to sell the planes, Schmudde said. Yagen sold a dozen before taking them off the market when he said his finances improved.
The Commissioner of the Revenue's Office is auditing how much he should have paid. It can legally bill Yagen for up to three years of back taxes, in addition to issuing a tab for the current year, Schmudde said.
It's difficult to put a price on one-of-a-kind aircraft, Yagen said. They've been valued between $20,000 and $7 million each, which would mean a tax bill of $740 to $259,000 per plane per year. The museum has about 60 aircraft, Director David Hunt said.
Yagen said Friday that he's working with the city on the issue and believes the planes should be exempt from taxation because they're used by the museum, which is a nonprofit.
Schmudde said the Commissioner of the Revenue's audit won't be complete before Tuesday, when the City Council is scheduled to take up Yagen's request. The proposed ordinance would exempt Yagen from paying personal property and real estate taxes pertaining to the museum. He owns its planes, buildings and land, totaling about 80 acres.
The real estate tax bill was $81,501.48 this year, according to city records.
The city would make up the revenue the first year by taking it from the reserve fund, city spokesman Marc Davis said in an email. In future years, officials would account for the reduction in revenue when they drafted the city budget.
The request - enabled by a state law crafted specifically for the museum - has brought to the surface tensions between the museum and its neighbors.
Adjacent property owners are worried that the vintage warplanes flying over their homes aren't safe, said Councilwoman Barbara Henley, who represents Princess Anne and Pungo. The flights are becoming more frequent, with the museum now selling rides to the public, she added.
Those concerns should be addressed before the city agrees to subsidize the operation, said Daniel Franken, who lives about a mile away on West Neck Road.
"I'm opposed to granting them that status," he said. "It's a free ride for something that shouldn't have ever been approved."
The retired Navy pilot watches from his backyard as the planes - a yellow-and-red 1941 Boeing-Stearman trainer, a wooden Mosquito fighter-bomber and others - take off and land. Franken said he loves the view but worries a crash could endanger himself, his wife or his granddaughters, who often visit.
The Frankens have lived there since 1996, 12 years before the museum opened.
Del. Barry Knight, a Virginia Beach Republican who carried the enabling legislation for the tax exemption, also lives near the museum. He said the Frankens are in the minority of residents who take issue with it.
"I love it," Knight said. "It's an absolutely tremendous amenity for Virginia Beach."
The museum contributed about $25,000 in admissions taxes to the city in 2012, according to its most recent tax filing available online.
State law already allows nonprofits to apply for exemptions on their real estate and property taxes, but a change was required for the Military Aviation Museum because it's a nonprofit that is located on and uses privately owned property.
"It is a unique situation," Schmudde said.
Knight sits on the museum's board but is not compensated, according to the museum's tax filing. Yagen and the museum have contributed $7,000 to his campaign since 2008, most in the form of hall rentals for events, according to the Virginia Public Access Project, which tracks political spending.
Yagen also has made small contributions to Mayor Will Sessoms and council members Jim Wood, Shannon Kane and Rosemary Wilson.
Yagen, who owns several private, for-profit colleges, said he has subsidized the museum for a long time, sometimes to the tune of $2 million a year. A tax exemption could save the museum if he died or ran into dire financial straits again, he said.
"The sole purpose of that museum is to operate those airplanes," Yagen said. "And the taxes is a very big expense."
Kathy Adams, 757-222-5155,
kathy.adams@pilotonline.com
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