Ordinance to amend County Code Section 15-1601, Property exempt from taxation by classification.



Authorize public hearing to amend County Code Section 15-1601, Property exempt from taxation by classification, to amend classification regarding nonprofit hospitals.



Tucker, White, Davis, Wiggans, Woodzell





October 4, 2005


ACTION:                               INFORMATION: 



  ACTION:     X                     INFORMATION: 











A state Constitutional amendment, effective January 1, 2003, shifted the authority for granting property tax exemptions from the General Assembly to local governing bodies.  On September 1, 2004, pursuant to state law enacted to implement the Constitutional amendment, the Albemarle County Board of Supervisors adopted Albemarle County Code § 15-1601 and  §15-1602.


Section 15-1601 readopted locally the property tax exemptions by classification that previously existed under state law. 


Section 15-1602 established the procedure for the Board to grant tax exemptions by special designation pursuant to the requirements of Virginia Code § 58.1-3651, if the Board chooses to do so.  Under current state law and County ordinance, the Board has the discretion as to whether or not to consider a request by a nonprofit to grant its property tax-exempt status by special designation.  On September 7, 2005, the Board adopted a Resolution reconfirming Board policy that tax exemption by designation would be considered only if there are compelling circumstances to do so.  No such exemption has been approved since 1996.


Currently nonprofit hospitals are tax-exempt by classification but only for property “belonging to and actually and exclusively occupied and used” by the hospital.  This classification standard has been in place since at least the 1902 Constitution of Virginia.  In the September 7, 2005 Board discussion there was general consensus that if a nonprofit hospital relocated to the County that it should be tax-exempt.  In reviewing the standard for tax-exemption by classification it was found that under modern hospital operating practices it would be very difficult for a hospital to qualify for tax-exempt status because the nonprofit hospital entity typically leases hospital space to other for-profit medical care providers to provide coordinated health care services.  These practices are in conflict with the requirement that the hospital property be “exclusively occupied and used” by the nonprofit hospital and would disqualify the entire hospital property from tax-exempt status.  In light of the 2003 Constitutional amendment, localities have the authority to amend the classification standards.



Goal 5:  Fund the County’s future needs.



Staff has drafted a proposed ordinance to amend County Code Section 15-601 to create a new classification for nonprofit hospitals that would no longer require that the hospital property be “actually and exclusively occupied and used” by the hospital [Attachment A].  The ordinance would provide tax-exempt status to that portion of the property that is owned by a qualifying nonprofit hospital that is used and operated by the hospital as an inpatient hospital or as an outpatient hospital if the outpatient hospital is adjacent to a qualifying inpatient hospital.  Any portion of the property owned by such hospital that is either leased to a third-party or not used for hospital purposes would not be tax-exempt under this classification.


The purpose of the proposed ordinance is to update the tax-exempt classification for hospitals to reflect modern hospital practices. New hospitals focused on patient convenience and service combine many medical facilities, some owned and operated by the hospital and others operated by for-profit doctors or other corporations providing medical services.  The

ordinance recognizes that nonprofit hospitals should qualify for tax-exempt status but the portion of the properties operated by for-profit entities or not used for hospital purposes should not be tax-exempt.



Currently there are no hospital properties in the County that would qualify for tax-exempt status under the proposed ordinance.  The first budget impact is anticipated to occur when Martha Jefferson Hospital relocates its inpatient hospital to the County.  Based on 2005 assessed values, the Martha Jefferson Hospital Pantops properties (future hospital site and existing outpatient care facility) were assessed $256,581.68 in taxes.  When the Hospital relocates to Pantops the portion of the inpatient and outpatient hospital property that is owned and occupied or used by the hospital for hospital purposes would be tax-exempt.  The portion that is leased to a third-party or not used for hospital purposes would not be tax-exempt under the proposed ordinance. 



Staff recommends that the Board authorize the attached ordinance be advertised for a public hearing to be held on November 1, 2006.



Attachment A - Ordinance to amend County Code Section 15-601

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