Milwaukee, Wisconsin-based Aurora Health Care, a large health care system, has proposed construction of a new $85 million hospital and physician clinic in the Town of Summit, west of Milwaukee. Before construction can begin, the Town of Summit must amend its master zoning plan, changing the zoning from “Business Park” to “Institutional.” While a portion of the project will keep the property on the property tax rolls, the portion related to the hospital would be exempt from property taxation. Everybody acknowledges that the new project will require the Town of Summit to expend additional funds on municipal services, including...
| The Desktop Guide is Quickly Becoming the Must Have Guide for Nonprofit Executives Jack Siegel's new book, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good, has quickly become the go to guide for nonprofit executives and advisors. So what are people saying about the Guide? When our Jack Siegel introduced himself to one of the leading authorities on the law of federal tax exemption after she had made a presentation at a recent conference, the speaker said, "You're the 'Jack' in the Guide! We are fighting over your Guide in our office." A second speaker held the book up to two people who were asking questions after her presentation, exclaiming "I love this book. I tell everyone at conferences to buy it." One state charity regulator has indicated that the Guide is great and has recommended it to her fellow regulators. Some of our readers have followed the link to the Amazon.com Web site, but apparently have not bought the Guide. If they were turned off by the price, they should reconsider. One prominent attorney in the exempt organization field grabbed a review copy of the Guide and couldn't put it down. She has instructed a number of her clients to buy it, pointing out to them that for less than 1/2 hour of her billable time, they receive a lesson (and resource) that tells it like she would like it told. If you are starting a new charity, the Guide could save you thousands of dollars in legal fees by teaching you how to better utilize your legal counsel and framing the issues so you don't spin your wheels at $400 an hour. Buy your copy today at Amazon.com. Barnes & Noble, or John Wiley (the publisher). |
police and fire protection.
Now enter ProHealth Care Inc., owner and operator of the Oconomowoc Memorial and Waukesha Memorial hospitals. The proposed Aurora project is approximately three miles from Oconomowoc Memorial hospital. ProHealth is opposing the zoning change in an effort to keep Aurora out of its market, arguing that the Aurora project would drive up health care costs by duplicating medical services already available to the community. That argument may or may not be true. The question is whether that argument is an appropriate one in the context of a land use decision.
Several newspaper reports that this has become a bitter battle, The Business Journal of Milwaukee, in article entitled “Campaign Signals Heated Debate Over Hospital” (August 13, 2004, Julie Sneider) quotes Evan Zeppos, a well-known public relations executive, as saying
"If the campaign continues like this, the greater Waukesha County community is the loser…It's bitter, and people will lose friendships over this.”
The same article notes an anti-Aurora website Notanotherhospital.org, which the article says is funded by ProHeath Care Inc. A quick view of that site makes clear that the debate is heated and the project is controversial.
There are two basic issues in this dispute, both centered on legal and business considerations. The first is the one we have already mentioned, property taxes. Those opposing the Aurora project are mobilizing community support by arguing that the Aurora project will take property off the property tax roles. The second issue is whether a second hospital for this service area is necessary. Although the articles don’t focus on it and we are not familiar with the current regulatory environment in Wisconsin, we assume that construction of a new hospital requires some sort of regulatory approval.
This is where our story really begins. In an effort to take the property tax issue off the table, Aurora Health Care has proposed entering into a PILOT (payments in lieu of property taxes) agreement. The terms of the agreement are set out in a September 21, 2004 article appearing in the Milwaukee JournalSentinel entitled “Aurora has Payment Plan for Hospital--Lump Sum would Help Summit with Site's Expenses” (Amy Rinard)
According to the JournalSentinel article, the Town of Summit estimated that it would have to incur $2.2 million in costs following the new hospital’s opening. Aurora proposed initial annual $350,000 payments for twelve years. However, the first six payments would be paid in a $1.5 million lump sum when the Town of Summit issues a building permit for the new hospital and the last six payments would be paid as a $1.2 million sum when the Town of Summit issues an occupancy permit. The lump sum payments obviously include a discount factor. Aurora’s proposal then includes a $200,000 annual payment in years 13 through 29, and then a $250,000 annual payment thereafter. Just to put things in perspective, according to the JournalSentinel article, the Town of Summit levied $1,254,343 in property taxes last year.
Aurora's sweetner apparently did the trick. The Town of Summit Plan Commission voted to recommend that the Town Board amend the land use plan and make the zoning change that would permit Aurora to move to the next step in the process. In a September 22, 2004 article in the Milwaukee JournalSentinel, one of the Aurora's opponents points to the PILOT as a factor in the Plan Commission's recommendation to the Town Board.
LESSON: PILOTS are often viewed as “blackmail” payments. And one could certainly argue that Aurora wouldn’t be making its generous offer if the project were not so controversial. But like everyone else, Aurora and nonprofits must respond to the environment in which they operate. We would have to say that the Aurora proposal represents a very creative use of PILOTs. Aurora apparently succeeded in neutralizing the property tax issue at the initial stage of the approval process.
|
THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NON-PROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL.
If you liked this post, please visit http://www.charitygovernance.com for a description of our Guide/Tutorial for non-profit directors and officers entitled “Avoiding Trouble While Doing Good: A Guide for the Non-Profit Director and Officer.” Copyright 2004, Auto Didactix LLC. All Rights Reserved. You may not copy any portion of this post to a computer "clipboard" for reposting anywhere or e-mailing, or otherwise reproduce this post. If you want others to review this post, you may provide them with a link to this web blog. Any use of the material or ideas in this post by reporters or other publishers shall make reference to Jack Siegel, author of "Avoiding Trouble While Doing Good, A Guide for the Non-Profit Director and Officer" and this web blog. |
Comments