Chesterton Tribune

 

 

Hospital tax abatement goes to the lawyers; Biggs hits assessment appeal

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By JEFF SCHULTZ

The Porter County Council’s attempt to dig into the tax abatement for Porter Regional Hospital on Thursday drew more questions than answers.

But exposing the issues is an important step towards agreement, said County Council President Dan Whitten, D-at large. Complicating the matter is the yet-to-be-determined tax value of the hospital on which the abatement will be applied.

The matter of the abatement will be discussed by Council Attorney Scott McClure, hospital representatives, and attorney John Schmaltz, who has been investigating the matter for the County Auditor. McClure said he will notify council members when progress is made. “We’re not going to decide this tonight.”

Whitten was one of the council members who wanted to know last year when the abatement would take effect, now that the hospital at Ind. 49 and U.S. 6 in Liberty Township is in operation.

McClure said he believes the abatement should begin for the March 1, 2013, assessment date as it was the first year the hospital was complete.

However, County Auditor Bob Wichlinski said that the hospital did not submit the state’s 322/RE form required to trigger the abatement, even though it had submitted the CF-1 abatement compliance forms in the years 2012 and 2013. The 322/RE forms must be accepted by May 10 in order to date-stamp the abatement year, he said.

Wichlinski added that he hasn’t applied the abatement when calculating the net assessed values needed by overlapping units of government to determine their budgets. The hospital did pay taxes for 2012 pay 2013, when it was assessed for $34 million, even though the hospital has appealed that assessment, Wichlinski said.

Hospital Compliance

The County Council in September 2009 unanimously agreed to grant Porter Health a 10-year tax abatement under the conditions that it hire 126 new full-time employees, totaling $7.5 million in additional salaries, in one year’s time; purchase at least $20 million in new informational technology equipment; and refund 10 percent of the amount abated to the council for economic development, said Brian Hittinger of Krieg DeValut, which represented the hospital when the abatement agreement was signed.

Hittinger, who was joined by Porter’s CFO Cheryl Harmon, said that in 2013 the hospital hired 213 more full-time employees with a total of $15 million in yearly salaries and spent $24 million on IT equipment purchases.

“(Porter) is dedicated to economic development,” Hittinger said. “They have exceeded the expectations.”

Biggs Calls Appeal ‘Confusing’

While none of the Council members contested the hospital’s performance, Jim Biggs, R-1st, did query Porter’s decision to appeal its assessments from 2012 and 2013. He also wondered why the 60,000-square foot medical office building attached to the hospital is included in the assessment if Porter is reportedly not the owner of it.

As McClure explained, the hospital was assessed at $34 million in 2012 by the county when it was at 90-percent construction completion and at $244.5 million in 2013. The hospital appealed both of those assessments.

Biggs said he wants to know whether the hospital thinks that office building is part of the abatement. He wants to know too why the hospital has not allowed the county assessor access to the building for an inspection. And he criticized hospital officials for being stand-offish with the county, after the county has gone ahead and awarded the hospital contracts for ambulances and employee wellness programs and has rented space as well at the hospital in Portage.

“We shouldn’t have to struggle with you,” Biggs said. “If we are going to both benefit each other, we both have to have communication,” Biggs said.

Biggs also noted--as recorded in the minutes of the meeting at which the council granted the abatement--that former hospital CEO Jonathan Nalli put the costs of the hospital building at $130 million, the same figure reported on the abatement compliance form. Biggs questioned why the hospital would appeal the $34 million assessment when the cost reported was more than $100 million.

Biggs questioned as well why Nalli addressed the council on the subject of compliance in the spring of 2011, when there was no abatement in effect. “Why was he there? That’s a little confusing,” he said.

Hittinger declined to speak on the assessment appeals since one is currently pending before the County PTABOA and the other before the Indiana Board of Tax Review. The 60,000-square foot building, he did say, is owned by a trust.

County Assessor Jon Snyder, for his part, said that the hospital is worth the $244.5 assessment, as determined by a private appraiser he hired.

Whitten, on the other hand, lauded the hospital for going “above and beyond” what was required of it under the abatement and said that the taxpayers will ultimately benefit. “We’re talking about a lot of money here, a lot of money.”

When and how much?

Other council members continued to probe.

Robert Poparad, D-at large, asked Snyder why the hospital reportedly was assessed at $34 million when it was 90-percent complete and then jumped to $244 million. Snyder said that he used the state’s assessment method for office buildings but that this method does not include cost models specifically for hospitals. Snyder believes that the actual value is the one reported by his private appraiser.

According to the 2013 appeal, the hospital puts its current value at $39 million.

Snyder also said he believes that the council’s abatement resolution started the tax breaks immediately, beginning with the assessment for the land. McClure differed, saying the abatement was to be “based on the improvements that would be on it.”

Putting in his two cents, Hittinger interpreted the resolution as saying that the abatement starts with a “geographical footprint.”

At one point in the discussion, Hittinger told the council that it has statutory authority to accept a late 322/RE form, thus setting the abatement process itself and beginning the process retroactively from that year.

Poparad expressed doubt as to that. In all his years on the council, he said, the board has never been asked to set the clock on a tax abatement. Abatements have always started automatically.

The question at hand, Whitten said, is “how much and when,” in terms of the hospital tax value and abatement. He said that starting the abatement as early as possible would bring “the most bang for the buck” to the taxpayers.

According to the Department of Local Government Finance, a 10-year abatement in its first year will be 100 percent; in its second, 95 percent; in its third, 80 percent; in its fourth, 65 percent; in its fifth, 50 percent; in its sixth, 40 percent; in its seventh, 30 percent; in its eighth, 20 percent; in its ninth, 10 percent; and its 10th, 5 percent.

 

 

 

Posted 2/28/2014