More than a dozen New Jersey towns have filed lawsuits against nonprofit hospitals seeking property tax payments, but on Friday, Gov. Chris Christie proposed a two-year freeze on payments while a commission studies the issue.
The lawsuits came after a state tax court ruled in June last year that Morristown Medical Center wasn't entitled to an exemption as a nonprofit, which generally are not liable for property taxes.
Following that, Morristown and the Atlantic Health System — the parent organization of Morristown Medical Center — announced an agreement in November to end a series of property tax appeals related to the hospital.
Under the terms of the agreement, Morristown Medical Center will pay the town $15.5 million, including $5.5 million of penalties and interest that will be paid in annual installments over the next 10 years. In addition, beginning in 2016 and through 2025, about 24 percent of the hospital property will be taxed at an assessed value of $40 million. That represents an annual tax payment of $1.05 million.
The accord followed a landmark 88-page decision issued June 25 by New Jersey Tax Court Judge Vito L. Bianco that rejected Atlantic Health's challenge to the Morristown tax assessor's 2008 decision to deny a municipal property tax exemption for certain operations at the hospital — then known as Morristown Memorial — for the tax years 2006, 2007 and 2008.
Christie said at Trinitas Regional Medical Center in Elizabeth that the judge was interpreting a 70-year-old statute that needs to be reviewed because the state's 62 nonprofit hospitals have changed how they do business.
“We shouldn't rely up on judges to make interpretations of 70-year-old statutes to determine the way our nonprofits operate,” Christie said during a news conference at the hospital.
The city of Elizabeth recently added Trinitas to its tax rolls, a move that the hospital is disputing. Christie says all cases in the court process will be frozen.
Christie vetoed legislation in January that would have required hospitals to pay community service fees. He called the legislation well-intentioned but rushed.
Democratic Assembly Speaker Vincent Prieto criticized Christie's proposal, saying the bill he vetoed had broad support. He said the issue needs to be resolved now, not in two years.
Senate President Steve Sweeney, also a Democrat, said he still believes the bill Christie rejected should have been enacted.
“The problem should not be ignored because it will continue to leave municipalities and their taxpayers paying the price for inaction and the hospitals in a continued state of uncertainty,” Sweeney said.
Christie's proposal would set up a nine-member property tax exemption study commission and would include the state treasurer and commissioners of health, community affairs and higher education.
The exemption from property tax liability under the proposal would remain in effect until Jan. 1, 2018.
“It gives us time to come up not just with a solution, but with the right solution,” Christie said.