January 19, 2016; NJBiz

Following the New Jersey tax court decision that found the modern nonprofit hospital to be a legal fiction, the subsequent finding that the Morristown Medical Center run by Atlantic Health was in large part subject to property tax, and the $25 million settlement reached between the town and the medical center, other nonprofit hospitals in New Jersey got busy backing a bill (S3299) that would standardize (and limit) hospitals’ payments to the localities in which they are based. That bill, which easily passed through the N.J. senate and house, ended at the office of Governor Chris Christie, who gave it a pocket veto along with 64 other pieces of legislation. This veto provides a window for suits to be filed by municipalities, many of which opposed the bill, figuring they could net more through filing suit in light of the Morristown precedent.

Sponsoring legislators, however, blamed the loss of the bill on timing, in that it is the end of the legislative session, and Christie, a candidate for president, may be loath to pass what could be seen as a bill that levies a tax. Some then predicted a Wild West scenario that could endanger hospitals and the public’s best interests.

“With the governor not being here all the time, the normal back-and-forth that occurs for a bill like this didn’t have a chance to develop,” said Assemblyman John Burzichelli (D-West Deptford). Apparently there are problems of categorization to be dealt with. “The recipe is out there for absolute chaos,” Burzichelli said, adding that the money municipalities could be receiving from hospitals will now be going to tax lawyers.

But Gayle Chaneyfield Jenkins, a Newark councilwoman, says the ability to file suits based on individual circumstances is likely to be a better deal for cash strapped municipalities.

The governor’s pocket veto of this legislation that was hastily drafted and pushed through the lame-duck legislature gives us a real opportunity to craft a solution that does not shortchange Newark the way this bill did. I am not entirely convinced a one-size-fits-all solution is in the best interest of Newark or other municipalities that are home to nonprofit hospitals.

In the coming months, we need to convene an independent task force with tax experts and health care providers, including acute care hospitals and specialized nursing homes, so we can determine the best approach to ensure the city is receiving its fair share.

Betsy Ryan, the CEO of the New Jersey Hospital Association, which had backed the legislation, said, “We are disappointed with the pocket veto of S-3299/A-4903. NJHA, along with its hospital members and both houses of the legislature, firmly believed the bill provided a consistent statewide approach for hospitals to support their host municipalities with added community contributions.…Now that the bill has been vetoed, we will work to present a constructive and refined approach that will provide certainty to hospitals and municipalities while addressing any concerns the governor may have.”

A statement from Michael Cerra, lobbyist for the New Jersey League of Municipalities, said that the group (representing 565 municipalities) would use the stop action to try to push a payment scheme more favorable to the cities and towns. “We are obviously pleased with the pocket veto. However, we recognize that this issue remains a concern to the industry,” Cerra said. “Hopefully in the upcoming days we can restart the dialogue with the sponsors, our partners in the hospital industry and other interested parties to find a middle ground we can all agree upon.”—Ruth McCambridge