Covenant receives tax refund from Champaign County
URBANA – Less than a week after a judge suggested Champaign County wasn’t going to prevail in a lawsuit with Provena Covenant Medical Center, the county decided to refund five years’ worth of the hospital’s property tax payments, plus interest.
County Treasurer Dan Welch on Tuesday said he issued a check for $6.1 million to Covenant, covering $5.8 million in taxes the hospital paid under protest and $315,849 in interest.
Nearly all the tax payments were being held in reserve by the city of Urbana, because one of the city’s Tax Increment Financing Districts that sets aside money for economic development was the recipient of all but a sliver of those tax payments. So Urbana also picked up most of the interest, Welch said.
Covenant filed a lawsuit against county officials after they rejected the hospital’s request for a refund of its property tax payments based on a Sangamon County judge’s finding last year that the hospital is tax-exempt.
Local attorney Jerry Lyke, who is representing county officials, said the county changed its position after a hearing in court last week before Champaign County Judge Michael Jones.
Jones denied a motion to dismiss Covenant’s lawsuit, but also urged the county to consider repaying the taxes voluntarily.
“Even though it was at the earliest stage of the pending case between Provena Covenant and various county officials, Judge Jones clearly signaled that the Sangamon County order is a final order binding Champaign County officials and entitling Provena Covenant to a refund – and probably with interest,” Lyke said.
Covenant’s lawsuit seeks double damages in the form of twice the amount of taxes paid, but Lyke said he hopes the voluntary payment of taxes plus interest will be enough to put the litigation to rest.
“But regardless, that (voluntary payment) is what Dan Welch feels is his responsibility,” Lyke said.
Provena Health spokeswoman Lisa Lagger said Provena welcomes the treasurer’s effort to provide Covenant with taxes and interest due, but there are some remaining details she declined to disclose that won’t allow the lawsuit to end quite yet.
“Important outstanding issues with other county officials remain unresolved, and we are hopeful they, too, will move quickly to carry out their duties and end this needless legal action,” she added.
The origin of the tax dispute dates back to the Champaign County Board of Review’s recommendation to revoke the property tax exemption long held by Covenant, a part of the Catholic hospital system Provena Health.
The Illinois Department of Revenue agreed with the local Board of Review and declared the hospital taxable, and when Provena challenged that decision in court, a Sangamon County judge disagreed with the state and county and restored the hospital’s tax exemption.
Covenant sought a tax refund based on the Sangamon County ruling, but the county had declined, contending the ruling wasn’t final because the Department of Revenue is appealing it.
For now, the tax payback is costing the city of Urbana dearly. City Comptroller Ron Eldridge said $481,320 of the money he turned over to the county was interest income and some additional principal he was led to believe the city would get to keep, and it was in reserve for improvements to University Avenue.
“I had the money invested and was earning interest on it, and I was planning on using it in the future,” he said. “We’ll have to alter our plans.”
Lyke said Provena could wind up paying all the money back to local governments if the Department of Revenue prevails on appeal.
“The case is on appeal over in Springfield. If the ultimate result is that Provena Covenant is not exempt, then it would be the county’s position that Provena Covenant did, indeed, owe the taxes for all those years, so what they’re refunding now would all come back,” he said.