By Lisa Coryell
Capital Health Medical Center, Hopewell, under construction off Scotch Road on Thursday, December 9, 2010. The 237-bed, 924,000-square-foot hospital is scheduled to open in the fall of 2011. The new hospital, situated on 165 acres, will cost $530 million.
HOPEWELL TOWNSHIP — A controversial agreement to waive tax liability on the new Capital Health hospital for nearly 20 years has been scrapped under a new agreement requiring the health facility to pay its fair share of taxes.
The new deal, revealed Monday night by the township committee, calls for Capital Health to pay $4 million in taxes while the Scotch Road medical complex is under construction and to pay for all taxable portions of the complex when it becomes occupied in 2012.
“Given the controversy over the first agreement we decided it made good sense for Hopewell Township to review and renegotiate its settlement with Capital Health,” said Committeewoman Vanessa Sandom.
“What’s taxable on Capital Health’s campus will be taxed and we’ll have a world-class health facility in Hopewell Township,” said Deputy Mayor Michael Markulec.
Capital Health officials did not return a call seeking comment on the settlement, which is subject to the approval of a tax court judge.
The new deal replaces a settlement that allowed a 20-year tax exempt status for the entire hospital campus — not just the nonprofit parts — in exchange for annual payments of $813,000 to $1.6 million that would have gone directly to the township in lieu of taxes.
That deal was roundly criticized by the Mercer County Board of Taxation and Hopewell and Pennington boroughs because it denied the county and the Hopewell Valley Regional School District, which includes the boroughs, their fair share of the taxes collected from the hospital.
County Tax Administrator Marty Guhl, who called the former agreement illegal, said the new agreement is fundamentally fair.
“At least they’re following the law,” Guhl said. “They’re paying taxes as they should be.”
Guhl said the new deal has a much better shot at getting approved by a judge than the old one.
“I think all the parties realized that the judge would never have accepted that agreement because it was illegal,” Guhl added. “So they decided to negotiate a new one.”
The original settlement was negotiated to end a dispute between the town and Capital Health over tax issues surrounding the $530 million hospital project that got under way in 2008. The major issue was whether the entire hospital campus would be subject to property taxes for the years before it became operational. Capital Health maintained that treating the hospital as commercial taxable property while it was under construction was not permitted under New Jersey law while Hopewell officials claimed that such treatment is permissible.
Under the first settlement, Capital Health agreed to pay almost $1 million for three years’ worth of rollback taxes on land that has been taken out of the tax-discounted farmland assessment to allow for development of the new health care facility. But it also provided for a tax-exempt status for 20 years that exempted Capital Health from paying taxes for the commercial space it leased within the 165.5 acre campus, most notably a 150,000-square foot medical office building that will be leased, at least in part, to doctors.
Markulec said the new deal allows for the proper apportionment of Capital Health’s tax revenues.
“We’re satisfied that the settlement protects the interests of the county and the two boroughs,” he said.
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