$6 million setback

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

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Skepticity wrote on April 14, 2013 at 11:04 am

Carle has sought tax exemption for quite a while.  This should not be a surprise.  Yet the taxing bodies continue to budget to spend the money.  Property values have fallen.  Have taxes?  Has government spending been reduced?

What I find disturbing in the story is the large list of taxing districts that take money from property owners in Urbana, and the fact that there is an assumption that the money was taken from the taxing districts. It is presented as money unfairly lost, rather than assuming that the money is belongs to Carle and government is wrong in continuing spending at the same levels. 

The tax money does not belong to the government, it is taken from taxpayers.  Instead of finding ways to charge the property owners more to make up for Carle keeping the money as allowed by law, why not look at fewer taxing bodies, and those taxing bodies each SPENDING LESS.  When is the last time that any government kept level expenses, or cut spending???  Government and bureaucracy has an endless appetite for increased spending. 

However what we can expect is that taxes will be increased to other property owners and subsequently to renters in increased rents.

Sid Saltfork wrote on April 14, 2013 at 2:04 pm

But..... Urbana wanted a new pool with a water feature, and a climbing wall.  Urbana even got state funding for the water feature, and glossy stuff.  If Urbana did not have a pool, people would have to go all the way to Champaign.  How can Urbana maintain it's sculptures, or develop bike paths with this "unexpected" financial disaster?  What about the bike trail to Danville?  Maybe, the state will pay for it?  The new subsidized hotels will add jobs, and revenue.  The Boneyard beautification will attract people to the downtown which will help with revenue.  

Thank goodness, the mayorial election was completed before this financial storm hit.  Will the increased property taxes cause people to buy homes elsewhere?  Will it add to the middle class flight from Urbana?  Oh well, the faculty will maintain residences in Urbana.  They will get things turned around, and set things straight.

rsp wrote on April 14, 2013 at 6:04 pm

Carle Hospital was for profit, and as such it paid taxes. They merged it with the Clinic and changed it's status to non-profit, so now it doesn't pay taxes even though it makes a ton of money. It has property in all those places, many of which used to pay property taxes. Now they don't so you get to make up the difference. Oh, and by the way, they have been spending less. Sid doesn't like the swimming pool. But it is actually a cheap way to keep kids out of trouble in the summer, reducing the costs of policing. 

Atlas Shrugged wrote on April 14, 2013 at 9:04 pm

You have the same problem that the officials in the article have.  You believe everyone else must "make up the difference." 


Why can't government be expected to live within its means, instead?

SaintClarence27 wrote on April 17, 2013 at 9:04 am

The two are not mutually exclusive. Why can't everyone pay their fair share WHILE the government is expected to live within its means?

Sid Saltfork wrote on April 15, 2013 at 12:04 pm

Look at the cost of the swimming pool; and look at what it could have paid for additional public safety (fire, and police personnel) , and public works (street repair).  Will the beautification of the boneyard creek, major street work on Main St., and repair of Windsor Rd. continue with the financial shortfall?  A municipality should prioritize it's needs, and have current funds with which to finance them.  Urbana has not done that.

Your right.  I do not like the swimming pool because state grants were used to pay for the frills.  I do not like the proposed trail between Urbana, and Danville for the same reason.  I do not like seeing needed money being spent on sculptures.  I do not like seeing municipal governments subsidizing businesses like auto dealerships, and hotels.  I lived in Urbana for many years before moving to a less crime ridden area.  I am tight with money.  I prioritize my family budget with some money in savings for the unexpected.  Urbana conducts business based on a credit card mentality.

EL YATIRI wrote on April 16, 2013 at 6:04 am
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Other way around.  Carle Foundation Hospital was always non-profit and Carle Clinic was for profit.

But this was just a mechanism to lower their tax burden because both institutions have always been essentially one.  They artificially lowered Carle Clinic's profits by having the clinic rent all it's office space and equipment from Carle Foundation at hugely inflated prices (higher than in Manhattan), thus shifting money to the Foundation which was non-profit. 

robt wrote on April 19, 2013 at 9:04 am

Property taxes are based on the value of the property not on income.  Prior to acquisition by the Carle Foundation, the Carle Clinic was owned by the physicians and the income of the clinic was theirs.  It does not make sense for them to have paid inflated prices, because to do so would have taken money from their pockets and put it in the foundation where they would not, and could not by IRS rules and regulations, have access to it.

read the DI wrote on April 17, 2013 at 4:04 pm

You have it backwards: Carle Foundation Hospital is for not-for-profit, and Carle Clinic was for profit. The Hospital bought out (not merged with) the Clinic.

