Opinion ID: 1915575
Heading Depth: 1
Heading Rank: 2

Heading: Whether This Property of the Municipal Hospital Was Exempt Pursuant to Iowa Code Section 427.1(2).

Text: There is no dispute that the property in question is municipally owned. The issues on appeal concern its public use and whether these facilities are held for pecuniary profit. [1] A. Public use. The court of appeals determined that the municipal hospital's assisted-living facilities and independent-living facilities constituted a public use because facilities of this type are statutorily recognized as ancillary to the functions of a municipal hospital and they provide needed housing and care for the elderly. The court determined that these facilities served a significant need in their community because they were the only assisted-living facilities or independent-living facilities in Orange City. It correctly noted that subsidization of low-income patrons is not a requirement for a municipal corporation's property to be deemed exempt under section 427.1(2). See Van Buren Hosp. & Clinics v. Bd. of Review, 650 N.W.2d 580, 590-91 (Iowa 2002). We agree with the decision of the court of appeals. The fact that the legislature has provided that a municipal hospital may operate facilities of this nature as an ancillary hospital function shows a recognition that in today's society this is one of the public needs that municipal hospitals should attempt to meet. [2] We are satisfied that in providing these facilities the municipal hospital is attempting to satisfy that need. B. Whether these facilities are operated for a pecuniary profit. The impediment to property-tax exemption that results from activities for pecuniary profit was substantially clarified in Van Buren, 650 N.W.2d at 587. Discussing the pecuniary-profit language contained in section 427.1(2), we viewed that provision of the statute as a corollary to the public-use provision. We discussed the connection between these two matters as follows: [T]he test that has emerged from our cases interpreting the public use element of section 427.1(2) is whether the property in dispute is primarily used to carry on reasonably necessary or essential facilities to the efficient operation and maintenance of the public use for which the exemption is authorized.... A similar approach is taken to the not ... held for pecuniary profit element of the statutory exemption. When the primary use of property is public, it is not subject to taxation simply because the municipality incidentally receives revenue from the operation of the property. Van Buren, 650 N.W.2d at 587-88 (quoting City of Osceola v. Bd. of Review, 490 N.W.2d 539, 542 (Iowa 1992) (other citations omitted) (emphasis added)). In the present case, it appears that any excess of revenues over expenditures in the operation of these facilities is used first as a reserve for necessary maintenance of the assisted-living facilities and independent-living facilities and any residue is utilized to support the general operations of the municipal hospital. We agree with the court of appeals that the operation of these facilities is not for pecuniary profit in the sense that would work a denial of a section 427.1(2) exemption. We have considered all issues presented and conclude that the decision of the court of appeals should be affirmed. The judgment of the district court is reversed and the case is remanded to that court with directions to declare the subject property exempt for the tax years 2000 and 2001. DECISION OF COURT OF APPEALS AFFIRMED; DISTRICT COURT JUDGMENT REVERSED AND CASE REMANDED.