City loses out on millions in hospital property taxes

June 25, 2007 -- The city would realize $9.3 million in additional property tax revenues if the seven non-profit hospitals it services were on the property tax rolls, according to a new report.

"The tax-exempt status of virtually the entire hospital industry in Wisconsin requires a hidden public subsidy on top of high hospital costs," according to a new report.

"The not-for-profit hospitals operate a win-win system—they charge high rates and have others cover the cost of their municipal services," according to the report, "Hospitable Taxes: How Property Taxes Subsidize Wisconsin's Non-Profit Hospital Industry."

The hospital tax exemptions mean that amount must be recovered from other property taxpayers, according to the report by Institute for Wisconsin's Future. In Milwaukee, the additional tax burden amounts to an average of $40 per home, the report said.

The cost is probably understated, since not-for-profit hospitals generally report out-of-date property values on the federal tax forms the study relied upon for data, the report said.

IWF recommended strengthening the criteria for determining whether hospitals qualify for tax exemptions.

"Non-profits have traditionally justified their tax exemptions on the basis of the charitable or benevolent community work they perform," the report said. "Nevertheless, these institutions utilize a wide variety of public services as much as do for-profit organizations."

Not-for-profit status has nothing to do with a hospital's net income, the report said.

"Generally, hospital incomes have been rising in recent years," it said. "The Milwaukee Journal Sentinel has reported that three especially profitable hospital systems in the Milwaukee area registered financial growth well above 'a reasonable rule of thumb.' The paper cites a health-care specialist noting that a 6% to 7% annual increase in unrestricted net assets is reasonable, while Froedtert & Community Health, Children’s Hospital of Wisconsin and Columbia St. Mary’s all showed increases of 9.2% to 13.3% over the past three years."

Salaries for hospitals' top officials are extremely generous, according to the report. Aurora CEO Ed Howe earned up to $2.9 million in 2003, while Children's Hospital Jon Vice made $863,407 in 2004.

William Petasnick, president and CEO of Froedtert Memorial Lutheran Hospital, was paid $713,218 in 2004, and Leo Brideau, president and CEO of Columbia St. Mary’s, made $815,446 in 2004, according to the report.

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