EdRyan wrote on April 14, 2013 at 6:04 pm

Another reason to get rid of real estate taxation and use income taxes.  Indiana has very low real estate taxes but that is made up for with local income taxes.  

lcoil79 wrote on April 14, 2013 at 7:04 pm

Actually, the Hospital has always been non-profit, it was the Clinic that was the for-profit arm of the organization.  Once they merged, they became fully non-profit. 

I will agree though, it's kinda silly to see the City of Urbana crying foul for stealing money from them, when Carle has been trying to get that money exempted for years.  With $6 million on the line, who in their right mind wouldn't expect Carle to apply for the exemption to get their money back (or as the case may be not have to pay it in the first place).

 

rsp wrote on April 14, 2013 at 8:04 pm

You're right, I had them backwards. This is a trend going on nationwide. Some hospitals are paying their CEOs in the millions and undergoing huge expansions yet doing everything they can to avoid any taxes. 

Atlas Shrugged wrote on April 14, 2013 at 9:04 pm

Interesting.  48% of American households don't pay income tax.  Should we not be mad at them, too?


There is no requirement to pay more than what is required in taxes.


Tell us, do you purposely pay more in taxes than you should?  The world wants to hear.

jlc wrote on April 14, 2013 at 10:04 pm

Why are you mad at elderly people, Atlas? Or parents who work at the minimum wage? They comprise about 3/4 of your 48%.

rsp wrote on April 15, 2013 at 9:04 am

They all pay property taxes. Even if they rent. They also pay sales taxes. Even the 48%. Except for non profits like Carle.

Illini Libertarian wrote on April 14, 2013 at 9:04 pm

No one has made mention that Carle is avoiding paying $6M in real estate taxes, but they are providing over $32M in charity and services to the community. Would the mayor prefer receiving the property taxes and losing the charitable benefits?

serf wrote on April 15, 2013 at 7:04 pm

Easy to get to that $32 million number when you charge 15 bucks for an aspirin.

robt wrote on April 19, 2013 at 9:04 am

By standard state reporting, Carle's numbers are based on their costs, not on their charges.  So, whether they charge nothing, $.10, $15, of $1500 for an aspirin doesn't matter.  What would be counted is the $.005 cost (or whatever it is) they pay when they buy it.

SaintClarence27 wrote on April 17, 2013 at 9:04 am

Carle's level of "charity" is pretty shoddy. Most of it is writing off as charity debt that you are still attacking with collections agencies.

robt wrote on April 19, 2013 at 9:04 am

Also by state reporting standard, hospitals cannot pursue collection of what they count as charity care.  If they pursue collection, then it is bad debt, and bad debt is not counted.

Atlas Shrugged wrote on April 14, 2013 at 9:04 pm

For something that has been likely with Carle for some years, it would appear the extent of financial planning we can expect from Mayor Prussing, Democrat, is best stated in her own words:


"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."


She wants one of our remaining large employers to "come to their senses" and seemingly 'make up' the lost taxes? The taxes lost, in part, are due to what she says is 'flawed state legislation,' created by our Democrat-controlled Illinois House, our Democrat-controlled Illinois Senate, and passed by our Democrat Governor.


A theme throughout the article appears to be that the 'rest of us' are going to have to 'make up the shortfall.'  Prussing states, "Your tax bill is going to be really affected by this." Vicki Mayes, Park District, states, "The other taxpayers in the district will make up the difference." and Stan Jenkins, Champaign County supervisor of assessments, states, "In the future, everybody else is going to make up that difference."  Couldn't anyone have planned to reduce the size of expenditures, and, for instance, not developed a new swimming pool?


Mayor Prussing is just showing us her well-earned knowledge in Public Finance (Ph.D. - University of Illinois) and Economics (Masters - Boston University, Undergrad - Wellesley).


Wow, Urbana, aren't we feeling happy today, knowing she just got re-elected?  We are being led by only the most competent of persons.  Rejoice!

Danno wrote on April 15, 2013 at 11:04 am

Many good perspectives here. Myself, I believe that Carle is not 'avoiding' taxation; only, doing business as best as it can under Local Government Laws set forth prior to when...umm...Prussing was sucking her thumb in the crib...say?

