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November 9th, 2005 NIGEL JAQUISS | News Stories
 

On The Waterfront

Tax-exempt docs will own South Waterfront development.

     
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The OHSU docs' building (skeleton on left) opens in fall 2006.
IMAGE: OHSU
For years, Oregon Health & Science University has envisioned a biotechnology center along the Willamette River that would catapult it and Portland into the 21st century.

The premise behind that vision for the South Waterfront has been that major public investment would be needed to generate the biotech development, which in turn would guarantee new city property-tax revenues for decades to come.

Yet the building rising rapidly under the OHSU crane at the South Waterfront doesn't exactly fulfill that vision and its underlying assumptions.

The 16-story structure, known as the OHSU Center for Health and Healing, will be little more than a large health clinic when it opens next fall. The university won't own it, and it won't pay property taxes.

As many floors—four—will be for an upscale gym and retail shops as for research labs, says OHSU spokeswoman Rachel MacKnight. Those four lab floors will include a biomedical-engineering component but also cancer and cardiology labs and federally funded general clinical research.

The other eight floors will be offices for OHSU doctors practicing many of the same specialties—internal medicine, plastic surgery, family medicine—as their peers in various other clinics around town.

And it's the doctors who will own the building. While the sign on the crane reads "OHSU," MacKnight says doctors will contribute $120 million of the building's $145 million price tag, with the university kicking in the balance.

That's a pretty big chunk of change. But the 700 members of the OHSU Medical Group, all of whom serve on the faculty of the university (through which they issued bonds to pay for the building), are an economic force in their own right. Last year, according to the group's tax return, they generated revenues of more than $140 million and profits of nearly $11 million.

Except the doctors' group, unlike any other in Oregon, doesn't call its earnings profit. That's because, in 1999, it was organized as a 501(c)(3) nonprofit under Internal Revenue Service rules. Jim Kronenberg of the Oregon Medical Association says the OHSU group is the only nonprofit doctors' association he's aware of in Oregon.

The doctors' nonprofit status carries major implications. The first, of course, is that like other nonprofits, it pays no federal, state or local corporate income tax. More importantly for the development of South Waterfront, which will require more than $200 million in public investment, the building won't appear on property-tax rolls.

Richard Sanderman, a supervisor of commercial assessment for Multnomah County, says if the building were owned by a for-profit operation such as the Portland Clinic, it would pay more than $1 million annually in property taxes.

The building is chock-full of environment-friendly features, such as toilets that flush using rainwater, and 40,000 square feet of stone that will store solar heat. But it won't help pay for the cost of the roads, public-safety services or even the city's share of the $45 million (and counting) aerial tram that will link the new building to OHSU's main campus on Marquam Hill.

 
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