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  • Ordinance Subject: Tax Exemption and Tax Stabilization Agreement for Our Lady of Fatima Hospital
  • Posted: May 12, 2014 03:25 PM
  • Municipality: North Providence

ORDINANCE #14-003
?AN ORDINANCE ESTABLISHING ARTICLE V OF CHAPTER 32 OF THE CODE OF ORDINANCES OF THE TOWN OF NORTH PROVIDENCE TO BE ENTITLED
?ESTABLISHMMENT OF A TAX EXEMPTION AND TAX STABILIZATION AGREEMEMNT FOR PROEPRERTY LOCATED AT 200 HIGH SERVICE AVENUE, NORTH PROVIDENCE, RHODE ISLAND A/K/A OUR LADY OF FATIMA HOSPITAL?

 
IT IS HEREBY ORDAINED BY THE TOWN OF NORTH PROVIDENCE AS FOLLOWS:

SECTION I:  RECITALS: 

WHEREAS, CharterCARE Health Partners (?CharterCARE?) operates a healthcare system in the Town of North Providence and the City of Providence which includes Roger Williams Medical Center and St. Joseph?s Health System of Rhode Island; 

WHEREAS, St. Joseph?s Health System of Rhode Island (?St. Joseph?) operates an integrated delivery system consistent with the healing mission of the Catholic Church including Our Lady of Fatima Hospital (?Fatima Hospital?), which is a 278-bed, acute care community hospital located in the Town of North Providence, an assisted living facility through its St. Joseph?s Living Center Division, and specialty care services through St. Joseph?s Hospital Specialty Care; 

WHEREAS, Roger Williams Medical Center is a 220-bed, acute care community hospital located in the City of Providence that provides secondary and tertiary care, is engaged in medical research, and is a community-based teaching hospital affiliated with an academic medical center; 

WHEREAS, St. Joseph?s Health System of Rhode Island also operates a school of nursing education through St. Joseph?s School of Nursing Division; 

WHEREAS, the CharterCARE healthcare system has considerable economic impact on the Town of North Providence and the State of Rhode Island.  

WHEREAS, CharterCARE employs over 2,700 employees with salaries and benefits over $178M per year; 

WHEREAS, CharterCARE purchases over $70M per year in goods and services from vendors in the State of Rhode Island;  

WHEREAS, utilizing the multipliers employed by Hospital Association of Rhode Island, CharterCARE has an economic impact of over $524M in the State of Rhode Island; 

WHEREAS, approximately 240 of CharterCARE?s employees reside in the Town of North Providence.

WHEREAS, CharterCARE provides over $25M in healthcare services to those in Rhode Island and North Providence, who cannot otherwise afford such healthcare; 

WHEREAS, beginning in 2012, in an effort to bring the CharterCARE system to profitability, and to continue its mission out into the foreseeable future, CharterCARE sought an affiliation with a broader healthcare network; 

WHEREAS, after a year of marketing and interviewing potential partners, CharterCARE has entered into an agreement to form a partnership with Prospect Medical Holdings, Inc. (?Prospect?) that will advance such goals (the ?Transaction?); 

WHEREAS, Prospect owns and operates 8 hospitals and a network of specialty and primary care clinics in high-density areas in California and Texas; 

WHEREAS, Prospect CharterCARE, LLC has been formed to own and operate the CharterCARE healthcare system (hereinafter ?Prospect CharterCARE?); 

WHEREAS, the existing CharterCARE ownership shall continue to hold a 15% ownership interest in Prospect CharterCARE;

WHEREAS, the governing structure of Prospect CharterCARE will be such that Prospect?s ownership interest will appoint 50% of the membership of Prospect CharterCARE?s Board and CharterCARE?s ownership interest will appoint 50% of the membership of the Prospect CharterCARE Board; 

