Atlantic will pay the city $795,400 a year starting this year and ending in 2023.
TRENTON -- Summit officials and Overlook Medical Center reached a settlement Tuesday night that boosts the city's budget by about $800,000 a year until 2023, and allows the hospital to keep its nonprofit, tax-exempt status.
The agreement is the fourth Atlantic Health System -- Overlook's owner -- has reached with the communities that host its various hospitals in north Jersey in lieu of paying property taxes.
A tax court judge in 2015 ruled that portions of Morristown Medical Center, Atlantic's flagship facility, operated like a for-profit enterprise. The ruling said based on its executive perks and revenue figures that Morristown was entitled to challenge the hospital's nonprofit status. The hospital relied on the city's public safety and public works department and other municipal services but was not expected to pay for them.
N.J. towns sue 35 hospitals over property taxes
Judge Vito Bianco's ruling has spawned dozens of tax appeals, creating fear among New Jersey's many privately run, nonprofit hospitals they could lose their tax-exempt status.
As of May, 41 municipalities had filed tax appeals against nonprofit hospitals.
Atlantic will pay the city $795,400 a year starting this year and ending in 2023, according to the announcement released by Overlook's President Alan Lieber and Common Council President Mike McTernan following the council's vote.
"We greatly value the partnership that Overlook Medical Center has with the community of Summit, and we recognize the responsibility we have," Lieber said in a statement. "This agreement reflects our ongoing commitment to contribute not only as health care providers, but as good neighbors."
McTernan said the settlement was "beneficial for our taxpayers and is a testament to the outstanding community partner Atlantic Health System continues to be in our city."
Atlantic Health paid Morristown a $15.5 million settlement. It also operates Newton Medical Center and settled with Newton last year, agreeing to pay $135,050 the first year and increasing the amount by 2 percent annually until 2020, according to a report by the New Jersey Herald.
Atlantic settled with Hackettstown, on behalf of Hackettstown Medical Center, although hospital officials did not have the details immediately Tuesday night.
When the Morristown decision was first announced, hospital executives panicked, fearing they would face steep budget shortfalls if they had to pay taxes. Legislators passed a bill last session that would have imposed a $2.50 per day hospital bed fee and a $250 per day fee for each satellite emergency care facility, but Christie rejected it.
Sen. Paul Sarlo (D-Bergen) introduced a similar bill in the spring but it has not gotten a vote.
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.