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Will the row over hospitals’ property taxes go the distance?

medicalHaywood and Jackson counties could have a long road ahead in their property tax disputes with Duke LifePoint, which owns Haywood Regional Medical Center and Harris Regional Hospital.

Duke LifePoint has appealed the property tax value of its two hospitals in Haywood and Jackson counties, claiming they are worth far less than what the counties purport. Hundreds of thousands of dollars annually hang in the balance in the high-stakes property tax appeals pending in both counties.

It’s not a new move for Duke LifePoint. It has appealed its property values in six out of the nine counties where it has hospitals in North Carolina. 

Based on a survey of all nine counties, The Smoky Mountain News found there have been appeals in Rutherford, Wilson, Vance and Person counties, as well as Jackson and Haywood, following acquisitions by LifePoint within the past five years.

• Stakes high in tax dispute with Haywood hospital
Harris Regional asks county to slash the hospital’s tax value

Two more LifePoint hospitals — in Lee and Catawba counties — have not seen a tax appeal yet, but it’s too soon to say whether they are out of the woods. Those two hospitals were bought in January, and Duke LifePoint’ pattern has been to wait a year following acquisitions before filing a property tax appeal. The same has played out when Duke LifePoint  bought hospitals in Michigan and Pennsylvania.

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One county where Duke LifePoint doesn’t seem inclined to appeal its property tax value is Swain County. It could be the stakes there are too low to bother. Swain’s uber-low property tax rate coupled with a super-small hospital there means Duke LifePoint’s property tax bill in Swain is low in the first place. There’s potentially not enough savings to be had to make it worth challenging.

Haywood and Jackson could learn from other counties that have gone before them in a tax battle with Duke LifePoint. Wilson County, for example, fought with Duke LifePoint over the value of Wilson Medical Center in 2014, a case that went all the way to the N.C. Property Tax Commission.

Wilson County claimed the hospital’s property value was $64 million, but Duke LifePoint countered that it was only $32 million. The state Property Tax Commission ruled summarily in LifePoint’s favor — coming in not a penny more than the $32 million LifePoint claimed.

“We had a good solid case, but they had their hired gun and they prevailed,” said Randy Faircloth, tax administrator in Wilson County.

Faircloth said the county must now decide whether to appeal the ruling. On one hand, the appeal process is costly for counties due to the necessity of hiring consultants and experts versed in the complexity of pegging a hospital’s value. On the other hand, there’s a lot to be gained or lost.

It’s not just one year’s worth of tax revenue on the line, but years into the future.

“If you don’t get the baseline value correct, over the course of several years, that translates into a lot of money,” Faircloth said. “The county stands to lose hundreds of thousands of dollars in tax revenue by having it undervalued, and frankly the citizens of the community should not be harmed in that way.”

In the end, it can be a crapshoot, however.

“When it comes down to five people making a decision, whether it’s the Board of Equalization and Review or the Property Tax Commission, there’s no way you, I or anyone else knows exactly what those individuals are going to think and do,” said Bobby McMahan, tax assessor for Jackson County.

There’s also no telling how long an appeal might take at the state level.

“We have no control over that,” McMahan said.

Vance County has been in an ongoing property tax dispute with Duke LifePoint for four years. Duke LifePoint bought Maria Parham Medical Center there in 2011, and the following year, appealed its property tax value.

A compromise avoided a drawn out fight over the real estate value — the county claimed it was $66 million, LifePoint claimed it was $29 million, and they settled at $50 million.

The property tax value of Duke LifePoint’s equipment and assets in Vance have been in limbo four years, however, with the county pegging it at $18 million and LifePoint at only $8 million. 

Vance Tax Administrator Porcha Brooks said LifePoint has been elusive in providing an accurate list and depreciation schedule of their equipment and assets.

“We kept saying ‘We need the entire list,’ and they kept saying they didn’t have it,” Brooks said.

That was an issue in Wilson County as well, where the equipment LifePoint listed on its tax form didn’t match what was on the ground.

“You can take what they say and go with that, but my suggestion is, personally, you should question it all because you are talking about millions of dollars in value,” Faircloth said.

Duke LifePoint is a relative newcomer in North Carolina’s hospital network. Five years ago, it had no hospitals in the state. Now it has nine.

Duke LifePoint is a rare bird in the state’s hospital landscape as one of the few for-profit hospital systems that actually have to pay local property taxes. Most hospitals are non-profit, government-owned or affiliated with a university and thus are exempt from property taxes.

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