LRGHealthcare declines to make payment in lieu of taxes on exempt property in Gilford

GILFORD  — Gilford's town attorney has advised selectmen that two of the buildings owned by LRGHealthcare in Hillside Park meet tax-exempt criteria.

The question arose earlier in April when the hospital applied for its 2013 tax-exempt status, as it has traditionally done and selectmen wanted to understand better what the town attorney thought.

Atty. Robert Ciandella told selectmen that LRGHealthcare meets the requirements and suggested instead to do the research on a PILOT or payment in lieu of taxes.

PILOTs are payments to communities that enjoy a tax-exempt status but voluntarily, and usually after negotiation, pays the community some money, the amount of which is usually based on the cost of the town services it uses.

After approaching LRGHealthcare about making a payment in lieu of taxes (PILOT) for its facility on Maple Street, selectmen learned recently that LRGH will not pay one.

After hearing Ciandella's analysis, selectmen voted unanimously Wednesday to grant them the tax exempt status and not to pursue the matter further.

According to a letter sent to the town on October 14 and signed by the MItchell Jean, Esq. Director of Risk Management and Safety, LRGHealthcare feels the two units on Maple Street are appropriately taxed. One of the three buildings in the complex pays property taxes, however the other two are tax-exempt.

"We appreciate the fact that the town is experiencing financial constraints," he wrote. "The hospital is being subjected by the state to Medicaid Enhancement Taxes (MET) taxation in the millions that is putting severe pressure on the organization's finances."

Advanced Orthopedic Specialists are part of LRGH and are located at Hillside Park on Route 11A. LRGHhealthcare pays property taxes to Gilford on one of the three buildings.

According to Ciandella, LRGH meets the four individual criteria for tax-exemption three of which are – that the institution was established and is administered for a charitable purpose; that an obligation exists to perform the organization's stated purpose to the public rather than simply to members of the organization; and that none of the organization's income or profits are used for any purpose other than for which it was established.

Ciandella said the fourth prong - that the land, in addition to being owned by the organization, is occupied by it and used directly for the stated charitable purpose - required some additional analysis. This is the actual use of the property.

Based on data provided to the town attorney by LRGH, 15 percent of the accounts for two of the three units on the property are held by people who are uninsured, under-insured and those who don't have the ability to pay.

In 2009 LRGHealthcare provided discounts and assistance amounting to $299,256. In 2010 it was $430,515, in 2011 it was $594,294 and in 2012 it was $256,651. These discounts and services amount to 13 percent of LRGHealthcare's net revenue.

In addition, Ciandella concluded the sleep center in one unit is the only source for that service in the county and the Rehabilitation/Therapy Department "is the sole source of integrated and coordinated rehabilitation and therapy (Physical, Occupational, and Speech) including hydro-therapy in the county."

Considering the above, the Ciandella determined LRGHealthcare meets the final prong of the four-prong test.

His legal opinion drew heavily on the standards set by the City of Laconia v. Taylor Community when in 2001 the N.H. Supreme Court upheld Taylor Community's tax-exempt status after a lengthy court battle.

The Taylor Community provides the city of Laconia an annual payment in lieu of taxes.

In Gilford, the Wesley Woods housing community pays a payment in lieu of taxes to the town for eight of its units. The PILOT was negotiated this year as a compromise between the two after three years of disagreements and instead of litigation.