JERSEY CITY — After city officials appealed Jersey City Medical Center's tax-exempt status, the Downtown hospital has agreed to kick in $550,000 annually to the city's coffers for the next six years.

The agreement, which is part of a legal settlement between the hospital and the city, comes three years after a tax court judge ruled that Morristown Medical Center should pay Morristown property taxes because it fails to meet the legal test that it operates as a nonprofit. That ruling led dozens of towns statewide to sue hospitals seeking tax revenue.

JCMC, now part of the RWJBarnabas Health system, owns four properties in Jersey City, tax records show. Its main campus, located on Grand Street in an upscale area of the city, is assessed at $126 million. If the hospital were not tax-exempt, it would pay $800,000 in property taxes this year, city attorney Nick Strasser told the City Council on Oct. 9.

The settlement, approved by council members on Oct. 10, comes in two parts. The first includes JCMC's agreement to pay $300,000 in "voluntary" property taxes annually until 2023, retroactive to 2016. In exchange, the city will end its challenge of the hospital's tax-exempt status and the hospital will drop its counterclaim.

A second agreement has JCMC agreeing on annual "health care collaboration" payments to the city, also retroactive. The payments for 2016 and 2017 will be $1 million total and from 2018 through 2023 they will amount to $250,000 annually.

The tax agreement does not preclude the city from challenging the hospital's tax-exempt status after 2023.

A bill under review by state lawmakers would require nonprofit hospitals in New Jersey pay a "community service contribution" equal to at least $2.50 per bed daily. If that becomes law, the agreement between the city and JCMC would allow JCMC to reduce that contribution by the amount JCMC will pay under the settlement.

JCMC has about 320 beds.

At the council's Oct. 9 caucus, Councilwoman Joyce Watterman asked if the settlement was the best the city could do.

"It's perhaps not the best we could do but it's definitely not the worst we could do," Business Administrator Brian Platt told her. "The worst is actually zero, is what we get now."

The council approved the JCMC agreements 8-0-1. Council President Rolando Lavarro abstained from voting. His wife, Veronica, works at Barnabas in media relations.

"Jersey City Medical Center is pleased that the City of Jersey City has accepted this agreement," Veronica Lavarro said in a statement. "We look forward to our collaborative work to reduce health disparities and improving health equity in Jersey City."

An earlier version of this story should have said JCMC's property on Grand Street is assessed at 126 million.

Terrence T. McDonald may be reached at tmcdonald@jjournal.com. Follow him on Twitter @terrencemcd. Find The Jersey Journal on Facebook.