A Delaware County hospital formerly operated as a nonprofit but later acquired by a for-profit corporation can no longer receive tax breaks reserved for nonprofit entities, the Commonwealth Court has ruled, affirming the lower court and rejecting the hospital's argument that the entire Delaware County Court of Common Pleas bench should have recused.

A three-judge panel consisting of Commonwealth Court Judges Dan Pellegrini, Robert Simpson and Anne E. Covey upheld a trial judge's order granting a petition to enforce a previous order approving a payment in lieu of a tax agreement and ordering that the tax status of Springfield Hospital be changed to taxable nonexempt effective July 1, 2016.

Prospect Crozer, which owns Springfield Hospital, was issued a school real estate tax bill from the Springfield School District for the 11-acre medical campus of $434,000 based on the property's current real estate tax assessment of $13.81 million.

In the ensuing litigation, the trial court held that the clear language of a PILOT agreement from 1994 dictated that the property would be taxed as long as it was held by a for-profit entity.

Prospect appealed to the Commonwealth Court, arguing that the whole Delaware County bench should recuse and an out-of-town judge be appointed to hear the case because an unnamed Delaware County judge also serves on the hospital's board.

“Despite its claim to the contrary, Prospect knew of the facts that form the basis for its motion by June 29, 2017, but did not file the motion until more than four months later. Because Prospect did not present the recusal issue at the earliest possible moment, the underlying basis for the motion to remand is time-barred and waived,” Pellegrini said in the court's opinion.

“Even if Prospect's motion is not waived as time-barred, it still must be denied. Prospect has failed to allege any facts, let alone come forward with any evidence, tending to show bias, prejudice or unfairness on the part of the trial court judge which would necessitate recusal,” he added. “Importantly, there is no evidence in the record even identifying the trial court judge who heard the petition to enforce as the individual with the potential conflict.”

The court then turned to the language of the PILOT agreement.

“Here, the trial court found that the language of the 1994 PILOT order, specifically, paragraph 4, is unambiguous and that the parties intended the subject property to remain tax exempt only so long as any entity that operated it as a hospital was exempt from federal taxation,” Pellegrini said. “That condition was no longer in effect when the property was transferred from CKHS [Crozer-Keystone Health System] to Prospect on July 1, 2016, and the trial court held that through the 1994 PILOT order, Prospect's predecessors agreed to pay the tax effective as of that date.”

Robert L. Byer of Duane Morris represents Prospect and did not respond to a request for comment. Mark Sereni of DiOrio & Sereni represents Springfield Township and also did not respond to a request for comment.

(Copies of the 23-page opinion in In re Appeal of Springfield Hospital, PICS No. 18-0184, are available at http://at.law.com/PICS.)