A smattering of not-for-profit hospitals in New Jersey have decided to settle property-tax claims against them rather than participate in long legal and legislative battles shaping up over the controversial taxes.
In June 2015, a New Jersey tax judge ruled that Morristown Medical Center should be subject to property taxes. Since then, various cities have challenged the tax-exempt status of 35 hospitals in the state.
Some hospitals are starting to settle, as municipal lawsuits against the hospitals proceed and the New Jersey legislature fails to agree with Gov. Chris Christie on the best way to address the issue.
Since Morristown, which is part of Atlantic Health System, settled its case for $15.5 million in November, Trinitas Regional Medical Center in Elizabeth, N.J. has come to terms with the city to pay $250,000 per year from 2016 to 2019, the website NJ.com reported last week.
New terms will be negotiated for the years after 2019, the website said, quoting a resolution approved by the city of Elizabeth in June.
Another hospital, JFK Medical Center in Edison, N.J., has agreed with the town to maintain its tax-exempt status, but pay Edison a “community service fee of $500,000 in 2016 and 2017,” the NJ.com story said. That fee will continue in subsequent years unless renegotiated.
The closely watched Morristown case opened the door to the latest settlements. In that case, Judge Vito Bianco ruled that Morristown operated like a for-profit entity and should be treated as such for property-tax purposes. “If it is true that all non-profit hospitals operate like the hospital in this case, as was the testimony here, then for purposes of the property-tax exemption, modern non-profit hospitals are essentially legal fictions,” Bianco wrote.
In addition to agreeing to pay the city of Morristown $15.5 million, including $5.5 million in penalties and interest over 10 years, the hospital intends to start paying about $1 million in annual taxes on 24% of its property for the next 10 years.
The New Jersey Hospital Association would like to see the issue addressed in legislation rather than in piecemeal lawsuits that cost thousands of dollars and cause hospitals and their municipalities to become adversaries, said association spokeswoman Kerry McKean Kelly.
Legislation passed earlier this year called on hospitals to pay their municipalities a $2.50 per bed per day fee to recognize municipal services to the hospitals, McKean Kelly said. But Christie failed to sign the legislation, which was supported by the association.
In March, the governor called for a moratorium on lawsuits until a study commission could be convened to look at a statewide solution.
A bill to create the commission has been introduced but not moved to a vote. Another bill has been introduced to prevent third parties to challenge negotiated settlements between hospitals and municipalities.