Bellingham council to eye tax exemption for PeaceHealth hospital

BELLINGHAM — A $1.2 million new city tax bill proposed for PeaceHealth St. Joseph Medical Center is back on the City Council agenda for Monday.

The council is scheduled to discuss the measure during a committee session scheduled for 1:30 p.m. in council chambers at City Hall, 210 Lottie St.

The issue last came before the council May 19, when hospital executives and employees, along with other supporters, packed the council chambers to express opposition to a measure that would remove PeaceHealth’s existing exemption to the city’s business and occupation tax — an exemption now limited to “religious” health organizations. PeaceHealth is affiliated with the Catholic Church.

PeaceHealth officials say they understand the city’s move to abolish an exemption based on religion, but they have urged the city to adopt an alternative taxing plan that would reduce the impact.

According to that plan, supported by Mayor Kelli Linville, PeaceHealth revenue from both the hospital and outpatient clinics would be taxed, but the rate would be lowered to ease the tax hit on the hospital while recovering the $350,000 per year in lost city tax revenue resulting from the PeaceHealth takeover of Madrona Medical in 2007 and North Cascade Cardiology in 2011.

PeaceHealth executives worked out that proposal in earlier negotiations with Linville and her staff.

At the hearing, PeaceHealth backers argued that the hospital’s programs would come under financial pressure if the full $1.2 million annual tax were imposed. The pressure might be hardest on programs such as mental health services that return little revenue to PeaceHealth.

No formal vote is scheduled on the tax issue Monday.