Credit agency watching hospital tax exemption case
When we last wrote about the recent decision by the New Jersey Tax Court that stripped Morristown Memorial Hospital of its property tax exemption we said that municipalities and other hospitals across the State would watch closely for the next move in this ongoing battle. Most observers believe that the hospital will most certainly appeal, while at the same time, seek a legislative fix to win back its local tax exemption. The impact of the ultimate outcome will certainly be felt across the State and the matter has drawn interest from not only other hospitals and municipalities but the bond market as well.
The Star Ledger reported earlier this week that Moody’s Credit Outlook declared the court’s decision to be “credit positive” for the Town of Morristown, noting that if unchanged, it will provide about $6.9 to the Town (approximately $2.3 million for the 2006 through 2008 tax years at issue in this decision). That sum represents about 18 percent of the Town’s budget for 2015.
In addition to the potential influx of cash that may result from this decision, Morristown will benefit further if its denial of the exemption for subsequent tax years is upheld. As for future years, the denial of the exemption could result in millions of dollars in new annual tax revenues. Like Morristown Memorial, New Jersey’s other 70 or so “non-profit” hospitals must be desperate for a cure top preserve their tax exempt status, while some of the host municipalities are salivating at the prospects of a financial windfall. Meanwhile the credit rating agencies are watching.
Moody’s statement is not an upgrade or an outlook change, but it does indicate the impact this decision may have as an important credit factor in determining a municipality’s debt rating. While this will not be a consideration by the Appellate Division on appeal or the Tax Court in future cases, it will certainly be a key consideration for legislators when the hospitals come calling for help.
A copy of the Star Ledger story may be found here.