So, Carle might just well 'come to their senses' and decide to cough up $6M to appease Prussing? Huh?

Gee, guess that, that sliding scale of income for Community Care program involvement charges will ratchet up a notch, or two.

What say you, Nurse Rached?

Danno wrote on April 15, 2013 at 11:04 am

Many good perspectives here. Myself, I believe that Carle is not 'avoiding' taxation; only, doing business as best as it can under Local Government Laws set forth prior to when...umm...Prussing was sucking her thumb in the crib...say?

So, Carle might just well 'come to their senses' and decide to cough up $6M to appease Prussing? Huh?

Gee, guess that, that sliding scale of income for Community Care program involvement charges will ratchet up a notch, or two.

What say you, Nurse Rached?

Marti Wilkinson wrote on April 15, 2013 at 1:04 pm

If it came down to a choice between giving Carle a six million tax break, and seeing them continue to provide the community care program, I would rather see people get medical care. To be honest, I do have a specific bias in regards to this. When I lost medical insurance a few years ago, my own post cancer treatments got disrupted. It's very hard to see a doctor at Christie when you have to pay a hundred dollars upfront. I switched back to Carle last fall and I'm able to resume Tamoxifen. My hope is that I will be able to find a position that will provide insurance, and I will be able to cover myself and my daughter who is in college. I've been looking and, even with an advanced degree, I have found the job market to be a challenge.

I'm also friends with someone who is too young for medicare, and he was able to get treated for prostate cancer under the Community Care program. Both my story and his are a couple of anecdotal examples of how the program works. You can even have medical insurance and still qualify for the program depending on your income. The Carle website shows where a person can fall under the sliding scale for services. 

If my memory is correct, the News-Gazette reported stories where Urbana residents had a hissy fit when the Urbana Wal-Mart and Meijers were being built. Urbana is not a community that is known for being very business friendly, and I know residents who would rather pay higher property taxes for the privilege of living close to bike trails, Meadowbrook Park, and tree lined neighborhoods.

One resident once asked me where I lived, and she was absolutely horrified that I lived in Champaign. She wanted to know why I would live in such a place, and my response was lower property taxes, and my house was more affordable when I was in the market to buy. Since we don't rely on the hospital to provide us with our property tax base, the numbers don't have as much of an impact on us.

It's kind of foolish for the leadership in Urbana to be placing all of their proverbial eggs in one or two baskets. As another poster noted there are other taxation models beyond property taxes, that can be utilzed throughout the state. Perhaps Illinois wouldn't be so broke if our elected officials took that into consideration as well. 

Looks like Prussing and the members of Urbana City Council are going to have to find ways to make up for the revenue that is lost here. 

 

cretis16 wrote on April 15, 2013 at 6:04 pm

Remind me again how much the city of URBANA gave the Lincoln Hotel, and that ridiculous path along the drainage ditch. As posters have commented, one thing the city will not do is rein in this spending obsession. Absolutely insane, but professor's row is safe...we got plenty of money, so go ahead and tax us a couple more hundred or so...no biggie.

Marti Wilkinson wrote on April 16, 2013 at 12:04 am

"Professors Row" - I used to hear it referred to as the "Faculty Ghetto"  :D

Homeboy wrote on April 15, 2013 at 8:04 pm

The mayor must not be too worried. They are gonna pay a artist $75000 to design a sculpture for king park. You're tax dollars at work?

dane wrote on April 16, 2013 at 9:04 am

"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."


In other worrds, Carle provided some much needed charity to enough politicians to get the law chnaged to make what they were doing legal.

prp wrote on April 16, 2013 at 12:04 pm

Exactly.  Carle, and like organizations in the state have been working on this for years. And the new law has a very liberal definition of what counts as charity care.  Essentially, any large hospital will qualify if it charges more than the medicare reinbursement, and writes that off.

Urbana Mom wrote on April 16, 2013 at 8:04 pm

While I'm heartened that Carle has finally gotten a program together to help people with little or no health insurance, I'm saddened that it has to come at the expense of children in the Urbana school system.  Whatever your thoughts about government, taxes and spending, 3 million is a huge amount to remove from the school budget, and anyone with a stake in this community should be alarmed about that.  I personally don't want to see Urbana property taxes raised, even if it's to "subsidize" health care for the needy, as that will simply drive more people away from what is essentially a great community.  I hope that Carle does see itself as part of the Urbana community, and not merely a business that happens to sit on a lot of Urbana real estate. 

