City Council this week approved an agreement by which the city, the Altoona Area School District and Blair County collectively would receive an amount equal to 110 percent of property taxes due for 2013 every year for the next 10 years on the former Bon Secours Holy Family Hospital property.
The agreement could settle a dispute between the county assessment office and UPMC Altoona - which owns the property - over the office's ruling that most of the property is taxable, because most of it is no longer being used for hospital purposes.
The agreement depends on the property's recent designation as a Keystone Opportunity Expansion Zone, a tax abatement program that allows for the 110 percent payment to help offset loss of government revenue by the program's forgiveness of other taxes, including income and business taxes.
The agreement is contingent on the property being sold before August, according to city solicitor Larry Clapper.
"We were probably headed for litigation - the taxing bodies with UPMC over taxability," Clapper said. "This changes everything."
The KOEZ abatements and the presence of a potential buyer "confused" the simple dispute over whether the property should continue to be exempt from property taxes, Clapper said.
But the abatement program and buyer also provided a way for both sides to get something they wanted, he agreed.
The taxing bodies get the revenue, while the hospital gets tax forgiveness that could make the property attractive for sale, according to Clapper.
"But if [the sale] falls through, we're right back to where we were," he said.
The agreement calls for payment of taxes due up to the date of the sale from the proceeds of the sale through 2014.
After that, the new owner would make the 110 percent payment, according to the agreement.
The new owner could also apply for its own tax exemption, the agreement states.
If the property remains unsold by August, the parties would need to meet again to work out the exemption issue, Clapper said.
According to the agreement, the assessed value of the properties - the foundation of the 110 percent payment - would be based on a market value of $2.5 million, presumably the agreed-on sale price of the tract.
The hospital probably consulted with the potential buyer on the structure of the agreement, Clapper said.
The agreement does not affect the ongoing Payment In Lieu Of Taxes agreement between the taxing bodies and UPMC Altoona, according to Clapper.
The Bon Secours property agreement flowed from a provision in the PILOT agreement that calls for the parties to work out a resolution if a dispute arises after exempt parcels become taxable, according to Clapper.
Mirror Staff Writer William Kibler is at 949-7038.