In the latest settlement of a tax dispute in Pennsylvania, Lehigh Valley Hospital in Allentown has agreed to pay $1.8 million over eight years to Salisbury Township School District.
The agreement settles a tax dispute dating back to 1988 when the school district first challenged the 833-bed hospital's tax-exempt status. Lehigh Valley retains its tax-exempt status but will make a series of payments to the school district. The payments will be used to defray health-related expenses, such as salaries for nurses, health aides and a drug and alcohol abuse treatment coordinator; health supplies; health education and prevention programs and employee health benefit costs. The school district has 1,800 students and operates on an annual budget of $15.5 million.
The agreement calls for the hospital to pay $156,250 over the next eight years plus interest to settle retroactive claims for real estate taxes. That's equal to the sum the hospital supposedly would have had to pay in real estate taxes under the dispute.
In addition, over the next five years, the hospital will pay a percentage of what its property-tax liability would be. This year, it will pay 15% of the liability, or $128,170. In 1995, the hospital will pay 20%, and from 1996 through 1998, it will pay 25%. The first payment is due July 1.
A hospital spokesman said the payments with be financed through cash from operations.
Meanwhile, legislation that could require all tax-exempt providers in Pennsylvania to meet a five-part test for certification as tax-exempt organizations is moving through the state General Assembly. The measure would require organizations that fail the test to pay an assessment of as much as 25% of their tax liability or provide services lieu of payments.