Developer of proposed hospital in Carmel agrees to use tax covenant

The developer that owns the land where Franciscan Health plans to build a $130 million orthopedic center in Carmel told city officials this week that property taxes will be paid on the real estate in perpetuity, even if it sells the land to the health care system in the future.

In December, the proposal to build a specialty hospital on 18 acres along Meridian Street met pushback from city councilors who were unhappy that the health care provider would agree to pay taxes for only 25 years through a proposed payment in lieu of taxes, or PILOT, agreement.

Franciscan Health, like most health care providers, is a not-for-profit and would be exempt from paying property taxes on the land. As a result, it is common for communities to initiate PILOT deals to protect their commercial tax base when tax-exempt users seek zoning variances.

The Mishawaka-based health system plans to build the 255,000 square-foot Franciscan Health Orthopedic Center of Excellence along the east side of North Illinois Street, between West 106^th and West 111^th streets.

About six acres of the 18 total acres are currently zoned single-family, low-density residential. Franciscan has asked that portion of the site be rezoned to the Meridian Corridor District to accommodate the project.

When the project was introduced to the city council in December, councilors sent it to their land use and special studies committee for further discussion. Councilors said without an ongoing PILOT agreement, the rezone likely wouldn’t be approved since the Meridian Corridor is one of the city’s most expensive areas to build.

This week, when the land use committee met, Marty Rosenberg of Meridian Development Service, which owns the 18 acres, told councilors his company agrees to pay real estate taxes on all 18 acres in perpetuity, either through a PILOT or some other legal agreement. Meridian Development plans to lease the property to Franciscan. But should Meridian Development sell the property in the future, it would do so with a covenant that the tax commitment to Carmel transfer to any new property owner.

In addition to the tax issue, city councilors were also concerned about a subdivision that neighbors the land, which would become surrounded by commercial development if the Franciscan project gets built.

Meridian Development had begun discussing land acquisition with homeowners in the 31-lot Meridian Suburban subdivision, and some of those homeowners told city councilors they received “low-ball” offers.

At a meeting earlier this month, Rosenberg highlighted some of the commitments Meridian Development plans to make to those homeowners should plans to purchase the land move forward.

Rosenberg said the developer would use the 2019 assessed valuation to calculate new offers, add $1.5 million to the neighborhood offer—increasing each landowners’ buyout by about $50,000—and homeowners could live in their houses for up to one year rent-free after the sale.

During the Land Use committee meeting Tuesday night, city councilor Kevin Rider, who previously expressed concerns about offers made to homeowners, said he now feels more comfortable with the negotiations than he did previously.

The land use committee chose to send the issue back to the full council with no recommendation, pending legal agreements that are still being drafted.

The Carmel City Council only has until Feb. 19 to vote on the rezoning before it’s approved automatically for a lack of action. The council meets Monday.