Tax loss eyed in hospital sales
School districts brace for potential drop in property tax revenue
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.