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Kabetogama Township is a member of the Cook-Orr Health Care District (AKA Cook Hospital District). The District is a governmental entity formed legislatively in 1988 (under State Statutes 447.31-447.37). The district took over control of the hospital and nursing home in 1990. The district is governed by a Board which has the authority to levy taxes to support the maintenance of health care services and facilities in the district. Read more about the district.

​If you own property in Kabetogama Township, a portion of your property tax goes toward supporting the Health Care District. On your St. Louis County tax statement, the amount you are levied is listed under “special taxing district”.
 
In March of 2015, community members brought this tax issue before the Township Board. They felt the tax was not fair in relation to the service provided to the community by the hospital district and asked the board to work toward getting the township out of this special taxing district. The Board agreed to look into it.
After researching the issue and consulting with our township attorney, the Township Board set a course to see what could be done to address our concerns through engagement of our County officials and State legislative representatives.
 
On March 24, 2015 the Township Board presented the following letter to the St. Louis County Board at their meeting in Cook.
 
March 24, 2015
To: St. Louis County Board
From:  Kabetogama Township
 
At recent Township meetings, members of our community have brought forward for discussion the fact that a portion of the assessment on our property taxes goes to the Cook Hospital. Their basic questions were: (1) Why should we be paying taxes to support the Cook Hospital when few or none of our residents utilize this facility? (2) Why are some townships in this special taxing district exempt from being assessed for the Cook Hospital?

We took the information provided by the concerned residents and dug deeper into the issue and came up with this information:
  • The Hospital taxing district was established in the early 1990’s through state legislation intended to aid the operation of financially strapped rural hospitals.
  • Apparently (some) residents were allowed to vote at the township level on whether to be in or out of the taxing district.  Kabetogama was not organized at that time; no one recalls voting on this issue, so we assume that we were included in the taxing district through a larger voting block or at the County Board level. 
  • 5 Townships opted out of the taxing districts and pay nothing in support of what for many would be their local health care facility and for many more, their emergency care facility. These five Townships are Greenwood, Vermillion, Alango, Sturgeon and Morcom. 
  • Property owners in Kabetogama are assessed about $130 per $100,000 valuation for a total of about $95,000 for the township per year for a facility that is neither a health care provider of significance to us nor our primary emergency care provider.  Our township does receive some support from Cook Hospital in the form of an annual contribution to our First Responder organization which has been $1500 annually ($3000 for 2015); less than 2% return on our taxpayer contribution.
We would like to see a change to what we see as an unrepresentative tax to township taxpayers which is apportioned unfairly within the established special taxing district. We see two options that would bring about a more reasonable situation for us:
  • Allow the Kabetogama Township to vote on whether to be in or out of the special taxing district.
  • Require that properties in all townships within the special taxing district be assessed at the same rate to more fairly distribute the tax burden.
We understand that the special taxing district was established through state legislation and a change at that level would be required.  We ask for your support, including a letter to Sen. Bakk and Rep. Dill, as we pursue an equitable resolution. Read the full letter. 
 
Please look under Actions & Updates tab to follow progress on this issue.

District Response
​​​The Cook-Orr Healthcare District has responded to some of the Township's concerns. Click the button below to learn more. 

Actions & Updates
Follow process on this issue. Click the button below to learn more.
April 2016
Township Residents asked the Board to review our actions on this issue and that we get, in writing, the township attorney's evaluation and recommendations to the board on our actions to date and future course.
​The following is our attorney's letter to the Board:  
​ 
Couri & Ruppe

Memo
To:Chairman Stegmier

From:Bob Ruppe, Town Attorney

Date:May 2, 2016

Re:Hospital District Detachment

 
 

 
You have requested information regarding the ability of Kabetogama Township to detach from Cook Hospital District.  Minn. Stat. 447.38, subd. 2, permits a township included in a hospital district to petition the hospital district board for detachment from the hospital district.  This statute provides that the hospital board shall determine whether detachment should be granted.  No particular procedure is set forth in the statute but in accordance with Op. Att’y Gen. 1001-K (May 11, 1978), “the board may adopt its own reasonable procedures,” guided by the Administrative Procedures Act.    There are a few Court of Appeals decisions covering this issue:  Township of Ottertail v. Perham Hospital District, 438 N.W.2d 412 (Minn. App. 1989) and the unpublished cases of City of Otsego v. New River Hospital District; and City of Hinckley v. North Pine Area Hospital District.  To date, I am unaware of any municipality successfully being detached from a hospital district in the face of a hospital district board’s opposition.
 
As we discussed, this office represented the City of Otsego in its bid to detach from New River Medical Center, formerly known as the Monticello–Big Lake Community Hospital District. In 2010, the Court of Appeals issued its opinion in City of Otsego v. New River Hospital District and affirmed the hospital board's decision to deny detachment.   The facts underlying this decision illustrates the difficulty that Kabetogama Township will face in any action to detach from the hospital district as I expect that Cook Hospital District will adopt the same detachment standards as that of New River Medical Center.
 
