For 90 years, tax-exempt status has enabled Centre Community Hospital to provide many people with free care, but College Township's recent appeal to remove this status may jeopardize the service's continuation.

College Council wants the hospital to pay an annual property tax of about $40,000, said Lance Rose, hospital president and chief executive officer.

That figure could swell to more than $350,000 annually since the school district and county may also collect taxes if the township's appeal succeeds, said Robert Martin, hospital attorney.

"If College Township were to be successful in their appeal, it would apply to every assessment body in the area," Martin said.

Last year the hospital provided $425,000 in free care to the community, he said.

The hospital provides free care to people who cannot afford to pay medical expenses themselves, Martin added.

"The hospital does not take the issue of free service and improvement of service lightly," he said. "We evaluate those issues each year -- we are a community operation."

The state Supreme Court ruled in 1985 that a "purely public charity" must meet certain regulations to receive tax-exempt status, such as operating under a free-from-profit motive.

The tax-exempt status allows the hospital to function as a private, non-profit organization, Rose said.

"Any revenue is put back into the hospital for the benefit of the hospital in terms of equipment and staff to benefit the community," Rose said.

Even though the hospital's revenue was $3.1 million last year, money to pay the property tax, which seems small compared to that figure, would cause service cuts, Martin said.

Operations like ambulance and free care services would be affected if money is taken to pay the property tax, he said.

The hospital cannot rely on a consistent yearly revenue, Martin said.

"We can not count on a profit every year," Martin said. "Cuts would be inevitable."

The hospital receives many of the same services township taxpayers do, but doesn't pay property tax, said Fred Smith, College council chairman.

"The hospital does require township services like snow removal, police protection and so forth," Smith said. "When you look at the financial situation you can safely say that it is not fair to the rest of the tax-paying residents of the township."

College council members said the hospital does not provide enough charitable work to claim tax exemption.

"They call charity writing off bad debts," Smith said. "The hospital is playing games with their checkbook. They have a buildup of $15 million and that is not exactly small change."

Martin said he was not aware of that figure.

"Whether they are adding consecutive revenues or claiming we have a vault, it is not clear," Martin said. "The basis for tax exemption isn't whether a hospital is frugal or fortunate."

The hospital uses any excess revenue to continue free service and purchase equipment, Martin said.

"In order to buy a new piece of equipment or build a new wing, you have to have the money to begin with," Martin said.

The construction of a new medical facility has also sparked controversy. The facility will be a combination of medical offices and a University sports medical complex, Rose said.

"It is a totally separate entity. It is not part of the hospital," Rose said.

The building will not be tax exempt because part of it will house private doctor offices, Rose said.

"I believe Centre Community Hospital is entitled to tax exemption," Martin said. "If Centre Community is not entitled, then no other hospital or organization is."

The tax could cause increasing health care costs to the community, Rose said. Centre County residents would have to pay twice, he said, once for the tax and again for the increased cost of health care.

If the hospital is taxed the revenue needed to carry out its functions will be reduced, Rose said. This could cause cuts in supply and staff, he added.

"I don't understand how we will still be expected to serve the same amount of people with less funds," Rose said.

The first step in the case is a hearing in October or November before the Assessment Appeals Board, composed of Centre County Commissioners, Martin said, adding that the township may ask for a date extension.