Jim Dey: Why should Carle pay if law says it doesn't owe?
People don't know much about property taxes, except that they don't like paying them. They also don't like it when they think others who should pay don't.
That perception and the millions of dollars at stake each year are at the root of a long-standing battle between local officials and two Urbana hospitals — Carle Foundation and Presence Covenant — over property taxes. The battle has spawned litigation and legislation, but not until this week was there much conciliation.
Carle reached an out-of-court settlement with the Urbana school and park districts that ended the hospital's effort to collect property taxes it paid under protest.
Carle and the two districts agreed on a near split of the cash they held in escrow. The school district will refund about $5.7 million to Carle while the park district will return about $1 million.
Meanwhile, the city of Urbana, Cunningham Township and Champaign County continue to fight Carle's demand for its money back.
It's been a long and emotional battle. But what's really at stake here?
Urbana Mayor Laurel Prussing recently blamed a $1 million budget gap and a quarter-cent increase in the city's sales tax on Carle's property tax exemption. She has charged that Carle's property tax exemption will require other taxpayers to pick up the slack and "set Urbana on a downward spiral."
State Rep. Naomi Jakobsson, an Urbana Democrat, has introduced legislation to ease the so-called "Carle effect," which is ironic because she supported the 2012 legislation creating the "Carle effect."
Overall, tax officials estimate the county-wide loss to more than two dozen taxing district will be nearly $6 million this year.
But the impact will fall differently on different taxing districts. Schools will lose the largest sums, although they may get some or all of it back from state reimbursement.
To get an idea of the impact, The News-Gazette asked Carle hospital for its property tax payment figures from 2004-2013 for taxing bodies in Urbana. The figures were compiled by Carle general accounting manager Gene Koch.
Before all the controversy began in 2004, Carle paid $1.25 million to Urbana taxing districts in property taxes for the previous year. That sum covered properties owned by Carle Foundation but leased to Carle Clinic, primarily doctors' offices. There was no protest filed.
When local officials started pursuing Carle for property taxes on previously untaxed properties, Carle's property tax payment jumped to $3 million in 2005, of which $1.6 million was paid under protest.
The newly taxed property included what Carle calls its core, including the hospital, power plant and guest house.
Carle paid $3.1 million in 2006 and $3.3 million in 2007, protesting $1.7 million and $1.8 million, respectively.
In 2008, tax officials extended their assessment to 29 properties previously partially or completely tax exempt, including the hospital's parking garage and parking lots and buildings that house hospital functions. That year, Carle paid $4 million to Urbana taxing districts, protesting $2.4 million.
Over the next three years, Carle paid ever larger amounts in property taxes, topping off at $5.5 million in 2012.
During the 2004-12 period, Carle paid $19.7 million in property taxes under protest.
After its new state-approved exemption was granted, Carle paid just $450,000 to Urbana taxing districts in 2013, none of it under protest.
The tax exemption comes courtesy of 2012 legislation passed by the General Assembly and signed by Gov. Pat Quinn that allows hospitals to avoid property tax payments if they provide charity care in amounts that equal or exceed the property taxes owed.
State Reps. Jakobsson and Chapin Rose, a Mahomet Republican, voted for the legislation.
The bill resulted from a 2010 Illinois Supreme Court decision that allowed local officials to tax the property of Provena Covenant Medical Center in Urbana, now Presence Covenant.
The court held that hospitals are entitled to a charitable exemption but only if they provide charitable services. Merely being a hospital wasn't enough, the court ruled, as it invited the Legislature to clarify what constitutes charitable care.
As the property tax question spread to hospitals around the state, the issue took on added importance. Finally, urged on by Gov. Quinn, the General Assembly in 2012 passed the law defining charitable care and authorizing the property tax trade-off.
The real Carle effect is going forward because the properties it paid taxes on in 2004 were merged in 2010 with the foundation. That $1.25 million paid in 2004 has shrunk to $450,000 in 2013.
That's because Carle easily exceeds what it owes in property taxes with what it provides in charity care.
Carle Vice President Mike Billimack said the hospital provided $35 million in free or discounted care in 2012. During the period from 2004-2011 — the time period it paid taxes under protest — he said it provided $82 million in charity care.
That does not include other sums that go into the property tax reduction formula, like Medicaid shortfalls and other community endeavors.
The property taxes Carle continues to pay are those for miscellaneous properties the hospital said are "unrelated to health care services." They include rental and investment properties and facilities leased to commercial entities like Walgreens.
The numbers are dizzying and vast, the issues complicated and the consequences mixed. But the law is working as intended, even if the Carle effect adversely affects some taxing districts.
Jim Dey, a member of The News-Gazette staff, can be reached by email at firstname.lastname@example.org.