The borough assembly on Tuesday was to consider a draft agreement for the SouthEast Alaska Regional Health Consortium to make voluntary payments of $45,000 per year for 10 years on property owned by the nonprofit health care provider in town.
The borough had initially asked for $225,000 a year.
SEARHC is not legally required to pay taxes — state law exempts nonprofit religious, charitable, hospital or educational organizations from municipal property taxes — and it has been in negotiations with the borough for several months for a voluntary payment in lieu of taxes (PILT).
SEARHC paid a $331,287 property tax bill from the borough for the new Wrangell Medical Center in 2021. A draft payment agreement originally provided with the assembly agenda stated that the borough would refund last year’s tax payment, but Finance Director Mason Villarma on Monday said the latest negotiations had taken out that stipulation — the borough would not have to return the payment.
The assembly agenda for Tuesday included the draft agreement for consideration, noting a possible executive session to discuss the issue before a public vote to accept or reject the agreement.
The tribal nonprofit owns the hospital, clinic and other office and rental housing properties in Wrangell, including the Amanda Building on Lynch Street across from City Hall, where contract staff such as traveling nurses and their families are housed.
The borough and SEARHC signed an agreement in 2018 after it took over operations of the hospital from Alaska Island Community Services which stated that SEARHC had no obligation to pay property taxes on the hospital or its assets.
In the draft agreement before the assembly, the borough acknowledges that last year’s property tax assessment was in violation of that 2018 contract.
“After discussions with SEARHC’s administration, they noted their exempt status, yet paid the (2021) taxes on the hospital as a one-time exception. As SEARHC does not want to establish the precedent of paying property taxes as a tribal nonprofit, the borough and SEARHC began negotiations over a payment in lieu of taxes,” according to the summary statement provided for the assembly by Borough Manager Jeff Good and Villarma.
The health care provider does not make payments in lieu of property taxes in Sitka or Juneau, where it owns significantly more property than it does in Wrangell.
The borough began negotiations with SEARHC in November, with borough staff proposing a $225,000 PILT payment each year for the next 10 years on the hospital property, and full property taxes on the organization’s other properties.
SEARHC countered with a $45,000 PILT that lasts 10 years and exempts them from taxes on any new property acquisitions in town.
The organization had given the borough a May 6 deadline to accept the agreement, but later agreed to extend it past Tuesday’s assembly meeting, Good said last Friday.
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