Olympia considers charging B&O tax for Providence St. Peter Hospital

In an effort to generate more money, Olympia leaders are weighing a proposal to eliminate a tax exemption for Providence St. Peter Hospital.

The city’s Finance Committee has been exploring revisions to the business and occupation tax. A proposal calls for larger nonprofit businesses, such as St. Peter, to pay the same B&O tax rate as for-profit businesses. The nonprofit hospital currently is exempt from the B&O tax.

No official decision has been made. However, the Finance Committee will host another discussion on the topic at 5 p.m. Monday at City Hall, where the committee will explore more options for the hospital’s tax exemptions, said Olympia Councilman Jim Cooper, who chairs the committee.

Cooper said the proposal is part of Olympia’s pursuit of long-term revenue strategies. The financial impact of a new tax on St. Peter has not been officially determined because the hospital has multiple charity programs, he said.

“We don’t know exactly what it would be because they have so many exemptions,” Cooper said. “I don’t think we’re committed to any one way at this point.”

Based on previous discussions, the goal is to pass a measure for the 2015 budget, Cooper said. The committee will explore the issue with more depth at a future meeting before making any recommendations to the City Council.

“It won’t be over until the committee feels they have a solid proposal,” he said.

Providence does not think the tax is in the best interest of the community, public relations director Deborah Shawver said. She added the new tax could cost the hospital roughly $375,000 a year, although that number has not been confirmed by Finance Committee members.

“Naturally, we’re opposed to a B&O tax on a nonprofit hospital,” Shawver said. “Who is in the best position to maximize use of these dollars? Is it health care people, or is it the City Council?”

In May, the Finance Committee also discussed the proposed B&O tax changes. Doug Upson, senior director for Providence Health and Services, said a tax on the hospital would hurt its ability to provide charity care, according to the meeting minutes.

Mayor Pro-Tem Nathaniel Jones, a member of the Finance Committee, said the proposed revision is part of a larger analysis of the B&O tax structure. He said the hospital should be treated like other businesses in Olympia that benefit from public services such as infrastructure and police and fire protection. Times have changed for both the medical industry and the city, he said.

“They really don’t need the tax loophole they’ve been receiving for decades,” Jones said of the hospital. “We do very much value the fact that they’re here and they’re a major employer. … The question is, are we in balance?”

Olympia wouldn’t be the first Washington city to tax a nonprofit hospital. The Tacoma City Council voted in 2012 to charge its nonprofit health systems a B&O tax. The Bellingham City Council voted in June to impose a B&O tax on PeaceHealth St. Joseph Medical Center. The nonprofit hospital and its other health care services had been exempt from the tax for decades, according to the Bellingham Herald. The tax will generate $1.2 million a year, starting in January. A Bellingham Council member said PeaceHealth’s charity expenses are expected to decline as more low-income people get health coverage through the federal Affordable Care Act, according to the report.