Marti Wilkinson wrote on April 17, 2013 at 1:04 am

The dependence on property taxes to fund school systems is one that is outdated, and creates an imbalance across the board. I have a cousin who bought a house in Naperville just so her kid could benefit from access to the public school system there. Around here there are people who move to places like Saint Joseph and Mahomet for similar reasons. Blaming Carle for the kids being shortchanged won't change the fact that we really need to look at other ways to fund our schools. It's no secret that areas with higher levels of poverty and economic distress, also have schools that are struggling to provide students with an education.

SaintClarence27 wrote on April 17, 2013 at 9:04 am

It is outdated, and it does create an imbalance - but at this point, what is the alternative?

Marti Wilkinson wrote on April 17, 2013 at 1:04 pm

Good question Mr. Saint Clarence, and I hope this link provides some answers. There are differences between the United States and European nations in regards to how schools are funded, and it provides an interesting contrast.

http://www.ascd.org/publications/educational-leadership/may02/vol59/num0...

Local Yocal wrote on April 17, 2013 at 4:04 am
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The spending obsession in government is a jobs program for the cronies and outside corporations who have a vested interest in mindless projects (or better said, ill-prioritized projects) that are going to benefit a few pockets. "Services" are equated with "My Job." What's left out of the equation is a voice of the majority of people who would want other things besides boneyard creek beautification or public sculptures. With less than 25% showing up to the voting booths, we can't say we didn't have a chance to express ourselves, and Council meetings are always open to the public- for five minutes of your participation even.

How we control and scrutinize the Illinois State Legislature is the real problem. They pass bills virtually unnoticed and rare is the press able to detect the fine details amid a glamorous budget deficit. We're No. 1!

The stunning greed here by Carle is amazing. They think the community's health is enhanced by stealing 3 million from our school district? You have to congratulate Carle's lobbyists in Springfield on a job well done. If we call it a clinic, then its non-profit. Right. 

Look for little crumbs to be thrown at the Unit 116 school district to ease the immediate public relations negativities. "Carle announces a free one-day dental check-up at the all area Urbana schools...because Carle cares about the children."

Right.

While a combination of factors contribute to the sudden deficits created by Carle's "lucky" legislative break, it comes down to this: does Carle deserve a property tax exemption? I see no itemized listing of the charity they offer, nor the definition of that charity. I see incredible price gouging for every last object and service to treat an illness. Too many residents here have a bad taste in their mouth after a visit at Carle. Are the poor truely being treated to quality healthcare, and how stable will that be in the future now that Carle doesn't have to prove much or do much to qualify for the tax exemption? Security, please escort this uninsured person out of the building....now gimme our tax break.

enoughalready wrote on April 19, 2013 at 10:04 am

Finally...some truth. From the Urbana Superintendent's report posted online:


"Although we have been aware of the financial impact, the most recent tax exemption granted to Carle under the new legislation includes additional properties that total an additional $1.4M in lost tax tax revenue for this year."


So, it's not $6 million and it's not $3 million, it's $1.4 million.  This represents the properties previously on the tax rolls that can now be taken off due to Illinois law. This is the true net impact.  The other "setback" amounts are not true takeaways from the school district because its the property taxes Carle pays under protest due to the litigration stemming from the taxing bodies putting formerly tax exempt properties on the tax rolls. And up until the exemptions were yanked in 2007, the taxing bodies never collected on those properties.


Again, from the Superintendents's report:


"Urbana schools have not spent the property dollars collected from Carle for the four properties in question for the past 8 years (Roughly $10M in escrow)"


So, they appropriately reserved these amounts because they know there is a chance they did the wrong thing and will have to return these monies. They are not spending the money so it cannot be considered a takeaway.  And if they have to return the money it cannot be seen as a takeaway as they historically did not collect property taxes on these properties anyway.


And it appears there was plenty of warning and knowlegde. 


http://www.usd116.org/index.php/2013/04/superintendents-report-to-the-boe-regarding-carle-tax-exemption/


 

EL YATIRI wrote on April 20, 2013 at 11:04 am
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Indeed, it didn't make sense at all to many physicians who saw their income reduced by the arrangement.  However the Foundation always managed to pack the Clinic Board with those who would toe the line.  Dissenters never got into positions of authority.  Those who advocated breaking away from the Foundation and building their own campus were marginalized and drummed out.