WHEREAS, Prospect will pay $45M for its membership in Prospect CharterCARE.  This payment will be made to CharterCARE.  In turn, CharterCARE will utilize the investment to pay-off all long-term debt of CharterCARE and strengthen the St. Joseph Pension Plan, thus assuring that the pensions and retirement of many former employees, who reside in the community, are protected; 

WHEREAS, effective upon close of the Transaction, Prospect CharterCARE will be a for-profit entity and thus, a portion of the real property and personal property owned by the system in the Town of North Providence may become taxable;  

WHEREAS, the challenges facing acute-care, community hospitals in today?s environment requires the Town of North Providence and Prospect CharterCARE to partner in advancing the mission and continuing the positive economic impact of the CharterCARE healthcare system; 

WHEREAS, in order to ensure the viability of Prospect CharterCARE and encourage future development at Fatima Hospital and the properties owned by St. Joseph within the Town of North Providence, Prospect CharterCARE and the Town of North Providence have agreed to enter into a Tax Exemption and Stabilization (?Stabilization?) treaty; 

WHEREAS, the Town of North Providence has authority, pursuant to R.I. Gen. Laws ?44-3-9, to exempt and/or stabilize, in whole or in part, real and personal property taxes upon the determination that an entity may locate in the Town of North Providence to retain an existing facility and to ensure that the workforce therein is not substantially reduced; 

WHEREAS, Prospect CharterCARE has committed to locate in the Town of North Providence, retain Fatima Hospital as an acute-care community hospital with all essential services remaining intact, and to preserve the existing workforce; 

WHEREAS, Prospect CharterCARE has committed to inject $90M in capital into the existing hospitals over four (4) years which will be utilized, in part, to make improvements to Fatima Hospital, which may include, but not be limited to renovation/reconfiguration of the emergency department at Fatima Hospital, conversion of all patient rooms to private rooms at Fatima Hospital, renovation and expansion of the ambulatory care center at Fatima Hospital, new windows at Fatima Hospital, a new generator at Fatima Hospital, a facelift for the facades at Fatima Hospital, and access for the handicapped at the front entrance of Fatima Hospital; 

WHEREAS, Prospect CharterCARE will have to make significant, additional investments to ensure the sustainability of Fatima Hospital, whose bond rating has been reduced and has significant financial restraints on its current operations; 

	WHEREAS, after a public hearing, for which at least ten (10) days notice has been given in a newspaper having a general circulation in the Town of North Providence, the Town Council finds and determines that the Stabilized Payments contemplated to be made pursuant to this Ordinance have been determined by the Town Council to be fair, equitable and acceptable to the Town of North Providence; 

WHEREAS, it is in the interest of the residents of the Town of North Providence to grant a tax exemption and stabilization plan in order to ensure the success of CharterCARE?s operations in the Town of North Providence including Fatima Hospital. 

SECTION II: Article V of Chapter 32 of the North Providence Code of Ordinances shall read as follows: 

	Section 32-26. 	That the findings set forth in the preceding recitals are hereby made and confirmed. 

Section 32-27.	Definitions.  The following terms shall have the meanings set forth herein:

(a)	 ?Commencement Date? shall be the later of the passage of this Ordinance or the completion of the acquisition of CharterCARE in accord with regulatory approvals to be issued by the Rhode Island Attorney General and the Rhode Island Department of Health.

(b)	?Existing Property? shall mean CharterCARE?s Personal Property and Real Property in existence in the Town of North Providence, as contemplated to be acquired and subject to property taxation under the laws of the State of Rhode Island and Town of North Providence, as of the Commencement Date. 

(c)	 ?New Technology Investment? shall mean new investment in Personal Property utilized in, or related to, patient care at Prospect CharterCARE?s facilities in the Town of North Providence, post-acquisition and during the term of the Ordinance; 

(d)	?New Technology Investment Exemption? shall have the meaning detailed in Section 4.3 and is a property tax exemption granted during the term of this Ordinance. 

