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Posted March 21, 2009 | Copyright © The Northern Virginia Daily
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Valley Health tax deal with city confirmed

Wellness center faces assessment

By James Heffernan - Daily Staff Writer


WINCHESTER -- The city has confirmed the settlement of a dispute with Valley Health over the payment of real estate taxes on its new Wellness and Fitness Center.

Under an agreement dated March 4, the nonprofit health care provider will pay a semi-annual fee based on one-third of the assessed value of the building, since that portion has been deemed for use by the public for general fitness purposes and not for medical rehabilitation.

City Commissioner of Revenue Jay Russell III said Friday that as of Jan. 1, the wellness center was valued at $11,155,200. Valley Health's fee, then, would be one-third of that figure, multiplied by the local real estate tax rate, which has yet to be determined, he said.

Billing will be twice a year, with payment due on or around June 5 and Dec. 5, according to the agreement.

In a statement released Friday, the city said both sides have agreed to disagree over the tax issue, and the settlement represents an effort to "avoid the enormous expense, inconvenience and uncertainty" that litigation would bring.

"Through the agreement, Valley Health does not admit tax liability and the City does not concede to the exemption," the statement reads.

"While Valley Health has and continues to maintain that they are exempt from payment of real estate taxes, the City stands by its position that they are not exempt with regard to this building," it says.

However, both sides also "recognize the importance of maintaining good corporate relations between the City and one of the area's largest employers," it says.

Valley Health acknowledged in a statement Thursday that the city provides essential services to the Winchester Medical Center campus, including the wellness center, which opened in September.

It is not uncommon for nonprofit health care providers to have for-profit subsidiaries under their corporate umbrella, such as home care and pharmacies. However, those providers argue that wellness centers are part of their mission to improve the overall health of the communities they serve, and so the centers should also be nonprofit.

As a 501(c)3 charitable organization, Valley Health is not required to pay taxes on state and federal income. The organization had net patient revenue of $413.7 million in fiscal year 2007, making it the eighth-largest hospital system in Virginia, according to a report in this month's issue of Virginia Business magazine.

However, Valley Health does pay for business licenses for the portion of the wellness center that provides nonclinical services, including retail and food and beverages.

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