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The original item was published from 9/28/2020 5:43:53 PM to 9/29/2020 12:00:02 AM.

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Posted on: September 28, 2020

[ARCHIVED] Assembly Approves Hospital Subsidy Bill

Yesterday, the Assembly voted on and approved, A-1135, a bill which the League opposes. A-1135 seeks to address the ongoing issue of property tax exemptions for nonprofit hospitals with on-site for-profit medical providers. The issue stems from a tax court decision which brought to light how the business model for modern hospitals does not comport with the original public policy reasons for exempting non-profit hospitals from property taxes.

While the League is supportive of a legislative solution to this issue, we do not believe that A-1135 provides a proper solution. As a threshold matter, the bill sets up an unconstitutional tax exemption. Notwithstanding the constitutional issues, A-1135 poses other concerns as it attempts to create a Community Service Contribution (CSC) fee which would be paid by hospitals organized as non-profits in lieu of any property tax. The CSC fee is calculated based on the amount of licensed acute-care beds in a hospital
which, based on industry trends, would mean the fee would be reduced each year as hospitals move away from these types of beds.

The contemplated CSC fee would be far smaller than any property tax bill which these hospitals would otherwise be subject to. Effectively, serving as a subsidy to an otherwise profitable industry, paid for by all other property taxpayers of host communities.

We do welcome some committee amendments made to A-1135, including the removal of provisions of the bill that would have voided the settlements and agreements some host municipalities have already made with hospitals in their communities. The amendments also remove a section of the bill as introduced that would have required payments already made under negotiated agreements to municipalities to be reimbursed to hospitals. However, even with these changes, the League remains opposed to A-1135.

The Senate companion, S-357, has been introduced and referred to the Senate Health, Human Services, and Senior Citizens Committee but has not yet been scheduled for a hearing. We urge our members, especially those hosting non-profit hospitals, to review
A-1135 and S-357, and to reach out to your legislators expressing how this legislation would impact you and your taxpayers.

The League will continue to advocate for municipal interests and will continue to keep our members informed as this matter continues to evolve.

Contact: Frank Marshall, Esq., Associate General Counsel, fmarshall@njlm.org, 609-695-3481 x137.

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