Tacoma May End Tax Exemptions for Large Nonprofit Hospitals

The Tacoma city council will vote this week on a proposal to end partial tax exemptions for the city's two largest nonprofit hospitals, the Tacoma News Tribune reports.

Proposed by city manager T.C. Broadnax as part of his 2013-14 budget plan, the measure would eliminate a 75 percent exemption on business and occupation taxes — reduced from 100 percent last February to help fill a shortfall in this year's budget — for the MultiCare and Franciscan health systems. Restoring the full tax rate of 0.4 percent for the two systems is expected to generate an estimated $5.5 million in revenue for the city over the next two years. Smaller nonprofit hospitals with annual gross income of less than $30 million will remain fully tax-exempt.

Hospital officials have argued that eliminating the exemption was the wrong approach to addressing the city's budget problems. "As you finalize the city budget, I urge you to fully consider alternatives to address the city's financial problems," MultiCare CEO Diane Cecchettini, whose system employs 5,800 people and has created hundreds of construction jobs after investing millions in expansion projects, told members of the city council. "We stand ready to work with you on a compromise approach that would be fair and reasonable for all concerned." Franciscan CEO Joe Wilczak said his organization has hired 1,140 employees since 2007, has provided $25 million in charity care for the poor, and plans to invest $30 million in Tacoma over the next three years.

Last Tuesday, the city council narrowly voted down an amendment that would have rolled back the tax to a 50 percent exemption beginning in 2015. Councilman Joe Lonergan said the sunset provision was meant to ensure a meaningful re-examination of the city's business tax structure before the next budget cycle. "We've lived without this money for a long, long time," Lonergan said before the vote. "But we find ourselves in an unprecedented situation. As a result, we're grabbing for money. My fear is that without some sort of forced re-examination, it will be too easy to make this the status quo."

Lewis Kamb. "Tacoma Might End MultiCare/Franciscan Tax Break." Tacoma News Tribune 11/20/2012. Lewis Kamb. "Tacoma Rejects Sunset Provision for Hospitals." Tacoma News Tribune 11/21/2012.