Hospital warns of effects of B&O tax
CITY COUNCIL: Proposal to eliminate city tax exemption raises possibility of program cutbacks.

John Stark, The Bellingham Herald


Loss of a city tax exemption for St. Joseph Hospital would cut the money available for services to the community, a hospital official said.

Possible elimination of the business and occupation tax exemption for St. Joseph Hospital will be discussed during a Bellingham City Council committee meeting at 3:30 p.m. Monday at the mayor's boardroom at City Hall, 210 Lottie St. The matter may also come up for a vote during the 7 p.m. regular council session in council chambers.

Nancy Bitting, the hospital's chief executive officer, said she will be at Monday's meeting of the Bellingham City Council to argue against the loss of the exemption. Other hospital advocates from the community also are likely to be in attendance, she said.

If the hospital loses its current exemption to the business and occupation tax, the impact could be $300,000 to $600,000 per year, Bitting said.

In a letter to the City Council, Bitting outlined the expenses in the past year for what she called the hospital's health-care safety net, which include:

More than $2.2 million in free or reduced-cost hospital services to needy people.

$480,000 to provide free classroom and meeting space at the St. Luke's Community Health Education Center for health-care education.

$348,000 for drug abuse treatment, detox and related services.

$326,000 to recruit physicians, an effort that brought seven new doctors here.

$170,000 in support for Brigid Collins House family support programs and Interfaith Family Health Center medical and dental programs for the needy.

$70,000 for health outreach programs in elementary schools.

"The benefits that we give back to the community are many," Bitting said. "It would be hard to choose which one we would have to cut back on."

The potential loss of the hospital's tax exemption emerged Nov. 25 as an apparently unintended consequence of a move to streamline the business and occupation tax rules in Bellingham and other cities.

The B&O tax is a gross receipts tax on businesses that provides an important revenue source for 39 Washington cities, including about $7.7 million per year in Bellingham. For many years, firms that do business in several Washington cities have complained that each city has its own way of handling the tax, resulting in record-keeping headaches for companies that pay it.

To address that complaint, Bellingham and five other cities - Seattle, Tacoma, Everett, Bellevue and North Bend - worked with the Association of Washington Cities to develop a model B&O tax ordinance that all the state's cities could adopt. But when Bellingham city officials compared the model ordinance to the city's existing B&O tax system, they discovered that the new ordinance, if adopted, would eliminate the tax exemption for the hospital.

At that point, council members and Mayor Mark Asmundson agreed to postpone action on the tax system overhaul to give the question further study.

Asmundson was vacationing Friday and not available for comment. City Deputy Administrator Don Keenan said the mayor is not pushing to end the hospital's exemption. The exemption is just one of many matters that need to be resolved as part of the process of streamlining the tax system, Keenan said.

When the matter was first discussed on Nov. 25, Asmundson told the council they could adopt the model tax ordinance, but modify it to keep the hospital's tax exemption in place. If the council decides to eliminate the exemption, Asmundson said he would recommend that the overall B&O tax rate for service businesses be lowered to eliminate any windfall to the city. That would mean a slightly lower tax rate for the wide range of service businesses, from doctors, dentists and engineers to carpet cleaners.

Asmundson also recommended that the exemption not be revoked before the beginning of 2004, to enable hospital officials to plan for it.

But even the prospect of the hospital taking a financial hit is stirring up some strong reactions.

Anna Williams, former operator of Anna's Kaddyshack restaurant in Fairhaven, said she plans to attend Monday's council discussion. As she sees it, taxing the hospital would mean cutting into availability of medical care for the needy.

"How is charity care funded in Whatcom County?" Williams asked. "It's funded from any cash flow the hospital has."

Reach John Stark at jstark


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