February 17, 2013
Gun Violence, Property Taxes, and Community on Chicago's South Side
Although my field is comparative property law, today’s post is about a property issue a bit further from my expertise, and a bit closer to home.
President Obama visited my neighborhood on the South Side of Chicago on Friday. He came to give a speech on gun control at the Hyde Park Academy, a high school located just a twenty minute walk from President Obama’s Chicago home and a five minute walk from the University of Chicago Medical Center (UCMC), where Michelle Obama served as Vice President for Community and External Affairs. Hyde Park Academy is also located at the edge of an area with one of the highest gun violence rates in the city of Chicago, which itself has one of the highest homicide rates in the country. The speech was intended to emphasize that gun control is not only an issue of dealing with mass shootings of white children in small town Connecticut, but also everyday gun violence in urban areas across the country.
Discussions about gun violence have been particularly common on the University of Chicago campus during the weeks leading up to President Obama’s visit. On January 27, the university police arrested four high school and university students and alumni who were conducting a peaceful protest at the UCMC’s Center for Care and Discovery, a $700 million new building that the university has called the “largest single health care investment in [the] history of the South Side.” The January 27 protest was part of a broader campaign by community and student groups to push the university to re-establish a Level 1 trauma center, which could treat victims of trauma-related injuries suffered as a result of things like car accidents and gun violence.
Although the University of Chicago had a Level 1 trauma center decades ago, it was closed in 1988, with the university citing high costs. The predominantly black and low-income communities on the South Side now possess no adult Level 1 trauma center, requiring victims of trauma on the South Side to be transported to hospitals elsewhere in the city to receive attention. The need to re-establish such a center has been highlighted by a number of community organizations, one of the most prominent being a group of local students called Fearless Leading by the Youth (FLY). FLY’s 18-year-old co-founder, Damian Turner, was hit in 2010 by a stray bullet three blocks from the UCMC, but died 90 minutes later, after a nearly ten mile long ambulance ride to Northwestern Memorial Hospital. The university, however, has remained firm that an adult trauma center would imply excessive costs and that the difference in transport time is medically insignificant.
One of the arguments that has been raised in the debate over the trauma center is that the University of Chicago is tax exempt, but provides insufficient care (particularly trauma care) for the surrounding community to merit its exemption as a charitable organization. As with other non-profit hospitals across the country, one of the charity-based exemptions the UCMC receives is from property tax. (See this article by John Colombo for a detailed analysis of hospital property tax exemptions in Illinois.) The issue of property tax exemptions for non-profit hospitals has become a lightning rod in Chicago, particularly since the 2010 Illinois Supreme Court decision in Provena Covenant Medical Center v. the (Illinois) Department of Revenue. In Provena, a plurality found that the Department of Revenue had appropriately denied property tax exemption to a non-profit Chicago hospital due to its failure to exercise sufficient charitable use of the property. Rejecting the “community benefit” test widely used for federal tax exemption (which had replaced the previous emphasis on providing free or heavily discounted “charity care” for the poor in favor of a broader standard that could include things like health education or research), the plurality found that the appropriate basis for property tax exemption was relief of government burden. This relief could be provided in part through charity care, understood as a “gift” for the benefit of individuals or lessening the burden of government.
The Provena ruling did not, however, lay out a specific standard for appropriate levels of relief of government burden or charity care. In 2012, the Illinois legislature took up the issue, enacting a law stating that hospitals would qualify for property tax exemption provided the value of the hospital’s charitable activities met or exceeded its estimated property tax liability. These activities could include charity care, health services to poor or underserved communities, subsidies of state health care programs or state or local government activities related to health care for underserved or low-income populations, unreimbursed costs for Medicare or Medicaid patients, or any other activity that relieves the burden of government or addresses the health of low-income or underserved individuals.
What might these developments mean for the current debate over the re-establishment of a trauma center at the UCMC? In this post, John Colombo argues that the recent legislation is unlikely to affect hospital behavior generally, since hospitals that are underperforming in terms of charity care can simply cut a check to a government program to make up the difference. While this difference could potentially be large for UCMC - a 2009 study by the Center for Tax and Budget Accountability found that the UCMC received annual property tax breaks that were estimated at nearly three times (and total tax breaks estimated at nearly six times) what the UCMC spent annually on charity care - the legislation provides wide leeway for discretion as to how a hospital makes it up. This discretionary element of a hospital’s determination of how it meets the standard is key for the trauma center debate. As with a broad “community benefit” standard, the flexibility in how the new standard is met means that there is no mandate for hospitals to provide particular kinds of services or fit a particular community’s needs. Colombo argues for a third way, in which the question is not how much charity care a non-profit hospital offers or broad “community benefits,” but what services it brings to its community that cannot be acquired in the private market, playing a “gap filler” role which fits more closely the underlying reason that non-profit entities exist. Such a standard, though unlikely to be implemented, could have interesting implications for the kinds of services that UCMC would be expected to provide.
But underlying all these standards is a persistent ambiguity about who exactly a non-profit hospital is responsible for serving, and what “community” might mean. If we think about this in terms of Gregory Alexander’s social obligation theory, in which owners are obligated to provide to their communities benefits that the community reasonably considers to be necessary for human flourishing, to what community is a non-profit hospital obligated to provide such benefits, particularly when it receives property tax exemptions? Should a hospital’s charitable activities serve the neighborhood in which it is located? Or does “community” mean something broader? Does it simply mean “the public,” as is implied by the Illinois legislation’s approach to property tax exemption for charitable activities that relieve government burden? How might our analysis differ for federal tax exemptions and something like a property tax exemption, where the tax dollars lost to the government through exemption would have been spent on local services? In the case of the UCMC, how can we reconcile the importance of the broad benefits it provides through cutting-edge research and specialty-care services with the local nature of its property tax exemptions and the trauma care needs of the South Side?
In his speech on Friday, President Obama emphasized that what he was talking about was “not just a gun issue,” but also a question of “the kinds of communities that we’re building.” This question seems appropriately posed not only in relation to the prevention of gun violence, but also responsibility for the care of its victims.
February 17, 2013 | Permalink
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