City of Long Branch v. Monmouth Medical Center
| Decision Date | 27 January 1976 |
| Citation | 138 N.J.Super. 524,351 A.2d 756 |
| Parties | CITY OF LONG BRANCH, Petitioner-Appellant, v. MONMOUTH MEDICAL CENTER, Respondent-Respondent. |
| Court | New Jersey Superior Court — Appellate Division |
Francis J. Badach, Toms River, for respondent-respondent (Giordano & Halleran, Toms River, attorneys, John R. Orlovsky, Brick Town, on the brief).
Before Judges HALPERN, CRANE and MICHELS.
The opinion of the court was delivered by
MICHELS, J.A.D.
The City of Long Branch appeals from a judgment of the Division of Tax Appeals of the Department of the Treasury (Division) holding that several buildings owned by Monmouth Medical Center (the Center) were exempt in whole or in part from the property taxes imposed by Long Branch.
The Center is a private, nonprofit hospital corporation organized and existing under the laws of the State of New Jersey. It was incorporated originally in 1889 as the Long Branch Hospital pursuant to an act entitled 'An Act to provide for the incorporation of associations for the erection and maintenance of hospitals, infirmaries, orphanages, asylums, and other charitable institutions.' L.1877, c. 103. In 1900 the name of the hospital was changed to Monmouth Memorial Hospital Association and in 1958 it was changed to Monmouth Medical Center.
The Center operates a hospital in Long Branch, New Jersey, which provides general hospital services to residents of Long Branch and the surrounding communities. The Center owns, in addition to the hospital building proper, several other buildings which comprise what is often referred to as the 'Hospital Complex of The Center.' The several properties which are part of this complex and are involved in this appeal are described briefly as follows. 1
The Borden Apartments (Block 208, Lot 2)
The Borden apartments are located a block and a half from the main entrance to the hospital. The building contains 70 apartment units of one, two and three-bedroom apartments. One section of the building was built in the 1950s and another section was built in the 1960s. The apartments are used exclusively as residences for resident physicians, interns and nurses on the staff of the Center. The rents charged by the Center are substantially lower than rents for comparable apartments in the area, and actually serve as a subsidy to attract qualified personnel to the Center's staff. The Center operates the Borden apartments at a net loss. The garage of the building is used by the Center to store some of its vehicles and landscaping equipment, the basements to store records and furniture, and one of the rooms for a classroom.
Long Branch assessed the land at $10,000 and the building at $240,000 for the year 1973. The Monmouth County Board of Taxation (county board) reduced the assessment on the land to $7,000 and on the building to $160,000. The Division found 'that the exclusive use to which this apartment is put is an integral part of the operation of the hospital' and cancelled the 1973 assessment.
Steinan Housman Wing (Block 205, Lot 1)
The Steinan Housman Wing is a three-story building attached to the hospital building proper and connected by common hallways. The Center built the building in the early 1950s. Approximately one-half of the Steinan Housman Wing is occupied and used by the Center for several of its Long Branch assessed the building at $256,850 for 1973 and the county board reduced the assessment to $131,750. The Division found that notwithstanding the fact that the physicians used the offices in part for their private practices, the Steinan Housman Wing was 'exclusively used as an integral unit of the Medical Center for its convenience,' and therefore cancelled the 1973 assessment.
departments, such as security and finance offices, medical education, pulmonary medicine, inhalation therapy, public relations, cardiac physiology, renal dialysis and tumor registry. The Monmouth County Medical Examiner also has an office in this building. The remaining half of the building is occupied and used as private physicians' offices. The physicians occupying these offices use them for the conduct of their private professional practices as well as for the perfomance of certain hospital staff functions. The Center charges these physicians a rental rate less than that charged for comparable office space in the area, and the financial records reveal that this building is also operated by the Center at a loss. The physicians renting these offices, with one exception, are in some way affiliated with the Center either as employee-physicians or appointed-physicians without financial remuneration.
