Vestal refuses tax exemption on new UHS clinic, case headed to court

United Health Services Hospitals Inc. and the Town of Vestal are likely headed for a showdown in court after officials refused to grant the nonprofit a tax exemption on an $8.48 million property assessment for its new hospital clinic and the land it sits on.

 

UHSH contends it can use its nonprofit status for a tax exemption on not just the 77,600-square-foot facility it built and owns at 4417 Vestal Parkway East, but also the land it leases from a private corporation.

 

The town, however, dismissed the request for the tax exemption in May, saying: “Your complaint has been dismissed because of your (or your representatives) willful neglect or refusal to attend this board’s hearings or to be examined concerning your complaint or to answer questions relevant to your complaint.”

 

If the exemption is granted, the town, Broome County and the Vestal Central School District stand to lose tax revenue from the property. Just how much remains to be seen.

 

The private corporation, FGR Vestal LLC, with principal members George and Ronald Akel, previously paid property taxes on the parcel.

 

In May, while construction of the new hospital clinic was still underway, the building, improvements on the land, and the land itself, were valued at $8.48 million based on the tax roll filed for the 2012-13 fiscal year.

 

Before the facility was built, the land was assessed at $2.42 million, and FGR paid the $36,702 tax bill on the parcel, reflecting the 2011-12 fiscal year. FGR also paid the $49,437 school tax bill to the Vestal school district for the same fiscal year.

 

UHSH, which is administered by parent organization United Health Services Inc., or UHS, said lost tax revenue would be offset by the new hospital clinic creating other economic benefits for the town.

 

Vestal Town Attorney David Berger did not return requests seeking comment. Town Supervisor John Schaffer and Town Assessor Mark Minoia declined to comment, citing potential litigation.

 

After town officials dismissed the tax exemption request, UHSH began pursuing a legal challenge in Broome County Supreme Court, according to court documents filed July 27.

“It is very concerning to us that the Town of Vestal is choosing to question our tax-exempt status, while scores of other not-for-profit agencies in the town also are tax-exempt,” Matthew Salanger, president and CEO of UHS, said in a statement.

“We expect that the new UHS Vestal, with its appealing design, range of services and central location, will attract many people from outside the area to Vestal, where they will purchase goods and services and contribute substantial dollars to the local economy,” he added.

With the 2012-13 fiscal year tax exemption dispute unresolved, UHS, on Oct. 2, paid the $180,255 school tax bill that is based upon the disputed $8.48 million property assessment.

The town and county tax rates for the 2012-13 fiscal year haven’t been finalized.

'A unique situation'

During initial interviews for this report, attorneys for UHSH said court proceedings have been adjourned until November while they negotiate with town officials to try to reach a settlement.

In follow-up interviews, attorneys said UHSH plans to leave it up to the courts to decide.

“Is the property partially exempt, wholly exempt or, as it currently stands, not exempt at all,” said Paul Sheppard, an attorney of the firm Hinman, Howard & Kattell, representing UHSH in the case.

“This is a unique situation in that (UHSH) possesses the building that is on the property,” said Jeffery Alexander, a vice president and general counsel for UHS.

He said this means the leased land becomes an “integral” part of the not-for-profit health care services and is thus warranted a tax exemption based on New York State tax laws.

 

Alexander was asked to provide examples of other lease agreements where the nonprofit owns a building, but leases the land it sits on.

 

“UHS has many tenant leases, but none parallel the Vestal situation,” he said, noting other legal precedents could not be found by the nonprofits’ outside legal counsel.

 

In March 2010, UHSH began a 25-year lease with FGR for the property where the hospital clinic was built for about $30 million, according to UHS. The lease permits UHSH to renew for another 50 years.

 

Read more here.