SOMERVILLE, NJ – Robert Wood Johnson University Hospital/Somerset has agreed to pay the borough a total of $2.5 million in lieu of property taxes for an eight-year period that expires at the end of 2023.
The agreement was announced at Monday night’s Borough Council meeting and was affirmed by a resolution passed by the five-member council by a unanimous vote. Granville Brady, council president, was absent
Negotiations have been ongoing for years, beginning with former mayors Brian Gallagher and Ellen Brain. The settlement then became a priority when Mayor Dennis Sullivan took office following November’s election.
According to the agreement, Somerville will receive a lump sum payment of $1 million covering 2016, 2017 and 2018, with payments of $311,000 due annually over the next five years.
“This settlement eliminates the cost and delay of further litigation and recognizes the obligation of the hospital to pay its fair share for the essential services that Somerville provides,” Sullivan said.
“It will serve as a benchmark for discussion with other tax-exempt organizations within the borough to provide an additional revenue stream to stabilize municipal taxes,” the mayor added.
Earlier Monday, a hospital spokesperson said “RWJUH Somerset is looking forward to approval of the agreement by the Council tonight.”
Sullivan acknowledged the efforts of Anthony Cava, president of RWJUH/Somerset in reaching the long-sought settlement.
The settlement is an outgrowth of a 2016 court decision and ensuing lawsuit filed by the New Jersey Hospital Association on behalf of 35 hospitals statewide, including RWJUH/Somerset, none of which were required to pay taxes to their local municipality. Morristown successfully sued Atlantic Health System, parent company of Morristown Memorial Hospital, with Atlantic Health agreeing to pay Morristown $15.5 million to cover the period from 2006 through 2025.
Somerville residents pay one of the highest property tax bills in Somerset County because of the preponderance of tax-exempt properties within the 2.5 square mile borough.
Roughly one-third of the property within Somerville is tax-exempt, according to Sullivan – the Somerset County administration, jail and courthouse complex and outlying locations; the hospital; one dozen churches, cemeteries, schools, firehouses and emergency services buildings, and other non-profit organizations.
“By setting a timeframe not to exceed five years the Council has an opportunity to renegotiate an agreement that would give the Borough additional revenue based on our financial consultant’s review of the Medical Center’s finances to ensure that future agreements will reflect changing market conditions,” said who also serves as the borough council's finance committee chair.
“Several other municipalities have negotiated similar arrangements as host communities for hospitals, including New Brunswick, Morristown and Summit,” he added.