Officials probe Health Pointe tax exemption

Alexander Sinn • Mar 2, 2019 at 9:00 AM

GRAND HAVEN TWP. — Like many nonprofit organizations across Michigan, the Health Pointe medical facility in Grand Haven Township applied for a tax exemption at the end of 2018.

Township authorities denied the retroactive exemption while they investigate lease arrangements at the Spectrum Health facility.

The township is not accusing Health Pointe of wrongdoing. It’s a matter of crossing T’s and dotting I’s, according to Township Manager Bill Cargo. 

“They’re doing what we expect them to do,” he said.

Township officials anticipate that if the exemption is granted to Health Pointe, real and personal property revenue loss for Ottawa County in 2019 would approach $729,000, based on current millage rates.

Officials are concerned, however, that nonprofits — without breaking any laws — can receive large tax breaks while providing no measurable threshold of charitable services. 

‘Chiefly, if not solely’ 

Township officials want to know how much of its facility Health Pointe is leasing space out to for-profit practices. But the township may be delaying the inevitable, as its assessors can do little to enforce standards beyond the requirements of Michigan law.

To qualify for a tax exemption in Michigan, an organization must meet two requirements: form as a nonprofit entity, and provide charitable services.

The law is vague regarding how much charity a “charitable institution” must provide, according to Cargo. It states a charitable organization must be “chiefly, if not solely, organized for charity.”

“That’s basically all you have to do,” Cargo said.

Cargo said tax tribunal cases that have considered this issue in the state are “almost taunting the Michigan Legislature to provide a more equitable approach.” 

The issue of nonprofit tax exemptions has been raised in multiple court cases in Michigan, including with another Spectrum Health facility. 

In a tribunal case between Wexford Medical Group and the City of Cadillac, the court determined an applicant can profit and receive charitable status. A case between Spectrum Health and Grand Rapids Township applied the same standard, Cargo said.

“Even though facts would tend to support that Spectrum Health is anything but a ‘charity,’” the Grand Haven Township manager added.

For 2016 to 2019, Health Pointe aims to receive north of $1.3 million in tax refunds. This includes $634,000 in 2018, during which they’ve provided $18,000 in charitable care, Cargo said. The facility opened last year, paying just shy of $42,000 in taxes in both 2016 and 2017 during the construction of the building located near the Meijer store.

Some space in Health Pointe is leased to for-profit organizations, according to officials. The facility has requested a 95 percent tax refund.

Health Pointe officials declined the Grand Haven Tribune’s request for information regarding its existing charitable services and for-profit leases.

In a statement, officials said, "Due to this being an open item between Health Pointe and Grand Haven Township, Health Pointe cannot provide any further details at this time. We look forward to continuing to work with Grand Haven Township to provide greater understanding of our services as a charitable nonprofit organization." 

‘The one-legged stool’ 

Ottawa County will likely have to refund the past three years of Health Pointe’s taxes, which would otherwise support the Ottawa Area Intermediate School District, the state of Michigan and other entities.

Ottawa County Administrator Al Vandenberg said the county has for years opposed expanding tax breaks for nonprofit organizations. 

“Property tax is really the one-legged stool that local governments have to fund their operations,” he said. 

State legislation introduced in 2015 and opposed by Ottawa County sought to grant tax exemptions to nonprofit clubs that provide education on archery and firearms. The bill, which was defeated in the House, aimed to require these types of organizations to provide charitable services for 55 days each year.

Other states provide more options for local governments, Vandenberg explained. The issue is on the county’s Legislative agenda, but there doesn’t appear to be much will in Lansing to limit nonprofits from taking exemptions. 

“It seems like, with term limits, people have a very short time to learn a very complex system of government and don’t really understand the impacts of change,” Vandenberg said. 

Vandenberg said the county is not in favor of stripping current tax exemptions — only in limiting their expansion.  

‘Moving targets’

The township is not losing out on all of that revenue. When the Township Board approved the development of the Health Pointe facility at 15100 Whittaker Way, it entered a payment in lieu of taxes (P.I.L.O.T.) agreement, by which Health Pointe consented to pay an agreed-upon amount in lieu of taxes each year.

Through the P.I.L.O.T. deal, the township receives 75 percent of what it would otherwise get in taxes from Health Pointe, Cargo said. Health Pointe paid $45,216 in 2018, and slightly less in 2016 and 2017. 

Health Pointe has filled a community need, Cargo said, but has also incurred a cost to the township’s emergency services. The township’s first responders made 80 paramedic runs to Health Pointe in 2018.

The township’s P.I.L.O.T. agreement ensures the local government is not losing money on those emergency runs, Cargo added.

Ashley Larrison, the township’s assistant assessor, said tax exemptions are like “moving targets,” and applications are submitted regularly to the township. 

Township officials hope the state Legislature clears up the law to better define exemptions for charitable organizations. For example, Cargo said, the law could require 51 percent of an entity’s work to be charitable, or require that an exemption not exceed the amount of charitable giving.

“It’s going to get worse until it gets better, unless things are changed,” Larrison said.

State Rep. Jim Lilly, R-Park Township, said there are no current bills considering this issue in the Legislature. He added that he would not take a position on the present law before he better understands the circumstances. 

The township can look into Health Pointe’s services, but Cargo said the larger issue can only be addressed in Lansing. 

“The Legislature is where the solution has to be found,” he said.

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