Opinion ID: 1966956
Heading Depth: 3
Heading Rank: 2

Heading: Specialty Clinic.

Text: Although the specialty clinic is not tied to the future viability of the hospital to the same degree as the physician clinic, it does intimately relate to the ability of the hospital to provide the level of medical care needed in the community. Thus, like the physician clinic, the use of part of the hospital as a specialty clinic combines public and private use. The question turns to whether the private nature of the use is incidental or primary. We have previously found government property leased to a private entity exempt from property taxation where the lease was devoted to public use and not held for pecuniary profit. See City of Osceola, 490 N.W.2d at 542 (referencing 1967 Op. Iowa Att'y Gen. 57 (1968)); Airport Bldg. Corp. v. Linn County Assessor, 406 N.W.2d 806, 811 (Iowa Ct.App.1987) (city leased land to private entity to enable construction of government facility); see also 71 Am. Jur.2d State and Local Taxation § 280, at 561 (Use of exempt property by a private party under a lease agreement does not defeat the exemption if the private party's use is the public use underlying the exemption.); § 324, at 621 (facility remained exempt where lease directly related to the operation of the hospital). On the other hand, we have found leased municipal property to fall outside the municipal exemption when the use of the leased property did not relate to the duties of municipality. City of Oskaloosa, 490 N.W.2d at 544. We acknowledge a hospital facility is not entitled to an exemption if physicians lease space from the hospital for the purpose of furthering their private practice. See Greater Anchorage Area Borough, 553 P.2d at 471; St. Mary's Med. Ctr. of Evansville, Inc. v. State Bd. of Tax Comm'rs, 571 N.E.2d 1247, 1249 (Ind.1991); St. John's Mercy Hosp. v. Leachman, 552 S.W.2d 723, 726 (Mo.1977); Genesee Hosp. v. Wagner, 364 N.Y.S.2d 934, 943 (1975); Grand Prairie Hosp. Auth. v. Dallas County Appraisal Dist., 730 S.W.2d 849, 851 (Tex.Ct.App.1987); Gifford Mem'l Hosp. v. Town of Randolph, 119 Vt. 66, 118 A.2d 480, 484 (1955). Yet, the lease agreement in this case does not permit the specialty doctors to maintain their medical practice at the hospital. Instead, the purpose underlying the lease agreement is to provide health care services otherwise unavailable in Van Buren County. The arrangement was not made for the benefit of the specialists, but for the benefit of the community. Moreover, as with the physician clinic, the need for the specialty clinic can be traced to the rural setting, and the use of the area of the hospital for specialty care is reasonably necessary to the operation and maintenance of the hospital. The private benefit to the physicians is incidental to the greater public use. The evidence in this case also does not support a finding that the specialty doctors are utilizing the clinic space to further their own private practice for pecuniary profit. The lease agreement between the University of Iowa and the hospital is not a standard lease agreement in which the lessor relinquishes substantial rights to the lessee. Cf. Milton Hosp. & Convalescent Home v. Bd. of Assessors, 360 Mass. 63, 271 N.E.2d 745, 748 (1971) (hospital essentially became a landlord with no rights to exercise except for those delineated in lease agreement). The specialty doctors are not granted unlimited control and discretion under the lease agreement. The lease agreement simply provides for the operation of a clinic for a specified number of days each month. The doctors are not permitted to pick and choose patients as private practitioners operating their own practices would be entitled. Each doctor leases the space for only a few days each month. In exchange for the office space, the doctors must pay a nominal amount of rent and, ordinarily, are not required to pay for additional expenses. Moreover, the doctors are not engaging in a competitive practice, because there are no other specialty physicians in the area. We find all of these facts favor a finding of a lack of pecuniary intent.