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Elder facilities seek tax exemption

| Sunday, Jan. 4, 2009

Tough economic times might get tougher for some municipalities and school districts if officials from regional elder-care facilities win their battles to stop paying real estate taxes.

A 2007 state Supreme Court ruling that nonprofit organizations passing a five-point test can be exempt from real estate taxes has triggered tax appeals by senior-care facilities throughout the state.

Officials from those facilities say they meet the court's primary requirement that they operate as true charities because no residents will be asked to leave if they run out of money.

Though all eyes are fixed on the cases brought by the elder-care facilities, some officials fear the appeals may trigger a landslide of challenges from other nonprofit organizations. That could include organizations that care for the mentally retarded, mentally ill or handicapped and other types of medical facilities that provide care for the poor and uninsured.

"This is all virgin territory. We're all going to learn about it," said Hempfield Area School District Solicitor Dennis Slyman.

There are 32 retirement communities in Allegheny, Armstrong, Butler, Indiana, and Westmoreland counties, according to the state Insurance Department, which licenses the facilities. Allegheny has the most -- 19 -- followed by Westmoreland with four.

To date, only a few of those senior facilities have appealed their tax statuses.

Officials from two of the largest senior-living communities in the Alle-Kiski Valley -- Presbyterian SeniorCare's Longwood at Oakmont and Concordia Lutheran Ministries in Butler County -- say they have not pursued a reduction in property taxes.

Pat Kornick, a spokeswoman for Presbyterian SeniorCare, said officials there are aware of the court decision but haven't made any moves to use it to the organization's advantage.

"At this time we have no intention to appeal our status," Kornick said.

Keith Frndak, president and CEO of Concordia's 167-acre campus that straddles the border of Winfield and Jefferson townships along Route 356, said his organization likely will pursue changes in the future, but hasn't yet taken any action.

"It's a complicated situation," he said.

Concordia's facilities that provide skilled nursing and assisted living already are tax-exempt, Frndak said. But the neighboring apartment buildings designed for independent retirees are taxed.

Frndak said since all the buildings contribute to Concordia's nonprofit mission, the court ruling someday could pave the way for a reduction or elimination of property taxes on independent living facilities. Concordia now pays more than $250,000 annually in property taxes, Frndak said.

"They exist to serve a public good and to relieve a government burden," Frndak said, noting the cost to taxpayers could increase if Concordia no longer operated and government agencies took over the care of Concordia's residents. Concordia houses about 420 independent retirees and another 600 residents in the assisted living and skilled nursing facilities.

No action has been taken, but Frndak said he foresees Concordia approaching the taxing bodies -- including South Butler County School District -- in the future.

"We will probably look at this and see if there is some way to get some modest relief," Frndak said, indicating similar facilities in the state have negotiated contributions in lieu of taxes. "We also realize the economy is rough on taxing bodies. It's a two-edged sword."

Schools could lose money

Area school districts would take the biggest hits because they receive the bulk of property tax revenues.

For instance, the Franklin Regional School District in Murrysville could lose $183,000 from its $44.5 million budget if Redstone Presbyterian SeniorCare wins its appeal to the Westmoreland County Tax Assessment Board. Redstone operates three facilities in Hempfield, North Huntingdon and Murrysville.

The Norwin School District, which takes in North Huntingdon, would lose $161,000 from its $54.9 million spending plan.

The Hempfield Area School District stands to lose $117,000 from its $79 million annual budget if Redstone prevails.

The Bethlen Home in Ligonier, which is operated by the Hungarian Reformed Federation of America, has filed a complaint against Westmoreland County seeking the return of more than $34,000 in taxes it paid in 2006 and 2007. It also wants the Ligonier Valley School District to refund more than $146,000 in school taxes. Bethlen operates a 96-bed skilled-nursing center and a 10-bed unit that cares for patients suffering from dementia.

In Allegheny County, the Mt. Lebanon and Chartiers Valley school districts are appealing decisions by the Allegheny County Board of Assessment Appeals that exempted Asbury Health Center in Mt. Lebanon and the Baptist Home Society in Scott Township from paying property taxes.

