Steve Yarbrough, landlord

by David Safier
I've posted about the many ways Steve Yarbrough makes money from his Student Tuition Organization, ACSTO, each year. As Executive Director, he brings in $96,000. As legal counsel, he brings in upwards to $60,000 (That's the total ACSTO spends on legal fees, some or all of which goes to Yarbrough). And his company, HY Processing, charges ACSTO about $400,000.

Yarbrough is a man with many pockets, each one of which fills up with sizable quantities of private school tax credit cash courtesy of his nonprofit organization.

Now meet Steve Yarbrough, owner of 2241 E. Pecos, Suite 3, a condo in the Suntan Crossing Professional Plaza in Chandler.

Yarbrough_door Yarbrough bought the property in January, 2007, for $275,504. It's one of three suites in that building, occupying about 1150 square feet.

The suite houses ACSTO, School Choice Arizona (another STO) and Yarbrough's law offices. The other business whose name is on the door, Boyd W. Dunn, P.C., occupies a different suite in the building.

But wait, there's more. According to Yarbrough's 2008 and 2009 State Financial Disclosure Statements (required of "Public Officers and Candidates of the State of Arizona"), the address of HY Processing is also 2241 E. Pecos, Suite 3, even though HY's name isn't stenciled on the door.

To recap: Two STOs, a law office and an information processing corporation all occupy 1150 square feet of office space owned by Steve Yarbrough.

In 2007, the most recent tax return I have, ACSTO paid $44,981 in occupancy expenses, which I assume is rent on the space in Yarbrough's condo. School Choice Arizona paid $4,000 occupancy that same year. Because Yarbrough's law practice and HY Processing are both private, I don't have information about the rent they pay.

I know nothing about the going rate for office space in Chandler, and I don't know what portion of the condo ACSTO occupies. But a little simple math tells me its yearly occupancy expenses are 16% of Yarbrough's purchase price for the entire condo. If we suppose ACSTO occupies half the condo and Yarbrough charges on the basis of square footage, the STO is paying closer to a third of the buying price of that portion of the condo every year. Utilities and other expenses may be rolled in, which would mean the entire occupancy figure wouldn't reflect rent, but with a total monthly rent of $3,750, I don't imagine utilties make a large dent in that figure.

But does ACSTO occupy half the space? In a recent article in the Republic, Yarbrough said HY Processing pays salaries to "a dozen or so" employees. How many of those employees would be in the building at one time, and how much space would the corporation need to run a business that charges a single customer $400,000 per year? Then, of course, there are School Choice Arizona and Yarbrough's law office taking up the remainder of the space.

Rent isn't all the money ACSTO plows into Yarbrough's condo. According to ACSTO's 2007 tax return, it spent $124,653 for Leasehold Improvements. Since Yarbrough bought the condo in 2007, those are probably one time expenses to convert the generic office space into something suitable for doing business.

I know renters often enter into agreements with their building owners to make improvements, but I also know this generally happens as part of a good old capitalist bargaining session, where the owner tries to get as much as he can in the way of improvements and the renter tries to cut a less expensive deal. Here, however, good old capitalism doesn't come into play, because ACSTO is Yarbrough's left pocket, and the condo is his right pocket. It's to his advantage to have the nonprofit STO shoulder as much expense as possible for improving the property, which increases the value of Yarbrough's for profit condo.

The $124,653 in Leasehold Improvements amounts to 45% of Yarbrough's purchase price. Do renters often boost the value of the owner's property by almost 50%?

This post is filled with unanswered questions. I'm not an investigative reporter, tax lawyer or businessman, so I can't come up with definitive answers. But Steve Yarbrough is both a public servant who is supposed to be looking out for Arizona's best interests — not to mention a conservative Republican who wants to cut back on governmental waste — and he's also a businessman making a very good living from an Arizona state government program. Those are two reasons why he should come forward and open up his books so we can lay all this speculation to rest.

0 responses to “Steve Yarbrough, landlord

  1. L S G: Yup. Pretty much.

    As I read this, it makes me think there’s a big opening for fraud. I’m not suggesting that’s the case w/Yarbrough’s STO. But we see what a lack of oversight has yielded for our mortgage industry, kids. So what I see here, is without oversite and/or regulation of STOs, an uninformed contributor could potentially contribute their tax credits to a sham organization that never delivers funds to a school and/or a child’s tuition. In one solid year, with some good advertising, a fly by night STO could collect contributions, pocket money, and be gone before those dollars would ever be called for a child’s tuition payment. And with a reciept from the STO, the state would still be required to honor that dollar-for-dollar reduction of tax liablitlies. After all, how could the state declare the STO was a fraud? There isn’t a mechanism or industry standard that I’ve found that would prevent it.

