A recent New Jersey Tax Court ruling that most of the Morristown Medical Center campus did not qualify for a local property tax exemption from 2006 to 2008 is a credit negative for the state's non-profit hospitals, according to Moody's Investors Service.
It could boost the communities that host those hospitals, the rating agency added.
The tax court's ruled that the medical center's operations did not meet certain criteria under state law for tax-exempt status; that means non-profit hospitals and other healthcare organizations could have their credit profile impacted from potential larger property tax bills, according to Moody's. The decision however is a credit positive for the Town of Morristown, which Moody's rates as Aa2, because it can collect roughly $6.9 million in taxes for the three-year period.
"While the ruling is not explicitly precedent setting, it may induce other New Jersey municipalities to file similar lawsuits, which would be credit positive for those cities and towns to the extent such cases are successful," said Moody's analysts David Strungis and Kevin Connolly in a July 6 report.
Morristown Medical Center is part of the multi-site, not-for-profit Atlantic Health System, which is rated A1 with a stable outlook by Moody's. Despite the ruling against Morristown Medical, Strungis and Connolly emphasized that whatever taxes are due will have little impact on Atlantic Health given the system's $2 billion revenue base. Morristown Medical's taxes for the years 2009 to 2015 are still in dispute and were not addressed in the ruling.