Manchester to consider repealing special tax refund for nonprofits amid potential hospital sale

CT Post – Tuesday, April 1, 2025
By Joseph Villanova

MANCHESTER — Town officials will consider whether to modify or repeal local laws to avoid losing as much as $2 million in tax reimbursement if Prospect Medical Holdings completes its Manchester Memorial Hospital sale.

The for-profit healthcare holdings company filed for Chapter 11 bankruptcy in January after pursuing a sale of Manchester Memorial Hospital, Rockville General Hospital, and Waterbury Hospital to non-profit Yale New Haven Health for nearly three years.

Though both parties agreed to a $435 million price in 2022, lawsuits were exchanged back and forth after a month-long cyberattack and the reveal of numerous debts and financial issues.

Manchester Director of Finance Kimberly Lord wrote in a memo dated Dec. 24 that the town established an ordinance in 1965, in accordance with but not mandated by state law, that provides for reimbursement of taxes when a property is transferred from a taxable entity to a nontaxable entity.

When taxable properties transfer ownership, Lord said, a private tax adjustment is conducted between the buyer and seller, and the seller becomes responsible for all future tax bills.

Lord said that when a taxable property is sold to a nontaxable entity, the current Manchester ordinance requires the town to refund a pro-rated portion of taxes paid by the previous owner on the previous grand list to the new owner, and fully exempt taxes for the new owner on the subsequent grand list.

Since the ordinance was enacted in 1965, Lord said hundreds of tax-exempt organizations have received the tax break, but the potential sale of Manchester Memorial Hospital is unique.

“In most cases, the revenue loss has been minimal, but in the case of a sale of Manchester Memorial Hospital to a tax-exempt entity, the impact would be significant,” Lord said. “I estimate the tax loss at the time of the sale, if this ordinance remains in effect, to be $1.7 to $2 million dollars.”

The Board of Directors is scheduled to discuss and potentially vote on repealing or amending the ordinance at a meeting Tuesday night.

If the ordinance were repealed, “the tax exemption for nonprofit entities would become effective as of sale date, and taxes due would follow the Grand List, just as it does for all other property transfers,” Lord said.

Alternatively, Lord said she recommended the Board of Directors to work with the Town Attorney to amend the ordinance to remain in place for properties assessed at $1 million or lower, if allowed by law.

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