Carle's tax exemption will hammer more than two dozen area taxing districts this year, especially the Urbana school district — and next year, the burden will likely fall on taxpayers' shoulders
URBANA — A property tax exemption given to the Carle Foundation will cost more than two dozen taxing districts in Champaign County nearly $6 million in lost revenue this year.
Hardest hit will be the Urbana school district, which will lose more than $3 million. That amounts to about 5 percent of the district's approximately $60 million budget.
And while local governments will bear the brunt of the health care system's tax exemption this year, that burden likely will be passed on to taxpayers next year, particularly those in Urbana, where nearly 90 percent of Carle's estimated $68.3 million in equalized assessed valuation is located.
"This is a huge, huge issue in Urbana," said Mayor Laurel Prussing. "Your tax bill is going to be really affected by this, and that's why the city of Urbana is going to do everything we can to make sure this becomes a more reasonable thing."
"In the end what will happen is that the other taxpayers in the district will make up the difference in the tax extension," said Vicki Mayes, executive director of the Urbana Park District, which stands to lose at least $615,000. "It's of great concern. There are a lot of considerations that both the park district and other units of government in Urbana will have to consider."
"In the future, everybody else is going to make up that difference," said Stan Jenkins, Champaign County's supervisor of assessments.
Carle, a regional health care system, was granted the exemption by the Illinois Department of Revenue under legislation approved last year by the General Assembly and signed in June by Gov. Pat Quinn.
That measure established how nonprofit hospitals could qualify for property tax exemptions through services and activities, including providing charity care, providing direct or indirect financial or in-kind services to state and local governments, and offering health services to low-income and underserved patients.
If the value of the charity care and other activities exceeds the value of the estimated property tax payment, the tax payment does not need to be made.
In order to annually renew the tax exemption, Carle will need only to file a short application form, according to Jenkins.
"Each year from now on there is a very simple status form they fill out that basically says the ownership and the use is still the same this year as it was in the year that they were granted the exemption," Jenkins said. "It's a very simple, one-page form and it's not like an entire application process that has to go through the Department of Revenue."
In its application to the Revenue Department, the Carle Foundation claimed that it provided $15.7 million worth of charity care in 2012, had $10.2 million in unreimbursed costs for health services provided to low-income and underserved individuals, and provided $6.4 million in subsidies for state and local governments' health care services.
Prussing, however, said the state legislation is flawed because it spreads benefits over a broad region while focusing the costs primarily on Urbana.
"The essence of this is that the charity care for a regional hospital is paying paid for by the people of Urbana. That's what it boils down to," she said.
While taxing districts will be able to make up for the lost revenue next year with higher taxes on other taxpayers, a quirk in the property tax schedule prevented that this year, Jenkins said.
"Carle brought the application in to us just before the end of the year. The board of review had it processed, out the door and driven over to Springfield on January 11th," he said. "But we had already done the final abstracts and had everything certified. Therefore, that means that the tax cycle is set with what is there.
"So when they are exempted (which the Revenue Department did in March) there's no way the taxing bodies can go back and raise their rates to offset that loss. It happened too late. They're going to be short all that money this year."
The Urbana school district had been setting aside about $1.6 million a year in Carle tax payments in case of an unfavorable judgment, said Carol Baker, the district's director of business.
"But the $3 million (loss) was a surprise. We hadn't anticipated that," she said.
Part of the loss will come out of the current year's budget and part will be taken from next year's, she said.
"We are in deficit spending currently and this is going to make it that much worse," she said. "We've made so many cuts in recent years that we're pretty much down to bare-bones already. We'll have to talk to the board about this next year in terms of implementing something."
Although Prussing said the school district would "have to jack up their taxes tremendously" next year, Baker said that isn't a given.
"That's something our board is going to have to grapple with next December when we do our levy. We'll give them the options," she said. "I can't say what's going to happen because of all the other unknowns. We don't have a state budget for next year either."
Mayes, the park district director, said the agency had set aside about $320,000 before hearing that the loss would be greater.
"We're looking at a shortfall over $300,000. What that means for us is that for this upcoming fiscal year of 2013-2014, we're going to have to dip into our reserves and end up spending more than what comes in," she said. "It couldn't happen at a worse time for us because of the opening of the new (outdoor) pool and the first bond payment for the pool being due. This is really challenging."
The city of Urbana stands to lose more than $800,000 this year because of the Carle exemption. Prussing said the city also had set aside more than $400,000 in case Carle won a judgment.
"We knew that some of it was going to happen," she said, "but then they got some more properties added and that added another $360,000. There's no way that we can tolerate this. We can't afford this."
Prussing said city officials have just begun to discuss the ramifications of the Carle exemption.
"We don't know what it's going to mean yet. We're going to have to figure all of this out. I'm not going to say right this minute that this is what we're going to cut if we lose this because I don't know for sure that we're going to lose it, that (Carle) will come to their senses, or that the Legislature will come to its senses, or if there's going to be a court case or what," the mayor said.
"It's kind of premature to say exactly what we would do, but it's clear that this a bad thing for Urbana. It's a bad thing for Urbana schools. It's a bad thing for the Urbana Park District. It's a bad thing for every single taxing district in this county because the countywide districts are affected too."
Champaign County will lose more than $555,000, including about $163,000 for the county's all-purpose general corporate fund. Other county funds, including those for mental health, developmental disabilities, the county nursing home and bridges and highways, will lose lesser amounts.
County Administrator Deb Busey said the loss to the general fund means there will be a smaller fund balance at the end of the year.
In Champaign County's most recent audit report, Carle had the highest assessed valuation of any business in the county, equalling about 2.18 percent of the county's total valuation. A distant No. 2 was Campus Property Management at 1.07 percent.
Presence Covenant Medical Center, the other nonprofit hospital in Urbana, did not file for the property tax exemption for this year, Jenkins said.
Property tax revenue lost by Champaign County taxing districts this year because of Carle tax exemption
Urbana school district: $3.012 million
City of Urbana: $824,100
Urbana Park District: $615,186
Champaign County: $555,889
Champaign school district: $262,649
Champaign-Urbana Mass Transit District: $188,225
Cunningham Township: $131,613
City of Champaign: $86,451
Champagn-Urbana Public Health District: $78,149
Champaign County Forest Preserve District: $60,111
Champaign Park District: $45,202
Mahomet-Seymour school district: $24,807
Rantoul City Schools: $23,843
Rantoul Township High School: $15,240
Village of Rantoul: $7,282
Village of Mahomet: $4,767
Rantoul Township: $3,337
City of Champaign Township: $2,576
Mahomet Township: $2,560
Corn Belt Fire Protection District: $2,025
Mahomet Library District: $1,740
Rantoul Park District: $1,300
Rantoul-Ludlow Cemetery: $380
Rantoul-Ludlow Multitownship Assessment District: $214
Parkland College: not available
Source: Champaign County clerk's office