The exemption would cost the Mt. Lebanon district about $11,000 of its $73.3 million budget and the Chartiers Valley District more than $16,000 from its $47.8 million plan.

The monetary stakes are relatively small for the school districts at this point, but officials are concerned about those possible challenges.

"Anytime there's an exception case, as soon as there's a landmark decision, copy cats will file an appeal under that exemption," said Randy Waggoner, an assessor in Perry County and president of the Assessors Association of Pennsylvania. "It could have a wider impact, but each case has to be taken on its own merits."

The Redstone appeal, which states the facilities are "purely public charities" was denied by the assessment board and will go before a Westmoreland County judge in the spring.

Attorney Darrell Arbore, who represents the Westmoreland County Tax Assessment Board, said he questions how free care helps local governments and school boards financially.

"I don't know how Redstone is relieving North Huntingdon of any burden," Arbore said.

He said the residences Redstone built in North Huntingdon are luxurious, and applicants pay hefty entry fees for an apartment or condo.

Redstone offers independent living, assisted living and nursing care at its facilities, according to chief executive officer John Dickson IV. Redstone is part of the Redstone Presbytery, a group of 81 Presbyterian congregations located in Westmoreland, Fayette, Somerset and Cambria counties.

Dickson said residents of his three facilities' 260 units pay a one-time entrance fee -- from $25,000 to $35,000 -- and are then assessed monthly charges for housing and meals.

Redstone operates through fees it receives from residents, public contributions and revenue from reimbursements through Medicare and Medicaid, Dickson said.

But Arbore said, "these are the types of condominiums in North Huntingdon that you would see in Southpointe." Southpointe is an upscale housing development and commercial center in Cecil, Washington County.

Hempfield's Slyman said he thinks the fee requirement harms the facilities' status as charities.

"If I'm paying through the nose, how is that a charity?" Slyman asked.

Dickson said the core of Redstone's argument is that no resident will ever be removed from the facility because he is unable to pay.

"If through no fault of their own -- if they ran out of money -- we have benevolent care that allows them to stay within their existing unit," Dickson said. "They're not displaced out of the system. That's really the core of the requirements for exemption."

Redstone absorbed $1.6 million in free and uncompensated care last year, he said.

"We think we have a good argument. It's not like we were a case study and trying to press the issue," he said.

Slyman said the Supreme Court ruling is just beginning to have a financial impact locally.

But not every retirement community that qualifies is seeking an exemption.

Tina Raybold, spokeswoman for Masonic Villages of Sewickley in Allegheny County, said her organization qualifies as a public charity but won't seek an exemption.

The Masonic Village is one of several in the state operated by the Grand Lodge of the Free and Accepted Masons of Pennsylvania.

"We've given it careful consideration, but we've decided not to go that route," Raybold said. "We definitely meet all the requirements." She said Masonic Villages donated nearly $2 million in free and uncompensated care to residents in 2007.

Raybold said the Masonic organization provides a payment in lieu of taxes to the local governments.

It also provides $2,500 scholarships to graduating seniors from Quaker Valley High School who have done volunteer work at the Masonic Village.

"Even though we're not required, we want to be a good community member," Raybold added.

Richard Gazarik is a staff writer with the Greensburg Tribune-Review.

Additional Information:

At a glance

Throughout the region, most tax-exempt lands are governmental properties, according to county assessors.

In Allegheny County, there are 562,000 parcels of property of which more than 16,000 are tax-exempt, according to the Assessors Association of Pennsylvania.

In Westmoreland County, there are more than 5,400 tax-exempt parcels out of a total of nearly 188,000, according to John Wilt, a member of the county's Tax Assessment Board.

Butler County has 105,000 parcels of which 3,700 are exempt from taxes, according to Edward Rupert, director of the Tax Assessment Office. He said the loss in taxes is $1.4 million annually.

Five-point test

Nonprofit elder-care facilities must pass a five-point test established by a 2007 Pennsylvania Supreme Court ruling to qualify for tax-exempt status.

The organization must:

â?¢ Advance a charitable cause.

â?¢ Donate a substantial portion of their services.

â?¢ Provide a benefit to a substantial class of individuals, such as the elderly.

â?¢ Relieve government of some of its burden.

â?¢ Not make a profit in its operations.

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