Aurora touts tax benefits of hospital

Milwaukee Journal Sentinel, June 9, 2006

By AMY RINARD
arinard@journalsentinel.com

Oconomowoc - A new 88-bed hospital and clinic proposed by Aurora Health Care would generate at least $516,000 a year in property taxes for the city, far more than typical industrial projects if they were built on the same Pabst Farms site, Aurora officials said Thursday.

The health care system, which has revived its application to build in the city following a judge's ruling two weeks ago, also would be willing to make annual payments in lieu of property taxes to the city on the non-profit, tax-exempt hospital portion of the development, officials said.

Aurora spokesman Jeff Squire said that in 2001, when the project was announced, Aurora had offered to pay the city $313,000 a year in such payments.

"And we are prepared to discuss a payment in lieu of taxes again," he said.

"All we want to do is sit down and resolve this whole thing."

After a closed-door meeting last week with the city's lawyers in the case, Mayor Maury Sullivan said he is willing to discuss a settlement of the 5-year-old lawsuit Aurora filed against the city after the Common Council rezoned the site of the proposed hospital so that it could not be built there.

Ald. John Gross said Thursday that tax revenue from the proposed Aurora development and any payment in lieu of taxes would be subjects of negotiations between city and Aurora officials as they seek a resolution to the lawsuit.

"We are willing to look at ways of getting rid of the lawsuit," he said.

The court ruling, which the city is appealing, declared the rezoning vote illegal. As a result, the zoning of the 43-acre parcel, along the north side of I-94 east of the Highway 67 interchange, reverted to its original designation, which permits construction of a hospital. Aurora immediately resubmitted its application to build.

But, Squire said, Aurora officials were disappointed by a news release Sullivan issued after the meeting with city lawyers asserting that the city had an obligation to "protect the rights of its citizens by adherence to its properly adopted master plan and by prohibiting the establishment of incompatible land uses, such as a not-for-profit institution" in a tax incremental financing district.

In 2001, at the request of Pabst Farms developers, the city borrowed $24 million to jumpstart development of a section of the 1,600 acres of former farmland. The money was used to build roads, install sewer and water lines and pay other development costs.

The debt is being repaid by taxes on new buildings built within the boundaries of the tax district.

When they voted to rezone the proposed Aurora hospital site, which is within the tax district, city officials said a tax-exempt development would slow the debt repayment.

Squire said a letter delivered to Sullivan and all aldermen the day before their closed-door meeting to discuss the court's ruling specifically noted that the proposed Aurora project, which would include a new and expanded home of the Aurora-owned Wilkinson Clinic, would generate $516,000 a year in property tax revenue based on 2001 city tax rate figures.

The letter, signed by Brad Hahn, Aurora's vice president for finance and business development, said "significant portions of the project will be fully taxable," including the for-profit clinic.

Hahn compared the estimated annual property tax revenue from the Aurora project with a 2001 estimate done by a city consultant that said that if the same site were developed for industrial uses, the tax revenue expected to be generated from that type of development would be about $370,000 a year based on the 2001 city tax rate.

"It's simply not correct for anyone to suggest this project is inappropriate for a TIF district because it's a not-for-profit hospital," Squire said.

With the costs now estimated at $166 million, the annual taxes generated by the project could now be higher, Squire said.