Hospital sale could cost SLO County millions in property taxes. Here’s why

Stephanie Zappelli, Chloe Jones
·4 min read

San Luis Obispo County relies on local hospitals to pay hundreds of thousands of dollars in property taxes each year — but what happens when a nonprofit purchases those facilities?

The county budget could take a hit.

San Luis Obispo County could lose about $1.4 million a year in property tax revenue when Adventist Health takes over two Tenet Healthcare hospitals and other facilities on the Central Coast, SLO County Auditor-Controller-Treasurer-Tax Collector-Public Administrator Jim Hamilton told The Tribune for this Reality Check story.

In February, nonprofit Adventist Health announced that it had purchased two Tenet hospitals: Sierra Vista Regional Medical Center in San Luis Obispo and Twin Cities Community Hospital in Templeton.

Unlike for-profit companies, nonprofit organizations can apply to the state for property tax exemptions under the Welfare Exemption of the California tax code.

The California State Board of Equalization approved property tax exemptions for other hospitals owned by Adventist Health in Clear Lake, Ukiah, Delano and Tulare, according to a state database.

Adventist does plan to apply for property tax exemptions for Sierra Vista and Twin Cities, spokesperson Japhet De Oliveira told The Tribune on Wednesday.

But as of Wednesday, it had not yet applied to the Board of Equalization for a property tax exemption, according to board spokesperson Peter Kim.

The SLO County Assessor’s Office also had not received an application for property tax exemptions from Adventist, the agency told The Tribune.

If Adventist does apply for the exemption and it’s approved by the state, the county will lose property taxes currently paid by Sierra Vista Regional Medical Center and Twin Cities Community Hospital — which together accounted for the fifth-largest amount of property taxes paid to the county during fiscal year 2022-23, according to the county’s Annual Comprehensive Financial Report.

The county’s largest payer of property taxes is PG&E at about $12.8 million last year, the report said.

Sierra Vista Regional Medical Center in San Luis Obispo is one of two Tenet Health Central Coast hospitals in San Luis Obispo County.
Sierra Vista Regional Medical Center in San Luis Obispo is one of two Tenet Health Central Coast hospitals in San Luis Obispo County.

How much property tax does Tenet Healthcare pay SLO County?

Together, Sierra Vista and Twin Cities paid more than $1.39 million in local property taxes during fiscal year 2022-23. About 60% of that money — $836,160 — was allocated to public schools, while about 23% — $320,528 — went to the county, according to Hamilton.

Sierra Vista alone had the 10th-largest assessed property value in the county at $83 million in 2022-23, according to the county’s Annual Comprehensive Financial Report.

This meant the hospital paid about $830,000 in property taxes that year, Hamilton said.

Meanwhile, Twin Cities’ assessed value was $56 million in 2022-23, meaning it paid about $563,600 in local property taxes — all split between public schools, the county, cities and special districts, according to Hamilton.

During fiscal year 2023-24, Tenet Health was expected to pay $1.42 million in local property taxes between Sierra Vista and Twin Cities, according to a county report.

Twin Cities Community Hospital in Templeton.
Twin Cities Community Hospital in Templeton.

Of that funding, $361,443 would have been allocated to the county, $208,178 to cities and special districts, and $853,983 to local public schools, the report said.

The San Luis Coastal Unified School District was set to receive $308,229 in property tax revenue, the most of all the school districts.

Here’s how funding for other school districts breaks down:

  • Templeton Unified: $226,282

  • Cuesta College: $119,468

  • Lucia Mar: $63,827

  • County Office of Education: $56,887

  • Paso Robles Joint Unified: $44,939

  • Atascadero Unified: $28,507

  • San Miguel Elementary: $4,039

  • Shandon Joint Unified: $1,805

San Luis Obispo County Office of Education Assistant Superintendent Sheldon Smith said the loss of Tenet’s property tax revenue wouldn’t be a big hit for local schools because it makes up a small portion of each district’s budget.

For example, Sierra Vista’s property tax allocation makes up only 0.33% of San Luis Coastal Unified School District’s unrestricted revenue.

“The numbers indicate that the effect will be minimal,” Smith said.

When Adventist takes over the hospitals, however, the county and districts will no longer receive those property taxes if the nonprofit indeed applies for an exemption and it’s approved by the state.

The county will take this revenue hit as it faces a $22 million budget gap for fiscal year 2024-25, according to a February budget update.

Still, administrators aren’t worried about losing Tenet’s property taxes — and Hamilton said the loss in revenue will be offset by an increase in property taxes during fiscal year 2024-25.

The county expects to receive about $7.8 million more in property tax revenue next year — which is a 5% increase, according to a county report.

“It’s clear, just with that number, that whatever drop that happens related to Tenet is expected to be more than offset by the natural property tax growth,” Hamilton told The Tribune on Tuesday.