Update Christie pocket-vetoes nonprofit hospital tax bill

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A bill that would serve as a dam to the potential overflow of lawsuits to hold nonprofit hospitals accountable for their for-profit operations was pocket-vetoed by Gov. Chris Christie on Tuesday.(Editor’s note: This report was updated at 3 p.m. with comments from state Sen. Joseph Vitale, at 3:30 p.m. with additional information and at 4 p.m. with comments from Newark Councilwoman Gayle Chaneyfield Jenkins.)

A bill that would serve as a dam to the potential overflow of lawsuits to hold nonprofit hospitals accountable for their for-profit operations was pocket-vetoed by Gov. Chris Christie on Tuesday.

The move was more of a disappointment than a surprise, legislators said.

“With the governor not being here all the time, the normal back-and-forth that occurs for a bill like this didn’t have a chance to develop,” said Assemblyman John Burzichelli (D-West Deptford).

Sen. Robert Singer said that, since there is no more time left in the legislative session, the pocket veto was the only option.

“If this was not the end of session, the bill could have been conditionally vetoed. The problem is that’s not an option right now, so we want to go back and get it right,” Singer (R-Lakewood) said.

Problems with the bill include determining if it was a true payment in lieu of taxes, or PILOT, measure, and having to make sure it meets “constitutional muster,” Singer said.

The bill was created after a tax court settlement between the town of Morristown and Atlantic Health, in which the nonprofit hospital would pay for 24 percent of its operations deemed for-profit.

Morristown, which originally sued to strip the hospital of its nonprofit, tax-exempt status, would see a total of about $25 million over 10 years.

Legislators jumped into action to avoid similar lawsuits around the state, but with the veto it seems tax lawyers may have an opening.

“The recipe is out there for absolute chaos,” Burzichelli said, adding that the money municipalities could be receiving from hospitals will now be going to tax lawyers.

Sen. Joe Vitale (D-Woodbridge) said he was a little surprised but also very concerned by the governor’s veto, as well as the lack of explanation as to why.

Since the Morristown deal, tax lawyers now have a case law, or a template, to follow — threatening the financial security of some hospitals.

Vitale and Burzichelli pointed out that the veto was a political move by Christie to avoid signing something that related to any kind of increase in fees or taxes.

“Since the tax court (settlement) in Morristown, the legislation did what it should do, which is act responsibly before there is mass litigation statewide by communities where hospitals are located,” Vitale said. “Everyone who is paying agrees they should be (in the bill).”

The bill struck a balance, Vitale said: “Higher costs could translate to higher medical costs.”

Especially for nonprofits running on razor-thin margins, he said.

Singer said that nonprofits do contribute to their municipalities and “anyone who dares jeopardize them, shame on you.”

A Newark councilwoman, Gayle Chaneyfield Jenkins, was vocal about her disagreement with the bill, which she said offered municipalities significantly less in funding compared to what taxing for-profit operations could.

“The governor’s pocket veto of this legislation that was hastily drafted and pushed through the lame duck Legislature gives us a real opportunity to craft a solution that does not shortchange Newark the way this bill did,” Chaneyfield Jenkins said. “I am not entirely convinced a one-size-fits-all solution is in the best interest of Newark or other municipalities that are home to nonprofit hospitals.

“In the coming months, we need to convene an independent task force with tax experts and health care providers, including acute care hospitals and specialized nursing homes, so we can determine the best approach to ensure the city is receiving its fair share.”

Singer said any municipality seeking a legal settlement was only trying to “solve their own ineptness and budgetary problems” by relying on hospital contributions.

Vitale said that, especially for the hospitals running on lifelines, the taxable amount could bankrupt some facilities.

The New Jersey Hospital Association, which had worked on and supported the bill, was also disappointed.

“We are disappointed with the pocket veto of S-3299/A-4903. NJHA, along with its hospital members and both houses of the Legislature, firmly believed the bill provided a consistent statewide approach for hospitals to support their host municipalities with added community contributions,” said NJHA CEO Betsy Ryan. “Now that the bill has been vetoed, we will work to present a constructive and refined approach that will provide certainty to hospitals and municipalities while addressing any concerns the governor may have.”

Jill Ojserkis, an attorney with Cooper Levenson, said the pocket veto encourages uncertainty where the bill could have secured the legal future of hospitals.

“Because of the historical tax exemption for the real property upon which many nonprofit hospitals are situated, some municipalities have not heretofore expended the resources to perform accurate and current appraisals,” Ojserkis said. “Municipalities will bear additional costs, which many can ill afford, which will become part of the municipal budget paid for by its commercial and residential taxpayers, and perhaps wait a number of years before obtaining any real property payment from its hospitals.”