The small Long Island, N.Y., village of Thomaston is taking on a big hospital in a budding property-tax dispute over a local medical office building.
Executives at 705-bed North Shore University Hospital in nearby Manhasset, on Long Island Sound near New York City, say the building is being used in support of the hospital's tax-exempt purpose, and they have no intention of paying taxes or anything else.
The case is another example of a revenue-hungry community looking at an asset-rich not-for-profit hospital and seeing a source of new money or a drain on costly municipal services.
What's different in this case, however, is the amount in dispute: $77,000. Most hospital property-tax disputes across the country involve tax liabilities or payments in lieu of taxes amounting to millions of dollars.
The other difference is the mudslinging between the two parties. Most of the other cases have been settled behind closed doors, not batted back and forth at public meetings and in the media.
For example, Thomaston, a village of 2,700 residents, has attempted to portray itself as a helpless victim and the hospital as a cash-rich business, accusing hospital executives of buying the building for $10 million, making huge profits and setting up private-practice physicians in the largest office building in town.
The hospital, in turn, has attempted to portray itself as a selfless provider of care in the community, entitled as a public charity to the tax exemption.
Carol Hauptman, a spokeswoman for the hospital, said North Shore bought the building in Thomaston for $8.6 million. The hospital isn't wildly profitable, and the physicians in the building are employees of the hospital who operate clinics open to all patients regardless of their ability to pay, she added.
The hospital earned a $3.4 million profit on total revenues of about $477.1 million last year, according to HCIA, a Baltimore-based healthcare information firm.
Ms. Hauptman emphasized that the hospital provided $26 million in charity care last year, but she subsequently acknowledged that the figure includes bad debt as well as charity care.
Regardless, the figures don't sway Bryan Holzberg, the mayor of Thomaston.
"I believe that (the hospital) should make some payment in lieu of taxes because they're taking the building off the tax rolls," he said.
The hospital acquired the 60,000-square-foot office building from a private real estate developer late last year. The 4-year-old building had generated about $77,000 in annual property taxes for the city prior to the deal.
Mr. Holzberg said the hospital petitioned and received a tax exemption for the property from Nassau County and filed a similar exemption application with Thomaston earlier this year.
Mr. Holzberg said the city requested documentation from the hospital to prove that the building and the hospital's affiliated physicians were using the office space for a charitable purpose. The documentation requested included the physicians' lease with the hospital.
To date, according to Mr. Holzberg, the hospital has refused to provide any documentation in support of its exemption application, which is still pending.
"Without examining the documents, it's difficult to say whether they're entitled to an exemption," he said.
Mr. Holzberg said the city held two meetings with hospital representatives, who said the hospital won't pay the city but would help explain to city residents the charitable benefits the community receives in return for losing tax revenue.
To put additional pressure on the hospital to cough up some money, Thomaston held a town-hall-style meeting on the issue Sept. 12 and took out a full-page advertisement in the local newspaper Oct. 10, calling on the hospital to resume negotiations.
Ms. Hauptman said the city is trying to bully the hospital into donating money to the city coffers, something the hospital is "not considering at all."
If the hospital at some point in the future uses any of the space in the building for a for-profit venture, the hospital would be more than willing to pay property taxes for that part of the building, she said.
Meanwhile, Mr. Holzberg has set a Jan. 1 deadline for the hospital to supply additional documentation justifying its exemption for the building or agree to make payments in lieu of taxes.
"If not, we have no choice but to deny the exemption," Mr. Holzberg said.