(e)	 ?Personal Property? shall mean any and all tangible personal property including, but not limited to all fixtures, furniture, equipment, furnishings, vehicles, computer hardware and software, informational systems and other personal property subject to property taxation pursuant to the laws of the State of Rhode Island and/or The Town of North Providence. 

(f)	?Project Owner? shall be Prospect CharterCARE and its affiliates, and its successors and assigns.  

(g)	?Prospect CharterCARE and its affiliates? shall mean those entities identified in the application submitted pursuant to R.I. Gen. Laws ??23-17-1 et seq. and 23-17.14-1 et seq. including but not limited to,  Prospect CharterCARE, LLC, Prospect CharterCARE RWMC, LLC, Prospect CharterCARE SJHSRI, LLC, Prospect CharterCARE Elmhurst, LLC, Prospect CharterCARE Ancillary Services, LLC.   

(h)	?Real Property? and/or ?Facility Site? shall mean the property identified in the Town of North Providence Assessor?s records as detailed in Exhibit A, hereto and all of the real estate, buildings and improvements located thereon, at the Commencement Date and thereunder, subject to property taxation under the laws of the State of Rhode Island and the Town of North Providence. 

(i)	  ?Stabilized Payments? shall mean the amount set forth in the Stabilized Tables in Sections 4.2 and 4.3 below, as applicable, and subject to applicable Stabilized Credit Incentives. 

(j)	 ?Stabilized Credit Incentives? as defined herein are dollar-for-dollar credits applicable to Stabilized Payments due and payable in an applicable year.

(k)	 ?Termination Date? shall mean ten (10) years from the Commencement Date.

Section 32-28.	Term.  The term of this Ordinance shall be a period commencing upon the Commencement Date and terminating on the Termination Date.  

Section 32-39. Stabilized Payments

Section 32-30.1 Determination of Stabilized Payments. Prospect CharterCARE desires to enter into a positive partnership with the Town of North Providence to ensure that Prospect CharterCARE can forecast its potential tax liabilities appropriately and to ensure that the Town of North Providence receives adequate revenues for the provision of municipal services. 

Section 32-31. 	Stabilized Real Property Plan. After the Commencement Date, all taxes assessed, levied and collected on account of Existing Real Property and Personal Property (but for New Technology Investment)  shall be in accord with the Stabilized Payment Table, below: 

Year	Stabilized Payment
1	$540,000 
2	$567,000 
3	$594,000 
4	$621,000 
5	$648,000 
6	$675,000 
7	$702,000 
8	$729,000 
9	$756,000 
10	$783,000 

Section 32-32.	Stabilized Plan for New Technology Investment:   It is vital to Prospect CharterCARE?s success that it has the appropriate New Technology available for patient care. Prospect CharterCARE has committed to inject $90M in capital into the existing hospitals within four (4) years of the Transaction, which may be utilized, in part, for New Technology at Fatima Hospital. Moreover, the return on investment will be at least four (4) years on such capital injection.  Therefore, in order to facilitate and encourage Prospect CharterCARE?s purchase of New Technology, Prospect CharterCARE shall be granted a ten (10) year exemption for all New Technology Investment made within four (4) years of the Commencement Date.  

For any New Technology Investment made within years five (5) through ten (10) after the Commencement Date, all taxes assessed, levied and collected shall be in accord with the Stabilized Payment Table, below:

Year	Percentage of Assessed Value Subject to Tax 
5	10%
6	20%
7	30%
8	40%
9	50%
10	60%

In years five (5) through (10) after the Commencement Date, fifty percent (50%) of any funds that the Town of North Providence receives from the State of Rhode Island related to Prospect CharterCARE shall be applied as a credit towards taxes owed by Prospect CharterCARE resulting from any New Technology Investment.  

Section 32-33.  ?Buy North Providence? Initiative.  CharterCARE will use good faith efforts to ensure that goods and services purchased for Prospect CharterCARE?s operations located in the Town of North Providence, are purchased from economically competitive and qualified vendors located in the Town of North Providence.  In furtherance of this effort, Prospect CharterCARE will work with the Town of North Providence to develop a database of qualified and economically competitive vendors. 

