Chesterton Tribune

 

 

Porter County Council says hospital not meeting terms of property tax abatement

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By JEFF SCHULTZ

By not willing to accept a property assessment of at least $130 million, Porter Regional Hospital risks losing its 10-year property tax abatement.

On Thursday the Porter County Council made a “preliminary determination,” by a vote of 7-0, that the hospital was not within the terms of that abatement and set a hearing for Tuesday, June 24, after its regular business meeting, to vote on whether the tax break should be canceled.

“Apparently we and the hospital do not agree,” said Council President Dan Whitten, D-at large.

Meanwhile, Porter Chief Financial Officer Cheryl Harmon told the council a tax attorney for PRH is working to resolve the assessment issue with County Assessor Jon Snyder and requested that the council proceed with the abatement.

Commitments

With that, Harmon gave Council members a list of commitments which she said the hospital has “met or exceeded” in accordance with the abatement form:

* A facility with 225 beds in private rooms (The hospital has 225 beds in private rooms and has a licensed capacity of 301 beds).

* An estimate of 600 construction jobs with a payroll of $60 million to $65 million (The hospital’s general contractor estimates 689 jobs with a $69 million payroll).

* 126 new full-time employees or FTEs (267 new FTEs have been hired).

* An additional $7,575,748 in annual payroll for new FTEs (The hospital’s annual payroll has increased $18,696,035 for new FTEs).

*  Investment of approximately $20 in new information technology equipment (The hospital has invested over $33 million in new IT equipment).

* The hospital has negotiated the continuation of the existing EMS agreement with the County.

* The hospital has entered into a project labor agreement concerning the real estate project.

Construction Costs vs.

Assessed Value

Porter is also saying that it had made good on its promise of spending more than $130 million in construction costs for the abatement. The facility completed construction in 2012 at the corner of U.S. Highway 6 and Ind. 49 in Liberty Township.

But the point which Harmon tried to make was that construction costs don’t mean the same thing as assessed value. That is formulated with a model from the state’s assessment manual, she said

The first assessment from the County Assessor the hospital received was about $39 million in 2012, based on that model, Harmon said. Porter appealed that because it’s been a custom to do so in order to arrive at the right value, she said.

It had unsuccessfully attempted to withdraw that appeal when the Property Tax Assessment Board of Appeals raised it to $117 million.

A steep assessment?

Harmon showed a comparison of assessments with other large medical facilities in Northwest Indiana and claimed their replacement cost per square foot was $486, more than triple of everyone else, based on the current assessment given by the county.

“There is no way a 225-bed hospital is that expensive,” she said.

As for the $244.5 million assessment given in 2013, Harmon told the council “It’s grossly overstated. I’m sure you would agree if it was your building.”

As a compromise, Porter said it was willing to settle for an $85 million assessment which would still put it well above other health care facility assessments.

But Whitten said that when the council unanimously approved the abatement in 2009, Porter’s former CEO Jonathan Nalli and attorneys provided a cost-benefit analysis presenting the benefits which taxpayers would receive of having a hospital with an assessed value of more than $130 million, which was why he voted for it.

But it looks like “somewhere along the way we got disconnected,” Whitten said. He said he was “afraid” that the hospital would now claim that it had meant $130 million in construction costs rather than assessed value.

If the council were to continue the abatement but also accept the lower assessment on top of it, Whitten said, “I feel the tax payers have been duped and I will take no part of it.”

Council Vice-President Karen Conover, R-3rd, said that although she would agree that Porter delivers quality health care, she stands by Whitten’s comments. “You promised us $130 million,” she told Harmon.

Council member Sylvia Graham, D-at large, said that she was one of the council members at the time of the abatement and also remembers being told the assessment would be more than $130 million. “We’re playing with numbers now. I don’t understand it,” she said.

The council’s attorney Scott McClure said that in his reading of the abatement resolution, a figure of $130 million is estimated for the value of improvements, meaning that is to be the assessed value.

Harmon echoed that Porter is in the process of coming to an agreement over the assessment with the County Assessor.

Council Member Jim Biggs, R-1st, said that “this isn’t a flea market” in arguing over what the value should be but he’d be willing to consider a new assessment if the Assessor brought it to him. He said it should be considered that the County had spent $50,000 of taxpayer money to hire a “national expert” to make a complete assessment.

McClure said that the task at hand isn’t to decide the assessment, since that is not their purview, but to judge whether the hospital is in compliance based on the information it has in front of them.

By having the County assessing the hospital at $244.5 million, Council Member Robert Poparad, D-at large, said that it would appear the hospital is in compliance as far as the council is concerned.

So far as he’s is concerned, Whitten said, Porter’s disputing that figure means that the hospital is not in compliance with its statement of benefits. “They have the burden. I don’t think they’ve made it.”

Vote

Poparad ended up making the motion to declare the hospital not in compliance which generated a unanimous vote.

During the hearing on June 24, both sides will get the chance to present their case.

McClure said the council is the body which has the power to revoke the abatement. The hospital would have the option of appealing a revocation in court.

 

 

Posted 6/6/2014