The Professional and Educational Building (Block 206, Lot 1)
The Professional and Educational Building is a six-story building located directly across the street from the main hospital complex. It was constructed in 1969 with the assistance of federal funds. The Center rents the first floor of the building to Brookdale Community College, which uses the space for administrative offices and classrooms for its nurses' training program. The student nurses in the program render some services to the hospital patients. The second, third and fourth floors of the buildings are rented to physicians and one dentist for offices for the private practice of Long Branch assessed the building at $665,000 for 1973. The county board reduced the assessment to $540,700. The Division found that use of the first floor of the Professional and Educational Building by the 'student nurses is a direct hospital use and a necessary part thereof'; that '(t)he presence of the physicians is reasonably necessary to the operation of the hospital' and that the property was 'exempt as an integral part of the entire hospital complex.' The Division cancelled the 1973 assessment.
medicine and dentistry. Of the physicians and dentist renting these offices, only three hold medical administration posts on the staff or are involved in the operation of the hospital. The other physicans and the dentist apparently have privileges at the hospital and render some clinic service without charge and are available for some emergency duty. The Center uses the fifth and sixth floors for storage.
Hospital Clinic Building (Block 157, Lots 4A and B)
The Hospital Clinic Building is a one-story structure primarily used by the Center for its psychiatric and general medical and surgical clinics. A part of the building, consisting of approximately 3,000 square feet--or 18% Of its total area--is leased by the Center to a retail pharmacy. The Center charged the pharmacy a rental of $3,800 a year and the pharmacy agreed to give some discount on drug purchasers by clinic patients.
Long Branch assessed the land at $2,700 and the building at $23,200 for 1973. The county board upheld the assessment on the land but reduced the assessment on the building to $17,200. The Division found that the agreement by the pharmacy to extend discounts to clinic patients was 'an inadequate reason to grant exemption to the space occupied by the pharmacy.' The Division, however, granted an exemption for the remaining portion of the building 'actually
used in the direct hospital function' and reduced the assessment on the land to $500 and the building to $4,200.
The main thrust of Long Branch's challenge to the property tax exemptions granted the Center with respect to the foregoing properties is that these properties were not 'actually and exclusively used' for hospital purposes as required by N.J.S.A. 54:4--3.6. Long Branch contends that there was a substantial commingling of private profit-making activity with legitimate hospital functions in the use of these buildings which precluded them from qualifying for tax exemption under our statute. Our property tax exemption statute, in pertinent part, provides:
The following property shall be exempt from taxation under this chapter: * * * All buildings actually and exclusively used in the work of associations and corporations organized exclusively for the moral and mental improvement of men, women and children, or For religious, charitable or Hospital purposes, or for one or more such purposes; * * * the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair enjoyment thereof, and which is devoted to the purposes above mentioned and to no other purpose and does not exceed 5 acres in extent; the furniture and personal property in said buildings if used in and devoted to the purposes above mentioned; * * * provided, in the case of all the foregoing, the buildings, or the lands on which they stand, or the associations, corporations or institutions using and occupying them as aforesaid, are not conducted for profit, except that the exemption of the buildings and lands used for charitable, benevolent or religious purposes shall extend to cases where the charitable, benevolent or religious work therein carried on is supported partly by fees and charges received from or on behalf of beneficiaries using or occupying the buildings; provided, the building is wholly controlled by and the entire income therefrom is used for said charitable, benevolent or religious purposes. The foregoing exemptions shall apply only where the association, corporation or institution claiming the exemption owns the property in question and is incorporated or organized under the laws of this State and authorized to carry out the purposes on account of which the exemption is claimed. (Emphasis supplied)
The guidelines for the interpretation of this statute are well defined. The fundamental approach of our statutes is that ordinarily all property shall bear its just and equal share of the public burden of taxation. As the existence of government is a necessity, taxes are demanded and received in order for government to function. 51 Am.Jur., Taxation, § 9, p. 42. Statutes granting exemption from...
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