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DHMC makes public its offer to settle Lebanon tax dispute

After two years of confidential discussions between DHMC and the City of Lebanon, N.H., regarding the property tax status of the Medical Center's Lebanon facility, Dartmouth-Hitchcock has decided to bring the negotiations out into the open.

Offer: DHMC recently offered the City of Lebanon annual payments in lieu of taxes starting at $600,000, on the condition that the city end its challenge to DHMC's charitable and educational tax-exempt status. The proffered payments—which would be increased by two percent annually—would amount to more than $14 million over 20 years.

The matter dates back to March of 1998, when DHMC officials learned that Lebanon had denied the Medical Center's tax-exempt status for 1997. Between then and 1999, DHMC paid, under protest, $13.5 million in disputed tax bills, but since November of 1999 the Center has refused to pay any further property taxes—about $5 million a year.

"We believe our proposal offers a fair and reasonable contribution to the city," said James Varnum, the president of Mary Hitchcock Memorial Hospital, at a January 30 press conference at which the offer was announced.

The City of Lebanon would prefer to keep the negotiations confidential, but the Board of Assessors, the body that revoked DHMC's property tax exemption, is willing to consider a "fair compromise," wrote Lebanon City Manager James McSweeney in a February 2 letter to John Collins, DHMC's chief executive officer. "With respect to the settlement of the tax litigation," wrote McSweeney, "the city firmly believes that contrary to DHMC's claims, New Hampshire law supports the board's position. . . . We wish to confirm here that the city intends, without any equivocation, to continue to defend the board's decision and to probe the operations of DHMC and compare them to for-profit counterparts."

Mission: "DHMC's tax-exempt status is not negotiable," was Collins's response, in a letter to the Lebanon City Council. "If the city is insistent that this is only about taxes and that any settlement must confirm that all or some of DHMC's mission-related facilities are taxable, then there can be no agreement to discuss, and we will continue to look to the courts to confirm our charitable and educational exempt status."

A trial is scheduled for a year from now, in New Hampshire Superior Court, unless the parties can reach an agreement before then. At press time for this issue of Dartmouth Medicine, Lebanon had not accepted DHMC's offer and had, instead, proposed settling for an unspecified amount based on some portion of the assessed value of the Medical Center's property.

David Nierenberg, M.D., associate dean for medical education, was among the Dartmouth- Hitchcock officials present at the January 30 press conference. He was disappointed that the media didn't ask him to discuss the importance of academic medical centers. "In virtually every state in the country, they are granted charitable and educational exemptions from taxes," he told Dartmouth Medicine. "What a lot of folks don't realize is that . . . when income exceeds expenses in the Medical Center, that money is pumped back into programs supporting teaching, supporting education, supporting research, and supporting care to patients."

Stephen Christy, a Trustee of Hitchcock Hospital and the Dartmouth-Hitchcock Clinic, as well as the president of Mascoma Savings Bank in Lebanon, was also prepared to field questions from the media at the press conference but didn't get any either. "Most of the businesspeople that I've spoken with have been kind of scratching their heads in terms of why the city is taking the approach that it is, why they're not trying to negotiate a reasonable contribution that's fair to all parties," Christy told Dartmouth Medicine.

Agreement: The only other academic medical center in northern New England, the University of Vermont's Fletcher Allen Health Care in Burlington, Vt., reached agreement in 1999 with the City of Burlington on an annual contribution of $255,000, to be increased two percent a year during the 30-year term of the agreement.

-Laura Stephenson Carter

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