    If I’m wrong, I’m wrong. But it seems to me that it would be incumbant upon the AZDOR to do it’s due diligence as an agency to ensure that those private organizations collecting tax credit dollars would at the very least be required to meet a legal minimum of those three points before they’d be allowed to operate in the state OR collect their 10% in fees.

  2. So basically what this says, MindlessMama, is that the government is asking the ignorant public to police a business to make sure they are adhering to the rules for being a legitimate STO??? Really???

  3. Mr. Safier & anyone else who might find this interesting:

    http://www.azdor.gov/brochure/707.pdf

    take a look at a favorite:

    Will the Department of Revenue certify school
    tuition organizations?

    No. There is no requirement that the department certify
    a school tuition organization. However, the taxpayer
    should ask questions of the organization to determine if
    the organization (1) is tax exempt under Section
    501(c)(3) of the Internal Revenue Code; (2) allocates 90
    percent of its annual revenues to scholarships; and (3)
    makes scholarships available to students of more than
    one school.

  4. David Safier

    I just went on School Choice Arizona’s website to clarify how much an individual corporation can give to an STO and get a tax credit. For individuals, as you probably know, the cap is $500 per individual and $1,000 per couple.

    For an individual corporation, it looks like the only cap is the amount of taxes the corporation will owe for that year, and the corporation has to have enough money on hand to make the donation. But if a corporation donates more than the taxes it owes, the excess donation can be used to offset taxes for the next five years. The only catch is, the state limits the total of all corporate tax credit donations in a given year to a total of $14.4 million. That total goes up a bit each year.

    I have to say, I didn’t know an individual corporation could give literally millions of dollars and get all of it back at tax time. For some reason, I had the notion that the top was $5,000 per corporation or something like that. Where I got that notion, I have no idea.

    Someone confirm this. Do I have it right this time?

  5. AZDOR says 1. they don’t keep a running database of corporate contributions to STOs(which i call BS on, since they put out a report every year) and 2. if they did, that information would be confidential and up to the STO to make available.

  6. Jack the Griper

    I will take a stab and say that all of the lobbyists who have repeatedly asked for the repeal of the Education Equalization tax are laying out the dollars. Really, could it make more sense for Pinnacle West to pump out $250,000 to Yarbo…I mean the STO and then get that back along with a couple of million for the tax going away permanently?
    Here are my guesses:
    Intel, Pinnacle West, SRP…

  7. Good work, ParentX. Are the donations by the corporate donors public information, or would we need to take guesses at who they are, and then look at tax returns? Are their tax returns public information?

  8. Here’s one other thing that sets off my legislative BS alarm:
    Yarbrough’s company, ACSTO is a private tax credit operation. He makes a big show out of not being part of the corporate tax credit operation…but he just happens to house School Choice Arizona (one of the largest corporate STOs) in his office???

    According to the Arizona Department of Revenue, School Choice Arizona took in just nine corporate donations in 2007…but they totalled $3.2 million dollars. In 2007 School Choice Arizona only awarded $792,223 in scholarships. That leaves quite a bit of unused tax money sitting around at the end of the day, even if you consider the amount that they need to carry over to start the next school year.

    I’d love to know who those 9 corporate donors were – if you divide out those donations, it means that nine companies sent an average of $355,555 in tax receipts to Yarb.. – I mean, School Choice Arizona – instead of the state general fund.

    http://www.azdor.gov/researchstats/schooltaxcredit.htm

  9. I’m sure this is a done deal if Brewer called the special session. The AZ Daily Star posted an online story about the special session and mentioned nothing about the possible conflict of interest of Yarborough.
    I am really discouraged by the trashing of Arizona for the benefit of the wealthy and the promotion of corporate welfare.
    I’ve lived here most of my life and while there has always been an extreme right wing element, I’ve never seen it like this.

  10. Ick. Really. Great use of our tax dollars.

  11. Jack the Griper

    And we now have a special session in place to boost the amount of money going to the private school tuition program.
    When will there be an investigation into his fleecing of Arizona?