How many times have you heard an Oak Lawn politician say, “The hospital doesn’t pay property taxes and that’s unfair.”
What has always been left unsaid is that there is a state law that provides a “charitable exemption” for hospitals if the value of their charitable activities exceed what they would have paid in property taxes. For Advocate Christ Hospital, that is a hefty amount.
The Illinois Supreme Court on Thursday upheld the constitutionality of a 2012 law that sets standards for property tax exemptions for state hospitals.
Oak Lawn Village officials have fought tooth and nail with the hospital demanding what they had called a “fair share” payment by the tax exempt not for profit hospital despite the state law.
Earlier this year, the village board approved an agreement with the hospital calling for $2,600,000 in payments over four years. The first payment of $600,000 for the 2017 year is due by June 8, 2018. The second payment for 2018, in the same amount is also due at that time. Two additional payments to be made by the end of June in 2019 and 2020, each in the amount of $700,000, are also part of the transaction. Even though the agreement specifically calls the payments grants, Village President Sandra Bury said she considers it a fair share agreement.
In any case, the agreement came just in time because yesterday the Illinois Supreme Court ruled that the law exempting hospitals from property taxes is valid. The hospital had bargained with the village, which has a major budgetary deficit, because it thought that the court may rule against hospitals.
“[The Legislature] intended to enact a constitutional hospital charitable property tax exemption,” the justices wrote.
Illinois Health and Hospital Association CEO A.J. Wilhelmi praised the decision.
“Taxing non-profit hospitals would hurt the communities they serve by diverting dollars that are better used to care for patients and to upgrade equipment, modernize facilities and hire needed staff,” he said in a statement.
Oak Lawn shouldn’t expect to keep receiving the “grants” after the four year period. The agreement requires the village to deposit the money into a special fund and requires the village to provide an accounting to the hospital on the expenditures.
The four purposes that the agreement allows payment for are:
(1) The direct costs caused by the operations of Advocate that can be clearly documented by a transparent and verifiable methodology.
(2) Economic development efforts intended to spur the development of greater commercial development and the growth of a tax base for the village to fund the needs of the village.
(3) To identify and implement investments that increase the efficiency and reduce the cost of village services.
(4) To allow the village to contribute not more than 25% of any year’s annual grant to its reserve fund to offset future village deficits.
The village is not allowed to impose any new or additional taxes, fees or assessments on Advocate during the term of the agreement unless a utility tax is increased and applies to all customers.