The New Jersey Hospital Association said 35 of the 58 nonprofit hospitals have been hit with tax appeals – a challenge to their tax-exempt status.
TRENTON -- Eager to tap into a new source of cash to lower New Jersey's notoriously high property taxes, local officials have filed tax appeals challenging the tax-exempt status of 35 nonprofit hospitals, NJ Advance Media has learned.
The litigation continues to pile up in response to last year's precedent-setting tax court ruling and settlement which required Morristown Medical Center to pay Morristown $15.5 million in lieu of property taxes. The judge found the hospital operated in many ways like a for-profit entity and should share the cost of public safety and other municipal services.
Two of the 35 cases have been settled already, resulting in additional revenue for the city of Elizabeth and Edison Township.
In March -- after 15 municipalities filed tax appeals -- Gov. Chris Christie called on local officials to support a two-year freeze on new litigation while a commission devised a solution that would preserve the tax-exempt status of the 58 nonprofit in the state but require hospital make contributions in lieu of taxes.
Christie needs the Legislature to pass a bill creating the commission, however. Assemblyman Herb Conaway (D-Burlington), chairman of the Assembly Health Committee, introduced the bill, but Assembly Speaker Vincent Prieto has opposed it, saying the matter could not wait two years to be resolved.
Christie wants freeze on taxing hospitals
New Jersey Hospital Association CEO Betsy Ryan called the lack of resolution "frustrating."
"These cases take years and years to get through the system. Morristown took five years," Ryan said. "It's frustrating we have all these lawsuits and the only ones getting rich are the lawyers."
The settlements are paying off for local taxpayers.
The property tax rate declined in Morristown by 2 cents this year, in part because of the "historic" agreement reached with Morristown Medical Center's parent company, Atlantic Health Systems, according to the city's most recent budget.
The payout includes $15.5 million for unpaid taxes and interest on the hospital's for-profit enterprises from 2006 through 2008. It also guarantees the city will receive about $1 million in tax revenue from 2016 to 2025.
Trinitas Regional Medical Center will contribute $250,000 a year to Elizabeth from 2016 to 2019, according to a resolution approved by the city in June. After 2019, both sides will negotiate a new settlement.
"Trinitas will also work with the Mayor of the City, the economic development team...to promote desirable community and economic development," according to the resolution.
JFK Medical Center will retain its tax-exempt status but pay Edison a "community service fee" of $500,000 in 2016 and 2017, according to the settlement reached last month. The fee will continue on in subsequent years unless a new agreement is made, according to the document.
"JFK is pleased to contribute to the Township of Edison, which compliments our far-reaching community involvement since 1967," according to a statement from hospital spokesman Steven Weiss.
When the Morristown decision was first announced, hospital executives panicked, fearing they would face steep budget shortfalls if they had to pay taxes. Legislators passed a bill last session that would have imposed a $2.50 per day hospital bed fee and a $250 per day fee for each satellite emergency care facility, but Christie rejected it.
As time passed, the "issue seems to be resolving itself, with the negotiations and settlements," said. Mike Cerra, assistant executive director for the New Jersey League of Municipalities, a lobbying group for local government officials.
Tthe urgency felt last year has been replaced with an understanding the process is now playing out.
"The issue may come back in the fall, but I don't see a consensus" between the governor and legislature," Cerra added.
Ryan said the unresolved issue remains a worry, as it has created an adversarial relationship between hospital officials and elected leaders who historically have worked together well.
"We will keep trying to bring attention to the issue with individual legislators," she said.
The N.J. Hospital Association says the tax-exempt status of these hospitals have been challenged:
- Clara Maass Medical Center (Belleville)
- Jersey City Medical Center (Jersey City)
- Monmouth Medical Center (Long Branch)
- Monmouth Medical Center Southern Campus (Lakewood)
- Saint Barnabas Medical Center (Livingston)
- Newark Beth Israel Medical Center (Newark)
- Holy Name Medical Center (Teaneck)
- Englewood Hospital and Medical Center (Englewood)
- Hunterdon Medical Center (Raritan Township)
- Bayshore Community Hospital (Holmdel)
- Hackensack UMC Palisades (North Bergen)
- Jersey Shore University Medical Center (Neptune)
- Raritan Bay Medical Center (Old Bridge)
- Raritan Bay Medical Center (Perth Amboy)
- Riverview Medical Center (Red Bank)
- Chilton Medical Center (Pequannock)
- Overlook Medical Center (Summit)
- Newton Memorial Hospital (Newton)
- Robert Wood Johnson University Hospital (Rahway)
- Robert Wood Johnson University Hospital (New Brunswick)
- Robert Wood Johnson University Hospital Somerset (Somerville)
- Robert Wood Johnson University Hospital Hamilton (Hamilton)
- Trinitas Regional Medical Center (Elizabeth)
- CentraState Medical Center (Freehold)
- Virtua Memorial Hospital (Moorestown)
- St. Joseph's Regional Medical Center (Paterson)
- St. Joseph's Hospital Wayne (Wayne)
- JFK Health (Edison)
- Shore Memorial Hospital (Somers Point)
- The Valley Hospital (Ridgewood)
- Capital Health (Hopewell)
- Kennedy University Hospital (Stratford)
- AtlantiCare Regional Medical Center City Campus (Atlantic City)
- AtlantiCare Regional Medical Center Mainland Campus (Galloway)
- Princeton Healthcare System (Plainsboro & Princeton)
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.