Urbana Resolution to Challenge Carle Tax-Exempt Status
The Urbana city council is expected to take its first vote next week on a resolution opposing Carle Foundation Hospital’s tax-exempt status.
The measure seeks a legislative solution requiring the hospital to ‘pay its fair share’ in property taxes, opposing a law that passed in 2012 that gives tax-exempt status to hospitals that provide charity care.
Mayor Laurel Prussing said the tax exemption for Carle Foundation Hospital hurts the city, because more than 80 percent of the hospital’s property is in Urbana.
Prussing said the state law enacted last year runs counter to an Illinois Supreme Court ruling that said another hospital, Urbana’s Provena Covenant, did not spend enough money on charity care to qualify for tax exempt status.
“I think the whole issue of what is a not-for-profit, and what is charity, and what is a hospital’s fair share is a huge public issue, especially for the city of Urbana," she said. "We may have been hit harder than any other city in the state by this state law that was passed last year.”
Alderwoman Diane Marlin said the law is unconstitutional, noting that it demands too much from one city.
“The cost of regional charity care should not fall mostly on the shoulders of Urbana residents," Marlin said. "It’s just not sustainable. Citizens cannot afford the increase in property taxes that are going to result.”
A statement from Carle defends its charity care program, and said its economic impact in the community outweighs the property tax exemptions.
Mayor Laurel Prussing says Carle’s tax exempt status will force the city to raise property taxes by 11-percent, making it more challenging for the community to grow.
Prussing added that she is considering a court challenge to the law, noting Urbana makes up only 3-percent of Carle’s service population.
A final vote on the resolution would come in two weeks. Prussing said the Champaign County Board may pass a similar measure.
Five Illinois hospitals, including Carle Foundation Hospital in Urbana, have withdrawn their applications for tax exemptions, leaving it up to county governments whether to assess taxes on the properties.
Illinois Department of Revenue spokeswoman Susan Hofer says hospitals in Murphysboro, Moline, Monmouth and Hillsboro have also withdrawn applications in the past week. That clears county authorities to evaluate the properties and collect taxes.
The development comes as Illinois leaders grapple with a 2010 Illinois Supreme Court ruling. The court found that one hospital wasn't doing enough charity care to qualify for an exemption. That ruling called into question other hospitals' tax exemptions.
Gov. Pat Quinn authorized more rulings on hospital tax exemptions earlier this month when efforts to find a legislative compromise failed.
The revenue department is continuing to review pending applications from other hospitals.
The Illinois Department of Revenue has denied property tax exemptions to hospitals in Decatur, Chicago, and Naperville in a move that signals the state's plans to get tough on nonprofit hospitals that operate more like businesses than charities.
At stake are millions of dollars in tax revenue that the hospitals could contribute to cities, parks and schools.
Revenue Department officials tell The Associated Press that the hospitals were informed today. The three are: Decatur Memorial Hospital in Decatur, Northwestern Memorial's Prentice Women's Hospital in Chicago, and Edward Hospital in Naperville.
The hospitals can ask an administrative law judge to review the decisions.
Illinois' Supreme Court ruled last year that Urbana-based Provena Covenant Medical Center wasn't doing enough free or discounted treatment of the poor to qualify for a tax exemption.
The Illinois Supreme Court has ruled that Urbana's Provena Covenant Medical Center will have to pay property taxes to Champaign County dating back to 2002.
Justices determined Thursday that the hospital did not provide enough charity care to qualify for its tax exemption, upholding an appellate court ruling. That amount in taxes is expected to be around $8 million.
The Champaign County Board of Review initially recommended to the Illinois Department of Revenue that the hospital be denied the exemption. Chair Laura Standefur says after reviewing financial statements that her board found a few reasons for turning the hospital down, but it started with the amount of charity care. Sandefur says it's hard to define, but the board knows when it's not at the appropriate level.
"Charity, I think, is kind of that same way," Sandefur said. "Less than one percent, is that exclusive use? What defines exclusive or even majority use? None of us on the board could really look at those numbers and think that that was used exclusively for charitable purposes."
Champaign County treasurer Dan Welch says it's still not clear how the roughly $8 million in property taxes should be collected. He says the majority of the funds would be earmarked for Urbana's Tax Increment Financing, or TIF, district. But he says Urbana city leaders may be able to change how those funds are divided. Mayor Laurel Prussing has already suggested breaking down those funds among taxing bodies, including more than $4 million for schools, $1.2 million for the city, and $720,000 for Champaign County.
Provena officials released a written statement on the Supreme Court decision. Local Hospital Board Chairman Cody Sokolski says he's deeply disappointed in the ruling, noting that the hospital provided more than $38 million in free care and other community benefits in 2008. Provena Covenant CEO David Bertauski says he hopes the ruling prompts a dialogue among elected officials and hospitals over how charity care should be defined.
Six years ago Provena's tax exempt status for 2002 was revoked after the state department of revenue sided with Champaign County officials. A circuit court judge overturned the ruling, but an appeals court later reversed it again in the state and county's favor. In the meantime, Provena has been putting contested tax money - more than a million dollars a year -- into a fund that remained tied up pending the Supreme Court ruling.