Bill Would Require New Jersey Hospitals to Pay Municipalities

A bipartisan bill making its way through the New Jersey state legislature would require nonprofit hospitals, which have long enjoyed a property-tax exemption, to help their host communities pay for municipal services, Bloomberg reports.

The legislation would obligate nonprofit hospitals that also run for-profit businesses to make "community service contributions" of $2.50 per bed, per day, to municipalities to help defray the costs of police, fire, and ambulance crews. Many poor inner-city hospitals or those deemed by the state to be money-losing would be exempt under the bill, which passed a state senate committee earlier this month. The new payment formula is said to be less confusing for municipal governments that would have to decide how to assess hospitals in their communities, and the payments would be lower than the full levies hospitals might otherwise face, Sen. Robert Singer, a Republican co-sponsor of the bill, told Bloomberg.

Lawmakers are responding to a June court ruling which found that the Morristown Medical Center owed local property taxes because of the "blurred lines" between its nonprofit and for-profit businesses. In November, the hospital's owner agreed to pay the town $15.5 million over the next decade. The judge who issued the Morristown ruling also is presiding over a lawsuit against Princeton University, whose own property-tax exemption Princeton residents are challenging because the university collects drug-patent royalties that it shares with faculty.

"Clearly, the Morristown tax court decision has created a great deal of uncertainty, for hospitals and municipalities alike," said Betsy Ryan, president of the New Jersey Hospital Association, which supports the measure, in a statement. "Our goal was to support a statewide solution that would strike a fair balance."

"It's not a stretch to say that every nonprofit that owns property should be looking at this," said Linda Czipo, executive director of the Center for Non-Profits in Mercerville, New Jersey. "We're concerned about how the whole property-tax issue might play out for the broader nonprofit community."

Terrence Dopp. "Tax-Exempt Hospitals Face Payments to Host Towns in New Jersey." Bloomberg 12/28/2015.