Chesterton Tribune

 

 

Hospital to keep tax abatement after $130 million assessment deal

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By JEFF SCHULTZ

The issue of the ten-year tax abatement for Porter Regional Hospital has been resolved.

Porter Health Systems will keep its abatement after a five-member majority of the Porter County Council on Tuesday determined the hospital had measured up to the provisions set in the agreement for the tax breaks after the health care provider accepted an assessed value of $130 million.

Voting to preserve the abatement were Council President Dan Whitten, D-at large, Vice-President Karen Conover, R-3rd, members Jeremy Rivas, D-2nd, Sylvia Graham, D-at large, and Robert Poparad, D-at large.

Councilman Jim Polarek, R-4th, abstained from voting, stating his wife works for Porter Hospital, while Councilman Jim Biggs, R-1st, cast a “no” vote.

In a prepared statement to the local media a few hours before the County Council held a hearing regarding the fate of the abatement, Porter Hospital representatives said the deal “will provide (an estimated) $9.7 million in tax revenues for Porter County and Liberty Twp. residents and the Duneland Schools over the next ten years.”

The hospital is located at the northwest corner of U.S. 6 and Ind. 49 in Liberty Twp.

The Council earlier this month stated PRH had not made good on its promise to build a 225-bed hospital valued at or over $130 million. Its Chief Financial Officer Cheryl Harmon said then that construction costs had exceeded $130 million, but the assessed value should have been $39 million going by the model within the Indiana Assessor’s Manual.

But Whitten and other members who were on the Council during the time the abatement was granted in 2009, said they remembered PRH officials “promising” a facility of $130 million that would increase the county’s overall AV and benefit every taxpayer.

By subsequently not accepting that assessed value, PRH risked losing the abatement due to non-compliance. PRH had appealed both its 2012 assessment of $34 million and its 2013 assessment of $244.5 million, the latter of which the County Assessor’s office figured with a national appraiser of hospitals.

However, through continued discussions with County Assessor Jon Snyder, Porter did agree to a $130 million assessed value for 2013 and 2014, as well as a $117 million assessment for 2012 when PRH was 90 percent constructed.

The Council’s attorney Scott McClure said 2012 has been determined as the first year the abatement was to take effect, which also means the abatement is currently in its third year.

Porter officials recently filed their Form 322/RE abatement compliance forms from the preceding years and asked the Council to waive their late submissions in order to start the abatement retroactively.

Voting in favor of the request to waive were Whitten, Conover, Graham, and Poparad. Polarek abstained again while Biggs and Rivas were opposed.

Rivas said he voted “no” to the waiver because during those years, the hospital did not meet the criteria for the abatement but he voted in favor of moving forward with the abatement now that PRH is in compliance.

Having essentially the singular “no” vote, Biggs said outside of the meeting that he is against granting the tax abatement because of the “current funding situation the County is facing.”

“I don’t feel that we’re in a position to hand out an abatement to a company whose earnings run into the billions,” he said, believing the move would have a negative impact on revenues for the affected taxing units like Duneland Schools.

Biggs remained critical of what he saw to be a lack of communication on the hospital’s part in the Council’s search for answers on the abatement such as who owns the adjacent medical office building and because of the disputes with the Assessor over establishing an assessment that included a battle in Circuit Court.

“It’s just been a huge struggle,” said Biggs who questioned why the hospital has agreed to $130 million now after two years of friction when they said they would accept the assessment at the time Council gave the abatement.

According to the Council’s budget specialist Vicki Urbanik, the County, Liberty Twp. and the Duneland Schools would see more benefit with the abated $130 million in the end than if the hospital were to be assessed at the $39 million AV it claimed, minus the abatement.

Abatement schedule

With the higher value, more AV will be increase the County’s certified net values over time. Following the schedule, 100 percent of the AV will be abated the first year, 95 percent in the second, 80 percent in the third, 65 percent in the fourth, 50 percent in the fifth, 40 percent in the sixth, 30 percent in the seventh, 20 percent in the eighth, 10 percent in the ninth and 5 percent in the tenth.

With the assessments provided by the Assessor office, $0 of the hospital’s real property AV would be included in the County’s certified taxable AV for 2012, $6.5 million for 2013, $26 million for 2014, $43.2 million for 2015, $58.6 million for 2016, $68.6 million for 2017, $78.3 million for 2018, $87.5 million for 2019, $95.4 million for 2020 and $97.9 million for 2021. The abatement will expire in 2022.

Snyder told the Council that the AV will follow natural depreciation for commercial property. For instance, the hospital’s total AV on real property is expected to be $103 million in 2021.

Urbanik said it is uncertain how the tax rate for Liberty Twp. would be affected with the new AV as tax rates there have gone up about a percent or two in the years the hospital has been there.

Snyder added the reported $9.7 million the deal will bring over time is “a conservative estimate” but agreed “we don’t know what the tax rate is going to be.”

County Auditor Robert Wichlinski said he is happy to see the figures the Assessor will be giving him are certain as his staff will now be able to figure the tax revenue more accurately.

Good neighbors

In the meantime, praise was given among the Council, the Assessor, and the hospital for their exertion in unraveling the issues surrounding the abatement.

“I’m happy it’s settled. I commend all the parties involved,” said Graham.

Conover exclaimed “this is great news” and referred to the hospital as a “wonderful corporate neighbor.” She said she is glad that certainty has been reached.

Whitten in a statement to the press said this will prevent “a double hit” on taxpayers.

“The Porter County taxpayers are now protected and will reap the benefit of the bargain that was made with Porter Hospital LLC when the original tax abatement was granted,” Whitten said.

The County will now have a definitive list of what the real property value of PRH will be per year, which also avoids many years of tax appeals and associated costs as seen in the last two years, he continued.

Poparad asked McClure if the appeals will be “put to rest” with this agreement to which McClure said yes.

Rivas asked if the abatement would be on just the hospital itself and not the adjacent 60,000 sq. ft. medical office building reportedly owned by The Sanders Trust. McClure said the abatement will be exclusive to Porter and therefore would not include the MOB.

Snyder also mentioned that, as part of the agreement, Porter will shell out an additional $20,000 to the County for the appraisal conducted last year on top of a separate $20,000 it had already paid out. The County hired Jack Poteet of Hospital Appraisal Services for $50,000.

As part of the resolution for the abatement, Porter is to pay $100,000 to the County each year for the abatement.

 

 

 

 

 

 

Posted 6/25/2014