Public seeks negotiation of tax abatement for Tri-County Health Care

A public hearing considering approval of tax abatement for the new Tri-County Health Care clinic (Astera Health) brought out about two dozen people with several voicing an opinion and many others just listening.

The group heard that TCHC is seeking 100% abatement for 15 years, for a potential savings of about $1.5 million. That savings to the private, not-for-profit clinic could also mean a slight increase to your taxes under the current request. If approved, the abatement could begin in 2023 or 2024, depending on when the new facility is complete and taxing begins.

A general theme among public comments was that the hospital and clinic are important to the community, but that the new clinic should not create an additional tax burden on residents.

That was the hope of Wadena resident and Wadena Housing and Redevelopment Authority executive director Maria Marthaler. She said she fully supports the hospital and its location but was concerned with any increase to taxes.

“I am sorry that I oppose this,” Marthaler said. “I just feel that our taxes are already fairly high for property taxes. So everytime something scoots it up, it just goes that much higher.”

Another Wadena resident commenting on the topic said it was of utmost importance to show support to the hospital and recognize that they are willing to negotiate the abatement amount.

“I encourage the council to look at the fact that we have community leadership at our hospital and that’s a very precious thing,” said Don Niles, a resident, tax payer and former city council member. “If we don’t do what we need to do to support a hospital, our hospital will be in the eyes of acquisition, and do we really want our hospital controlled by an institution in the Twin Cities, ultimately taking over the hospital because we haven’t provided the support that we need?”

Niles also pointed out that when purchasing health insurance, in his experience costs have been lower because TCHC is a low-cost provider. He suggested that the $5 per year cost was incomparable to maintaining a local hospital with local leadership.

Another resident Ray Beyer brought numerous concerns. He felt the request for a 15 year abatement was too much and thought three to five years was more palatable. He also shared concerns about the timing of the request for abatement, considering construction is already underway. He called it an “impulse buy.”

TCHC president and CEO Joel Beiswenger responded that TIF financing was in the business plan and in motion two years ago, but unknowingly, the site clearing work that was done last year left TCHC no longer eligible for that financing. He claimed TCHC commenced applying for tax abatement once that was known.

Beyer then said that approving this abatement would set a precedent for the school district and Otter Tail County to follow. While these two government bodies will have to consider abatement, it remained to be seen if they would follow the decisions of the city.

Interim city administrator Dave Evans surmised that the school district's tax portion would be somewhat less than the city’s estimated $5 increase under the request. It was unclear what effect the county abatement would have on taxes in Otter Tail County. In Wadena County, the loss of a taxable clinic will be a significant hit to the taxable base.

Also brought up was that other new hospitals in the region have not applied for tax abatement.

Beiswenger spoke for the hospital and stated the biggest reason behind this request is that the project will be an economic boost to the community and will, in numerous ways, increase revenues for the region.

“The biggest reason to do this is that we project in the first five years after the project is done we will create growth within the communities that we serve … 48 new jobs, 36 full-time equivalents that will generate several million dollars more salaries and potentially more tax base by folks buying homes, buying groceries and all those things,” Beiswenger said. “It’s really an economic development assist to help us make that happen.”

Local economic development volunteer Jim Kraemer said Wadena is lucky to have great care with TCHC and he wanted to see a fair agreement to benefit all.

“I don’t want to let the hospital off completely, I want them to work out a reasonable plan with the city so that we are maintaining a tax rate that is fair, at the same time supporting what to me is a real big part of the quality of life in our community,” Kraemer said.

Those attending received information about the abatement options and their impact on a $100,000 property somewhere between a residential and commercial property for one year of taxes. Currently the tax on that property is $503.54.

Four scenarios were offered, considering the current snapshot in time, including:

• 100% abatement and no current clinic tax base, which would increase city taxes paid by $5.04;

• Abatement equal to current clinic tax base leaving no change to city taxes;

• No abatement and current clinic tax base would drop the taxes paid by $26.69;

• No abatement and no current clinic tax base would drop the city taxes by $20.14.

The public got a lesson in hospital taxing, hearing that hospital space is tax exempt, while the clinic space is taxable. Knowing that, TCHC is requesting 100% tax abatement for 15 years, projected to be $100,553 per year for a total of $1,508,295.
Interestingly the current clinic is valued at $1.8 million and pays $18,654 in city tax. The new clinic is estimated to have a value of nearly $10 million and would pay $100,553 in just city taxes each year, a significant boost to the city’s tax base.

Mayor George Deiss added that because of the added tax base and because it appears Wadena’s population has increased, the city is potentially looking at a $2,500 decrease in Local Government Aid with this new development.

The picture painted by the city’s worksheet was only the impact on the city taxes. Further taxes could be affected through the school district or through the counties. One thing pointed out by the public was that Tri-County Health Care is leaving Wadena County (a loss of taxable property for Wadena County) and moving to Otter Tail County (an increase of taxable property for Otter Tail County).

When the topic was brought up about the move of the campus to Otter Tail County, Beiswenger reminded the group of the missed opportunity.

“We worked hard with the county at the beginning of all this to put this in the (Wadena County) fairgrounds and of course the price tag was considerably too high,” Beiswenger said. “Wadena County had the opportunity to keep this in the tax base, unfortunately it didn’t work out.”

The cost to move the fairgrounds out to a new location was estimated at $13.1 million. The location at the Taggart farm west of town came in closer to $2 million.

Hearing concerns about an increase in taxes, Beiswenger communicated that they would consider negotiating their abatement options whether it be a full or partial abatement. Deiss said that decision of 0 to 100% abatement is in the hands of the Wadena City Council. The group tasked with negotiating the abatement includes Evans, Economic Development director Dean Uselman and council members Bruce Uselman and Jessie Gibbs. Neither Bruce Uselman or Gibbs were present for the public hearing. The committee would then bring their recommendation to the full city council.

In other actions, the council approved:

• Hiring Joseph O’Halloran as part-time liquor store clerk contingent on a successful background check.
• Awarding Trunk Highway 10 corridor stormwater drainage improvements to Kern & Tabery, Inc., in the amount of $963,938.81. This was the low bid and the city had an engineer’s estimate of over $1.25 million. The city received nine bids for the project.
• Authorizing the purchase of a 2011 Freightliner M2 plow truck at a cost of $69,000, with the trade in of the city’s current 1999 plow truck. The council had approved budgeting $60,000 for this purchase last year and they were agreeable to the additional cost after hearing of available funds in the public works budget from Public Works Director Dan Kovar. He noted over $25,000 available from salt, fuel and repair budgets. The newer truck (with 87,450 miles) replaces the oldest, most problematic truck of the fleet.