Like many industries across the nation, Ohio’s hospitals are experiencing tight margins, rising costs, and increased demands for medical services.

In Ohio, local governments have the power to administer economic development incentive programs in order to spur development within their territory. Local governments can offer tax abatements or issue bonds to incentivize new development. As such, it is has become extremely important for hospitals to work closely with local governments to determine what types economic incentives are offered by the governments prior to planning to construct or renovate facilities.

One of the most popular types of economic incentives in Ohio is called “tax increment financing (TIF).” A TIF allows a local government to declare the increases in real property taxes within a specific area to be a public purpose and thereby exempt from real property taxation for the life of the TIF. Property owners within a TIF area make payments in lieu of taxes for the amount of the real property improvements that have been exempted from taxation. The payments in lieu of taxes are used to reimburse a developer for its upfront costs of constructing any necessary public infrastructure improvements.

Another popular type of local economic development incentive in Ohio is called “PACE Financing.” PACE stands for “property assessed clean energy,” and it is a public-private partnership between property owners, lenders and local communities. Under a PACE program, a lender makes a loan to a property owner to construct certain types of energy efficient improvements. A local government then levies special assessments on that property owner’s property tax bill in order to repay the loan.

The federal government also funded many types of federal tax incentives to spur economic development at the local level over the next decade with its passage of the Inflation Reduction Act (IRA) in August 2022. Under the IRA, hospitals now have the ability to receive direct payments from the federal government based off their costs to construct certain clean energy-generating assets that are used to power their facilities. There are even geographic-based incentives that can greatly increase the amount of credit an asset can qualify for. Most of these federal and local incentives are not mutually exclusive of each other, so it is in the best interests of a hospital to work with its local government partners to attempt to receive as many economic development incentives as possible for each project it undertakes.

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