On Monday, representatives of six non-profit groups - Warren General Hospital, the Rouse Estate, Warren County YMCA, Warren County Memorial Park, the Crary Home, and Habitat for Humanity - presented information to demonstrate why they should remain exempt from property taxes.
The Warren County Assessment Board of Appeals has the responsibility to ensure that the proper subjects of real estate taxes are taxed.
Some of the organizations that were judged proper subjects of taxes have been tax-exempt for decades - more than a century in two cases.
Times Observer photo by Brian Ferry
Tax status appeal
Representatives of Warren General Hospital (left) board chairman Timothy Bevevino, and attorneys Jenna Bickford and Jack Mehler, present information, including a brief more than one-inch thick, to the Warren County assessment board of appeals (from right) Joe Whipp, Bernard Hessley, and Doug Wilson.
State law and state Supreme Court decisions have led to evaluations of what is and is not a tax-exempt organization, appeals board chairman Bernard J. Hessley said. The board looked at every tax-exempt entity in the county.
"Things change," Hessley said. "We want to make sure the proper subjects of taxes are taxed."
After the initial evaluations, entities that were looking at losing their status were given the chance to address the board, which is comprised of Hessley, Joe Whipp and Doug Wilson.
Hessley said the board might take 30 days to make a decision and that the entities are entitled to appeal the decision to the Warren County Court of Common Pleas.
Representatives for every group listed the ways the organization satisfied the five requirements of the HUP (Hospital Utilization Project) test that determine what is and is not a "purely public charity." An entity must: advance a charitable purpose, donate or render gratuitously a substantial portion of its services, benefit a substantial and indefinite class of persons who are legitimate subjects of charity, relieve the government of some of its burden, and operate entirely free from private profit motive.
Warren General Hospital
Warren County Chief Assessor Karen Beardsley announced an assessment of the value of hospital properties in the City of Warren. The fair market value of the grounds and hospital building was almost $38 million, with the total of other properties in that area adding almost another $1 million.
Attorneys Jack Mehler and Jenna Bickford, of MacDonald Illig Jones and Britton of Erie, joined Timothy Bevevino, chairman of the board of Warren General Hospital. Their brief for the board members was more than one-inch thick.
Mehler said facts were not in dispute. "It's a question of law," he said. "We don't believe there has been any change, legally or factually."
The hospital has been a tax-exempt entity for more than 100 years. It is exempt from federal income taxes and state sales and use taxes. Contributions to the hospital are exempt from federal income taxes.
The first three portions of the HUP test are wrapped up in charity care statistics.
"Warren General Hospital has an admission policy that admits people regardless of their ability to pay," Mehler said. "The uncompensated care is staggering." That number is about $3 million per year, he said.
Patients whose household income is less than 300 percent of the federal poverty level qualify for reduced-cost or free care.
According to Mehler, none of the court cases creating precedent held that hospitals do not relieve government of some of its burden.
He said there is a common misconception with the final HUP test. People assume an entity "has to lose money to be a non-profit," he said.
"Warren General Hospital has experienced revenues in excess of its expenses," he said. "Those monies are put back in operations to support the hospital."
The hospital determines salaries by comparing with similar hospitals and does not give bonuses or incentives "relative to profitability," he said.
With a total fair market property value of over $6 million, according to Beardsley, the Rouse Estate stands to lose substantially if it becomes subject to real estate taxes.
CEO Jasen Diley, CFO Jeff Sedon, and attorney Jack Owen, made the facility's case to the board.
"The Rouse is a governmental entity immune from taxes," Owen said. "As of today, they're still controlled by the county."
Of the five members of the Rouse board of directors, three are the Warren County commissioners and the other two are named by the commissioners.
Diley and Sedon gave several examples of times when the board gave away Rouse property to other concerns - including Rouse Manor, which is part of the Housing Authority of Warren County, not the Rouse Estate.
But despite being the county home, the Rouse has received just $1 from the county in each of the past two years.
"We are incorporated under the Pennsylvania legislature," Diley said. "There's an act that says the Rouse shall be tax exempt."
That the Rouse accepts patients "regardless of your ability to pay" is the agency's answer to three of the HUP test prongs.
Some nursing homes avoid patients covered by Medicaid, Diley said. "Over 70 percent of the residents we serve are on Medicaid."
