Risk, reward key to settlement issue

Risk, reward key to settlement issue

Carle Hospital reached a peace agreement over property taxes with two local units of government, but the legal battle with others continues to rage.

Urbana Mayor Laurel Prussing loves a good fight. Perhaps that's why she's surprised when others settle their disputes outside the ring.

To Prussing's chagrin, the Urbana school and park districts this past week wrapped up a long dispute over property taxes with Carle Hospital by choosing to forego a legal skirmish and reach a compromise agreement over taxes that Carle paid under protest and was suing to get back.

Under the arrangement, the school district will keep about half (47 percent) of the roughly $11 million Carle paid in disputed property taxes from 2004 to 2011, returning $5.7 million to Carle. The park district will keep about half of the roughly $2 million it received from Carle during the same period, returning about $1 million to Carle.

Both sides seem pleased and relieved with the agreement, perhaps concluding that 50 percent of something is better than 100 percent of nothing. If so, it wouldn't be the first time that litigants chose to take less than they wanted rather than roll the dice and risk snake eyes.

Mayor Prussing, however, is unhappy with the settlements, charging that Carle intimidated these two government entities. That claim can't survive scrutiny.

All the taxing districts are in the same position and stuck with the same arguments. Both sides have good lawyers, and the law is the law. What the park and school officials saw, however, was that Associate Judge Chase Leonhard had ruled earlier this month that Illinois' current law on property tax exemptions for nonprofit hospitals applies retroactively to Carle's exemption claims from 2004 to 2011.

Because there are appellate courts, Judge Leonhard certainly isn't the last word on the subject. But that kind of adverse ruling could have given the schools and the park district pause. It certainly should have.

One might ask, however, why Carle would want to settle given Leonhard's ruling when it could keep fighting and win back all the money it paid in disputed property taxes.

Litigation is expensive, and negative publicity is unpleasant. Despite its status as an outstanding medical facility and a huge part of the local economy, Carle's sheer size makes it instinctively unsympathetic to many people. Winning in court might have exacerbated that problem.

Nonetheless, the court battle will proceed. The city of Urbana and Cunningham Township, which are essentially the same, plan to fight on, as does Champaign County.

The question of retroactivity aside, here's the bigger issue. Prussing and Co. say they plan to challenge the constitutionality of a state law that addressed the issue of imposing property taxes on hospitals by allowing them an exemption if they met certain threshold levels of donated services to the community.

The legislation was passed in response to an Illinois Supreme Court decision upholding the constitutionality of levying property taxes on hospitals. But in that decision, the justices acknowledged that the issue was unclear and invited the General Assembly to pursue a legislative clarification.

It's understandable why Prussing & Co. are unhappy with the fix; it's denying them a new source of revenue. But it's hard to see a constitutional problem with legislation that establishes a balancing process by which hospitals could be exempted from property tax if their charity care, government payment shortfalls and other donations meet or exceed what they would otherwise pay in property taxes.

Lawyers and courts may disagree. But, on its face, the Legislature appears to have done exactly what it was asked to do. If people don't like it, they're free to ask their legislators to change the law. That's democracy.

Everyone will, of course, eventually find out who's right. If Prussing and Co. prevail, park and school district officials will look like the wimps the mayor says they are. If it goes the other way, those who rejected Carle's repeated invitations to negotiate a settlement will have second thoughts about their winner-take-all gambit.

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