Tax loss eyed in hospi­tal sales

School dis­tricts brace for po­ten­tial drop in prop­erty tax rev­enue

The Community Connection - - LOCAL NEWS - By Evan Brandt ebrandt@21st-cen­tu­ry­media. com @PottstownNews on Twit­ter

As the sale of Pottstown Memo­rial Med­i­cal Cen­ter trans­fers one of the bor­ough’s largest prop­er­ties to a non-profit or­ga­ni­za­tion, tax­pay­ers should be look­ing to their wal­lets.

Last month, Bor­ough Man­ager Mark Flan­ders told bor­ough coun­cil it faces a $2.4 mil­lion bud­get gap, which could re­quire a 23 per­cent tax hike to close and part of the rea­son for the gap is an­tic­i­pa­tion of the hospi­tal com­ing off the tax rolls.

Fi­nance Direc­tor Jan­ice Lee con­firmed Sept. 29 that part of that gap is an­tic­i­pat­ing the loss of $235,251 in an­nual prop­erty tax rev­enues from the hospi­tal prop­erty.

Al­though the ques­tion of whether the prop­erty will be­come par­tially or fully tax ex­empt has yet to be an­swered, the bor­ough is pre­par­ing for the worst.

“I al­ready had the num­bers,” Lee said in an email to Dig­i­tal First Me­dia.

The po­ten­tial im­pact on Pottstown schools is even greater.

John Ar­mato, com­mu­nity en­gage­ment direc­tor for the school district, said this year the hospi­tal gen­er­ated $923,927 in rev­enues for the $62.2 mil­lion bud­get — which would be lost if the hospi­tal is taken off the tax rolls.

That’s the op­po­site of what hap­pened in 2003, when Ten­nessee-based Com­mu­nity Health Sys­tems pur­chased the non­profit Pottstown Memo­rial Med­i­cal Cen­ter. Its place­ment onto the tax roles pro­vided a $1.1 mil­lion boost in rev­enues to the school district.

In June, school board mem­ber Ron Wil­liams called the tax im­pact of the sale “a po­ten­tial dis­as­ter,” given the al­ready un­der-funded sta­tus of Pottstown schools, which this year re­ceived $13 mil­lion less than they would have un­der Penn­syl­va­nia’s newly adopted fair fund­ing for­mula.

Of­fi­cials at both Pottstown and Phoenx­iville school dis­tricts said the re­spec­tive hos­pi­tals in each bor­ough are their largest prop­erty tax­payer.

And of­fi­cials in each said in June that if the sale of the two hos­pi­tals from the Ten­nessee-based for­profit Com­mu­nity Health Sys­tems to the non­profit Read­ing Health Sys­tems goes through, they stand to lose as much as $900,000 a year or more in tax rev­enues.

That’s be­cause as a non­profit busi­ness, Read­ing Health Sys­tems would be el­i­gi­ble to seek an ex­emp­tion from prop­erty taxes — the main lo­cal source of in­come for Penn­syl­va­nia pub­lic schools.

Lee said all to­tal, the Pottstown hospi­tal prop­erty is cur­rently as­sessed at $22,751,595.06, which means it also cur­rently gen­er­ates $87,570.89 in an­nual tax rev­enue for Mont­gomery County.

There is one com­mu­nity in Berks County where Read­ing Health Sys­tems pro­vides a “pay­ment in lieu of taxes,” but no such ar­range­ment has yet been made in ei­ther Phoenixville or Pottstown.

Dur­ing a joint June 20 meet­ing of Pottstown Bor­ough Coun­cil and the Pottstown School Board, school board mem­ber Thomas Hyl­ton, who said the loss of the hospi­tal tax rev­enue “could be cat­a­strophic to this com­mu­nity,” urged bor­ough and district of­fi­cials to try to strike a deal with Read­ing Health Sys­tems be­fore the deal is closed.

“They want good pub­lic re­la­tions now and we should try to make the best deal we can now,” Hyl­ton said in June.

But with the sale that was fi­nal­ized Sept. 29, that door may have closed.

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