Section 32-34.	Employment Opportunities for Residents of North Providence.  

	32-34 (a).Employment Opportunities During New Construction.  Prospect CharterCARE shall make a good faith effort to award to Minority Business Enterprises as defined in Rhode Island General Laws, Section 37-14.1 (?MBE Act?) no less than 10% of the dollar value of any New Construction costs in the Town of North Providence (as determined in accordance with the rules and regulations promulgated pursuant to MBE Act).  Prospect CharterCARE shall make a good faith effort to award to women business enterprises (WBE?s) no less than 10% of the dollar value of the construction costs in the Town of North Providence. CharterCARE will request the Town of North Providence establish a list of qualified MBE/WBE companies in order to satisfy its MBE/WBE construction goals.  In this manner, the Town of North Providence will assist Prospect CharterCARE in meeting said goals.  The process of participating with the MBE/WBE office shall begin upon passage in order to develop a designated MBE/WBE subcontractor list which will encourage MBE/WBE participation and joint ventures with other members of the construction industry.  

	32-34(b)Employment Opportunities During Operation.  Prospect CharterCARE shall establish a protocol with the Town of North Providence to post all job opportunities, create a database of the Town of North Providence residents to apply for such opportunities, and to educate the community about future employment opportunities with Prospect CharterCARE.  

Section 32-34(c). Plan for Compliance with Employment and ?Buy North Providence? Outreach Components.  Prospect CharterCARE will work with the Town of North Providence to publish a plan for compliance with Sections 4.4, 5.1, and 5.2, within sixty (60) days of the acquisition of Prospect CharterCARE being completed.

Section 32-35. Satisfaction of Obligations.	the Town of North Providence agrees that so long as the Stabilized Payments are made by Prospect CharterCARE in accordance with the terms of this Ordinance, the Town of North Providence shall accept said payments in full satisfaction of the obligations of Prospect CharterCARE as to the payment of any and all taxes, including real and personal property assessments, to the Town of North Providence which could otherwise be levied upon the Existing Property, New Construction, and New Technology.  

Section 32-36.	Beneficiaries of Ordinance.	the Town of North Providence expressly acknowledges that any and all future owners of the Personal Property, the Facility Site and/or units or sub-units thereof, are intended to be beneficiaries of this Ordinance, and the provisions herein will apply with the same force and effect, except that if Prospect CharterCARE loses title to the Facility Site as a result of a foreclosure or tax sale, this Ordinance will have no further effect on a future owner of the Facility Site.  

Section 32-37.	Severability.  If any one section of this Ordinance is found to be unenforceable, then the other provisions herein shall continue to have the same force and effect as if the unenforceable provision were not passed as part of this Ordinance. 
	
	Section 32-38. Effective Date.  This Ordinance shall become effective immediately upon the Commencement Date. 

	Section 32-39.	Applicable Law.  This agreement shall be construed under the laws of the State of Rhode Island. 

SECTION 3:  ALL ORDINANCES OR PARTS THEREOF INCONSISTENT HEREWITH              ARE HEREBY REPEALED.

SECTION 4. THIS ORDINANCE SHALL TAKE EFFECT UPON ADOPTION.

APPROVED AS TO FORM AND LEGALITY:

__________________________________
TOWN SOLICITOR


ADOPTED:________________________   ______________________________
                                                                      COUNCIL PRESIDENT

APPROVED:_______________________   ______________________________
                                                                       MAYOR

                                                                         ______________________________
                                                                         TOWN CLERK
   
THIS ORDINANCE IS SCHEDULED FOR PUBLIC HEARING ON JUNE 3, 2014 AT 7:00 P.M. AT THE NORTH PROVIDENCE TOWN COUNCIL MEETING, COUNCIL CHAMBERS, 2000 SMITH STREET, NORTH PROVIDENCE, RI 02911