Bellingham council votes to tax PeaceHealth $1.2 million next year


PeaceHealth St. Joseph Medical Center

PeaceHealth St. Joseph Medical Center is located at 2901 Squalicum Parkway in Bellingham.


BELLINGHAM - City Council has voted in favor of imposing a $1.2 million annual business and occupation tax bill on PeaceHealth St. Joseph Medical Center, ending decades of tax exemption for the non-profit Catholic-affiliated hospital and its other health care services.

The taxation ordinance passed late Monday, June 9 on a 4-3 vote. Terry Bornemann, Michael Lilliquist, Jack Weiss and Pinky Vargas voted in favor. Gene Knutson, Cathy Lehman and Roxanne Murphy were opposed.

The council must take a second vote on the measure at a later meeting to make it official, but those second votes are treated as formalities in nearly every case. The taxation measure takes effect Jan. 1, 2015.

Weeks before the vote was taken, Catholic-affiliated PeaceHealth officials conceded that a religious tax exemption in existing city law was untenable, and they expressed willingness to shoulder a significant tax bill. But they asked council members to approve a compromise that would acknowledge PeaceHealth's role in providing medical care to those who cannot afford it, and in providing money-losing services such as mental health care.

In voting to impose the $1.2 million annual tax bill on PeaceHealth, the four council members in the majority rejected the compromise measure proposed by Mayor Kelli Linville that had been worked out in negotiations with PeaceHealth executives.

Under the compromise plan, PeaceHealth revenue from both St. Joseph's hospital and PeaceHealth outpatient clinics would have been taxed. But the compromise would have reduced the impact by lowering the tax rate. The rate would have been set to recover the $350,000 per year in tax revenue the city lost when PeaceHealth took over Madrona Medical in 2007 and North Cascade Cardiology in 2011.

The four council members who voted for full taxation contended that such a system would not be equitable to other taxpayers. Bornemann added that as the federal Affordable Care Act provides coverage to more lower-income people, PeaceHealth's charity care expenses will decline.

Reach John Stark at 360-715-2274 or . Read the Politics Blog at or get updates on Twitter at @bhampolitics.

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