Carmel officials push back on Franciscan Health project

Franciscan Health’s plan to build a $130 million orthopedic hospital and medical campus in Carmel met opposition this week from city councilors who want the not-for-profit health system to pay property taxes. 

The Mishawaka-based health system’s project would span 255,000 square feet across 18 acres along the east side of North Illinois Street, between West 106th and West 111th streets. The health system is calling the project the Franciscan Health Orthopedic Center of Excellence.

The health system has asked Carmel to rezone about six acres on the northern part of the site from single-family, low-density residential to the Meridian Corridor District, which allows mixed-use development. The southern part of the site is already zoned in the Meridian Corridor District.

Franciscan, working with Meridian Development Services, wants the project developed in two phases. The first phase would be a 138,000-square-foot, four-story orthopedic hospital, a parking garage and a two-story, 120,000-square-foot medical office building. The second phase would be a medical office and retail building, the size of which has not been disclosed. 

Monday night, the Carmel City Council—which will cast the final vote regarding the project—sent the issue to the land use and special studies committee for further discussion. Four councilors said they would not approve the rezoning as proposed currently.

As part of its request, Franciscan has committed to making payments to the city in lieu of taxes (also known as PILOT) for 25 years. Franciscan Health is a not-for-profit and would therefore be exempt from paying property taxes on the land.

It is common for communities to initiate PILOT deals to protect their commercial tax base when tax-exempt users seek zoning variances.

Monday night, four councilors—enough to constitute a majority—said they want to see Franciscan make tax payments in perpetuity, not just for 25 years.

“This has not got much going for it from the standpoint of bringing something special … to the community,” Councilor Ron Carter told Franciscan’ attorney Robert Hicks. “I would tell you … if that commitment stays the way it is, you don’t have a chance, I don’t think, of getting this built in Carmel.”

Councilors Kevin Rider, Jeff Worrell and Sue Finkam echoed Carter’s sentiments. Rider said the PILOT would be discussed further when the land use committee meets. A date for that meeting has not been set.

Councilors and residents are also concerned about what will happen to the 31-lot Meridian Suburban subdivision adjacent to the proposed Franciscan development if the health facilities are built. City officials had asked Franciscan to draft a master plan that would illustrate what Franciscan might do with the neighboring land if the houses in the Meridian Suburban neighborhood were not there.

Franciscan complied, offering a plan that shows an expansion of the second-phase building, three additional multi-story office buildings and two parking garages, but Franciscan officials said they have no intention of redeveloping the subdivision in the near future.

During a public meeting held Monday night, one resident said she’s already seen an offer on her house related to the Franciscan project. Cindy Klebusch said she’s lived in the Meridian Suburban subdivision for 17 years and recently received an offer from a developer associated with the Franciscan project that was based on the assessed value of her house and not its market value.

“Over the years, we’ve had several people approach us, but they want to low ball us to buy the property that is valuable but not willing to pay us money where we can (re)locate but not suffer financially,” she said.

Hicks said he is sympathetic to the homeowners’ concerns, but Franciscan Health doesn’t need the subdivision’s land to build its project. The project’s developer, Meridian Development Services, has made offers to purchase those properties, and the homeowners have deemed those offers to be insufficient, he said.

“Maybe there will be another time, another chance to try something, to maybe get that done,” he said. “It shouldn’t hold up what we’re asking the council to do here, which is to rezone the property now to the MC district because, again, we don’t really need the 31 lots to do this campus.”