Politics Blog

Bellingham City Council takes up tax exemption for PeaceHealth

The Bellingham City Council's finance and personnel committee is taking up the complex question of continued B&O tax exemptions for PeaceHealth, the non-profit organization that owns St. Joseph hospital and many other health care-related services in Whatcom County.

The committee meeting is scheduled for 1 p.m. Monday, Jan. 27 in City Council chambers. The council agenda schedules just a few minutes for the discussion.

No action is scheduled on the longstanding tax exemption. The city staff is asking council members whether they want to be presented with an official ordinance removing or changing the tax exemption. That ordinance would get a public hearing at some future time before a vote would be taken.

Read the details here.

It looks as though the city is contemplating removing the current blanket exemption for "non-profit religious health care providers" (PeaceHealth is affiliated with the Catholic Church) but would replace them with the partial exemptions allowed in state law for non-profits that receive Medicare and other public payments, which account for a sizable amount of PeaceHealth's total revenues. There is also an exemption under state law that could apply to PeaceHealth's new cancer center.

But the change still appears likely to add significant amounts of new revenue to city coffers, even though the tax rate would be less than one half of one percent. On page 17 of the document linked above, the city reveals that it has been missing out on more than $300,000 per year in tax revenues stemming from just two PeaceHealth acquisitions of other for-profit health care providers in 2007 and 2010. That figure does not include revenues to the hospital itself. 

UPDATE: PeaceHealth's community affairs director, Chris Phillips, acknowledged that the city took a hit when the non-profit organizaton took over Madrona Medical and North Cascade Cardiology. But rather than fix the problem by imposing B&O tax on all hospital revenues, Phillips said PeaceHealth is proposing to make payments in lieu of taxes--to be negotiated with the city--to replace the revenue the city lost on those outpatient services. PeaceHealth wants the hospital's exemption to stay in place.

Phillips argues that other cities also support their non-profit community hospitals with either tax exemptions or hospital districts that collect taxes for hospital support.

When former mayor Mark Asmundson proposed a discussion on the idea of ending PeaceHealth's B&O tax exemption in 2002, the hospital argued that the increased tax expenses would mean fewer community services. St Joseph backers packed the council chambers, and the idea was quietly dropped.

Since 2002, PeaceHealth has acquired a number of other health care providers in the area, most notably Madrona Medical in 2008.