The New River Medical Center was formed in 1961 by a number of rural cities and townships west of the Twin Cities seeking to improve access to quality local medical services. Otsego was annexed into the district in 1962 upon its residents' request. The hospital district is governed by a board of directors, and is funded both by its operating revenue as well as tax revenue, which, pursuant to state statute, is levied based on property value. State law provides that should a city or township wish to detach from the hospital district, it may request detachment by petitioning to the hospital board.
 
In September 2008, Otsego formally requested detachment, and the hospital board adopted four criteria for evaluation of the petition: (1) the benefit or harm to Otsego and the hospital district if the petition is granted; (2) whether Otsego is unique in comparison to the other cities/townships in the hospital district; (3) whether a substantial change in circumstances from the time of formation to the present justifies granting the petition; (4) the probative, credible evidence supporting the reasons for detachment. These criteria were based upon the only other Minnesota Court of Appeals case that addresses the issue of hospital district detachment, Township of Ottertail v. Perham Hospital District, 438 N.W.2d 412 (Minn. Ct. App. 1989).  These criteria were also used in City of Hinckley v. North Pine Area Hospital District.
 
Otsego argued that its residents are paying for services that they are not using. Otsego also argued that the hospital district had made no effort to increase services to Otsego residents and, thus, there is no benefit to the city to remain in the hospital district.  Further, Otsego also argued that there is no basis for the hospital board to believe that granting the detachment petition would encourage other cities and townships to seek detachment because residents of the other cities and townships actually use the services and that growth patterns have made medical facilities in the Twin Cities the preferred choice of city residents.  These are the same arguments that Kabetogama would be expected to advance at any detachment hearing -- that detachment is justified because the taxes levied on Kabetogama residents are greatly disproportionate to use of hospital district facilities by the Township’s residents. Further, that growth patterns have made medical facilities in International Falls the preferred choice of Kabetogama residents.
 
New River Medical Center denied Otsego’s detachment petition asserting that evidence demonstrated that use of hospital district services by Otsego residents has increased in recent years, and because the sudden loss of Otsego's tax revenue could harm the district. The board expressed concerns that allowing detachment of Otsego would set a precedent, leading to a disorderly dissolution of the hospital district—a "rush to the exits." Although acknowledging that Otsego has experienced population growth, the board found that this factor was not unique to Otsego, as the entire region has developed in recent years, and, moreover, the hospital district has responded to that growth by increasing the services offered.
Applying the deferential standard of review appropriate for judicial review of administrative decisions, and acknowledging the authority granted to hospital district boards by the statutory scheme, the Court of Appeals affirmed the hospital board's decision, finding that the board did not act arbitrarily or capriciously in denying Otsego's petition to detach, and that the record supported the board's determination. 
Under this standard of review, the Court of Appeals will not substitute its judgment for that of the hospital board and will uphold the board’s decision to deny any detachment petition “if it was within the hospital board’s jurisdiction, not mistaken as to law, not arbitrary, capricious, unreasonable or oppressive, and reasonably supported by the evidence.”   Given this standard of review, the hospital board’s decision to deny detachment will always be upheld if the board has any evidence to support its decision.
Unfortunately, the City of Otsego decision reinforces the teaching of the earlier Perham Hospital District and the recent Hinckley v North Pine Area Hospital District cases, namely, that the courts will give wide latitude to a hospital district board to decide a member's petition to detach. If the hospital district board provides a procedurally fair process, courts are loath to second-guess what is essentially a business judgment decision on the merits.  In reviewing the cases cited above, the following detachment arguments were successfully rejected by the hospital districts:
 
  •  Residents favor detachment
  • The tax levy is higher than it was originally represented to be
  • The tax levy is unnecessary and due to imprudent management decisions
  • The Township is serviced by other hospitals.
  • A majority of the city’s population live closer to other hospitals
  • The hospital district no longer operates a hospital, just an emergency room, and therefore residents should not have to support it with a tax levy
  • The incurrence of additional debt for hospital operations and facilities
  • City residents pay a disproportionate amount relative to other district members
  • City residents utilize the district less than other hospital district members
  • City share of hospital district levy is disproportionately high in light of usage by residents
  • That the harm to the hospital district from detachment would be minimal because the total taxes levied against city accounted for a small percent of the hospital district’s total operating revenue
 
Given the unfairness of a state law that grants hospital districts the power to both determine the procedures and criteria for detachment as well as to determine whether detachment should be granted I can not guarantee success should the Town Board wish to file a detachment petition with the Cook Hospital District.  I suggest that the Township continue to work with your state legislators to amend the statute to bring about a more reasonable situation for the Township:
 
  • Allow Kabetogama Township to vote on whether to be in or out of the special taxing district; and/or
  • Require that properties in all cities and townships being served by the hospital district be assessed at the same rate to more fairly distribute the tax burden.
Please call with any questions.