URBANA — Carle CEO Dr. James Leonard said he is pleased with the settlement agreement with the park district and school district.
The amounts that both districts will pay back to Carle, as well as their timeline on doing so, is the result of several months' negotiations, Leonard said at a Wednesday press conference.
Both districts Tuesday approved the agreement, which will end their involvement in a lawsuit regarding Carle property taxes that has been going on since 2007.
Leonard said the settlement is a reflection of the goals of the hospital's board, which includes community members.
"We are a part of the community," he said. "We take that very seriously."
Leonard said Carle kept bargaining with the districts even when Judge Chase Leonhard ruled this month that Illinois' current law on property tax exemptions for nonprofit hospitals applies to Carle's exemption claims from 2004 to 2011.
The ruling, which is not final, could pave the way for Carle's exemptions from 2004-11 to be reinstated, said Carle spokeswoman Jennifer Hendricks Kaufmann.
Despite that ruling, Carle still settled with the park and school districts, Leonard said. The settlement calls for the park district to pay Carle $1.0125 million, and the school district to pay Carle about $5.7 million.
Carle didn't pursue having the districts return interest earned on the property tax money they've been keeping in escrow as the lawsuit was addressed in court, he said.
Leonard said Carle will follow state law on property tax exemptions.
"We intend to be a good citizen and follow the rules moving forward," Leonard said.
He said the heath care industry as a whole faces financial challenges. Carle will continue to do so in the next five to six years as it faces the possibility of missing $60 million or more in reimbursements from programs like Medicare and faces challenges from the Affordable Care Act.
He said Carle needs to able to meet the health care needs of the community.
"We have to be healthy" in order to do that, he said.
Leonard said Carle decided to start negotiating with the districts because of the expense of the lawsuit to all involved.
"This is expensive litigation," he said.
He said Carle knew it would have to accept less than a full refund from the districts in order to start working toward a settlement. That the districts will refund the property tax money through 2018 was also the result of negotiations among the three parties.
Leonard said Carle will put the refunded money through its budgeting process, and it will be used for things like updated technology and the free and discounted health care it provides to patients.
The agreement stipulates that Carle should file a motion to dismiss the school and park districts as defendants within five business days.
L.J. Fallon, Carle's senior vice president of legal affairs, said drafts of that motion are already circulating among the lawyers involved.
"We're geared up to go to the next steps to make this all happen," Fallon said.
Prior to the settlement, the school district had been holding about $7.3 million of Carle property tax money in escrow in its education fund, which it uses to pay teachers.
It had escrowed about $1.1 million in its operations and maintenance fund, about $1.5 million in its debt service fund, about $250,000 in its transportation fund and about $330,000 in the fund for paying retirement contributions for non-certified employees.
It also had about $4,000 escrowed in its working cash fund, about $187,000 in its tort fund and about $124,000 in its life-safety fund, from which it pays for building repairs required by the state.
Carol Baker, the school district's chief financial officer, said the district will wait for direction from its auditors about how to refund the tax money.
Superintendent Don Owen said Tuesday it's not appropriate to discuss how Urbana will use the remaining property tax money until Carle dismisses the case, and then, it will be the school board's decision as to how it will be used.
The school board is also expected to discuss its property tax levy at its November business meeting, which is scheduled for Nov. 19.
The levy sets how much the school district will ask for in property taxes that it will receive next calendar year.
The park district board voted 4-1 Tuesday to approve the settlement, and the school board voted unanimously.
Owen said Tuesday the settlement allows the school district to focus on its mission.
However, he said the situation has caused the school district to lose about $8 million in general state aid over the last eight years. That's because the state board of education determines how much general state aid a school district receives by how much money a school district collects in local resources, including taxes, "regardless of if we are able to spend it," Owen said.
The settlement also calls for the Urbana school district to drop a counterclaim it filed against Cunningham Township last year.
The counterclaim said that if the school district was found liable for breach of contract over a 2002 agreement with Carle, the township would have to contribute to the school district's reimbursement of Carle, as well as damages. The 2002 agreement said the city, Cunningham Township, school district and park district would receive money from Carle in exchange for the school district and other taxing bodies not challenging Carle's property tax exemptions
Owen said as a result of the settlement agreement, the school district will no longer be involved in any Carle-related litigation.
"The purpose of the district entering into a settlement was to remove ourselves from all litigation related to Carle and Carle's tax exemptions," he said. "This will allow us to invest our fiscal and human resources on our mission."