The Rouse lost about $40 a day on patients covered by Medicaid - 47,000 resident days in 2011 for about $1.75 million in losses. Over the last five years, the Rouse has lost $8 million on Medicaid patients.
When the facility does bring in more than it spends in a particular year, "we reinvested those surpluses in our own facilities," Sedon said.
Warren County YMCA
YMCA board president Paul Wood and CEO Thad Turner argued the organization's case to the board.
Like the other entities, the YMCA offers services "regardless of ability to pay," Wood said.
Between 700 and 800 local people are involved in the Y's "free and reduced-cost membership" program, Turner said. The program is based on income, though extenuating circumstances are considered on a case-by-case basis.
The organization donates back about $300,000 of its $1.6 million budget, he said.
Cost reductions are available to both memberships and programs.
The organization especially looks to provide healthy activities for young people. "We give every single seventh grader in the Warren County School District a free membership," Turner said. "No income requirements. No prerequisites."
Membership is not required for young people - the target group is sixth through eighth grades - to use the activity rooms.
The YMCA also hosts a number of community events and organizations at reduced or no cost, Turner said.
Warren County School District pays for the use of the YMCA pool for the Warren Area High School swim teams, but the cost is a "far reduced rate" from what it would have to pay to construct and maintain its own pool, Turner said.
"If we have any surplus - we don't because we don't budget depreciation - it would go into a depreciation fund," Turner said.
"We feel that we do meet the requirements of the HUP case," Wood said.
Warren County Memorial Park
Cemeteries are on the list of uses that are typically tax exempt.
However, board members informed Warren County Memorial Park managers Ruth and Ed Seebeck that they could lose that status.
There are about 25 developed acres, with about 20,000 burial sites, among the 50 acres that make up the park, Ruth Seebeck said. "It's been a non-profit since 1959 or 1960."
"We make burials, we mow grass, in the winter we plow snow," she said. "It's a mission as much as it is a business."
The park is a 501(c)(13) which means it is a cemetery exempt from income taxes, but it cannot take tax-deductible contributions.
The park income is about $112,000 per year, according to accountant Tom Sleeman. The "net profit is about $5,000."
He said depreciation probably brings that number to the break-even point.
"We did $10,000 of blacktop repair last year," Seebeck said.
The managers do not draw a salary from the park, Seebeck said. "We live in the manager's apartments."
The building on site includes office space, the apartments, and the location of an associated for-profit business. The Seebecks pay property taxes on the space associated with the business venture, she said. Their combined salary from that business is $16,000 per year.
The park offers space at no charge to families who lose children who are less than one year old - as many as seven in one year - and to individuals who are truly indigent, Seebeck said.
After hearing Beardsley list the fair market values of Crary Home properties add up to about $600,000, administrator Darrell Pusateri argued that most of the properties should be tax exempt. One, he admitted, would appropriately be taxed.
As far as the HUP test, the Crary Home provides housing, food, laundry, and housekeeping for those with limited ability to pay.
The most anyone pays for rent and utilities is about $700 per month, he said. "Fifty percent pay less than $500."
One of the 15 residents does not pay rent because he has no income, Pusateri said.
The amount of rent a resident pays is 30 percent of income after medical bills and some other expenditures are taken out, Pusateri said. "The rent we receive covers about half of our expenses."
Residents pay $225 a month - about $7.50 per day - for meals, housekeeping and laundry.
The organization budgeted for a $13,000 loss in 2012, Pusateri said. A fund created by the Crary family covers shortfalls and capital improvements.
The government is relieved of some of its burden because residents do not qualify for Pennsylvania rent rebates, food stamps nor federal Housing and Urban Development funding.
Habitat for Humanity
Habitat for Humanity president Rene Johnson said the organization only owns property that it plans to develop for someone else. Once the property is sold, at cost, to the recipient, it goes back on the tax rolls, she said.
"We only own real estate for the purpose of building a residence on the property and then selling the residence to a person who would not qualify for a commercial mortgage," Johnson said. "There's no profit at all to Habitat."
Other than the properties it plans to build on, "we do not rent space or even pay for a phone," Johnson said. The organization turns over property usually within two to three years.
The group provides single-family home ownership for those who would not be able to buy a home any other way, providing a charitable service and relieving the government of the burden of possibly providing public housing for the owners.