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Christie Veto Leaves Hospitals Open To Lawsuits Over Property Taxes

The Record (NorthJersey.com) — January 20, 2016

By LINDY WASHBURN
STAFF WRITER | The Record

Municipalities may try to levy property taxes against non-profit hospitals now that Governor Christie has vetoed legislation that enshrined the property tax exemption of the non-profits and instead would have required them to pay a community-service fee.

Advocates of the measure said they planned to return this session with a bill that satisfies the governor, while protecting hospitals from costly lawsuits and compensating local governments for some of the services they provide.

State Senate President Stephen Sweeney said he was "extremely disappointed" with the governor's action, which he attributed to the governor's "personal political ambitions." By assessing a fee on non-profit institutions, the measure might have been construed as a new tax by Christie's conservative competitors for the Republican presidential nomination, Democrats said.

The measure followed last summer's Tax Court decision that invalidated the property-tax exemption enjoyed by non-profit Morristown Medical Center. The hospital's parent company, Atlantic Health System, eventually agreed to pay $15.5 million to satisfy back taxes and interest, and will make future payments of about $1 million annually as tax on the for-profit part of its operations.

Non-profit hospitals across the state have been concerned that they, too, will face costly litigation — and big tax bills. In a historic shift, those hospitals had volunteered to make the "community contributions" outlined by the measure that went before the governor.

"We are disappointed with the pocket veto," said Betsy Ryan, president and CEO of the state's largest hospital association.

But critics had considered the measure lenient on the hospitals. Several local governments had expressed concern that the measure shortchanged local governments. Its $2.50 per-bed, per-day fee was far too little, they said. The Valley Hospital in Ridgewood, for example, would have been assessed about $407,000 annually, less than one-tenth of the potential property taxes on its full 15.5-acre property.

Some municipalities already are in "fact-finding mode" and are requesting information from their hospitals about their for-profit and non-profit operations, said Michael Cerra, vice president of the New Jersey League of Municipalities, which opposed the measure. "No one is looking to put anyone out of business," he said.

"We're not sure where the $2.50 daily fee came from," Cerra said. "We need to have a better understanding of the methodology as to how to determine what a fair amount is. Hopefully in the next couple weeks we'll start a dialogue with the hospitals, sponsors of the legislation, New Jersey Citizen Action, and coalesce around a middle ground."

The measure, sponsored by Sweeney and Sen. Joseph Vitale, chairman of the Senate Health Committee, and Republican Sen. Robert Singer, had passed the Assembly, 61-9, with two abstentions, and was unanimously approved in the Senate.

The state's 60 non-profit hospitals would have been required to make community service contributions estimated at $21 million to $25 million combined, under the measure vetoed Tuesday. Hospitals in financial trouble would have been allowed to apply for an exemption.

Sweeney said the fees would have provided tax relief to local residents. "Once again, property tax relief for middle class homeowners falls victim to the governor's veto pen," he said in a statement.

The bill "brought the right balance to a complex issue," he added. "I will continue to work with everyone involved to develop a workable solution. The needs of New Jersey residents won't go away with this veto."

The governor gave no specific reason for his pocket veto of the bill, which was among dozens of bills that swept through the Legislature last Monday.

Singer, a Republican of Monmouth and Ocean counties, said he looked "forward to working together with the Governor's Office, the Departments of Treasury and Taxation, as well as representatives from the hospitals and municipalities to reach a fair solution that eliminates the need for costly litigation."

New Jersey Citizen Action, the consumer advocacy group, welcomed the governor's veto. The bill was "a bad deal for health care consumers and municipalities," said Dena Mottola Jaborska, associate director. It would have allowed non-profit hospitals to become "tax shelters" for for-profit health care companies, as the parent institution retained its tax exemption while subcontracting some of its operations to for-profit companies, such as doctors' groups that bill consumers at out-of-network rates, Jaborska said.

Copyright 2016 North Jersey Media Group Inc.

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