Chicago Proposes Water Rates Compromise For Nonprofits

Chicago Mayor Rahm Emanuel is proposing a compromise for nonprofits that only recently found out they would be losing their exemption from water rates. The announcement came after meetings with leaders from nonprofits and select aldermen.

One of Mayor Emanuel's central promises of his election campaign was to end the practice of supplying free water to the many nonprofits in Chicago in order to help the city's budget. According to a report on DNAinfo.com Chicago, the Mayor had said the practice cost the city $20 million per year.

The water policy was changed as promised, but quickly met resistance from nonprofits, which claimed the rates were negatively affecting their ability to operate. While remaining firm on his pledge that he would not "give away" tax payer's money, Emanuel signaled last year that he would at least "study" a proposal by his aid Bob Fioretti, that would implement a sliding scale for rates based on an organization's assets.

Today's announcement indicates that he agreed with that plan, as the Mayor's compromise shares some of the features of Fioretti's plan. Under the compromise, nonprofits with overall assets under $1 million would not have to pay water fees. Those valued at between $1 million and $10 million, however, would still pay the feed but would get a 60 percent exemption. Those between $10 million and $250 million would get a 25 percent exemption.

Finally, those valued at more than $250 million would receive no additional exemption, although a public-museum exemption would remain at 20 percent regardless of asset level.

You can read the full story on DNAinfo's website.

Pennsylvania Law Would Let State Decide Nonprofits' Tax-Exempt Status

A proposed law in Pennsylvania would fundamentally change how nonprofits receive tax-exempt status, shifting the process from the judicial system to the state Legislature.

HB 724/SB4 passed the state Senate in a 30-20 vote last month and also received approval from the House Finance Committee. Since the bill would amend Pennsylvania's constitution, it must pass both houses in consecutive legislative sessions before going to voters for final approval.

The proposed law has generated enormous controversy in the state, according to an article in The Pittsburgh Post-Gazette. While supporters say it would provide consistency in what defines a tax-exempt charity, detractors, including Pittsburgh Councilwoman Natalia Rudiak, believe it's an effort by large organizations to shift decision-making away from communities which are increasingly trying to get nonprofits to contribute more.

Rudiak told The Gazette that she is also concerned that there is not a single public hearing to discuss the proposed change.

Those supporting the bill include large nonprofit hospitals and universities such as the Hospital & Healthsystem Association of Pennsylvania, and the Association of Independent Colleges and Universities of Pennsylvania. In a Jan. 28 memo to his colleagues, Republican Sens. Mike Brubaker and Joe Scarnati said the legislation became necessary once the Pennsylvania Supreme Court denied tax-exempt status to a camp in Pike County because it didn't provide relief to the local government as mandated by a 1985 court decision.

"By elevating its own judgment above the will of the General Assembly, the Court has created uncertainty as to the qualifications for public charities in Pennsylvania," the senators wrote.

You can read the full story in The Pittsburgh Post-Gazette.

Philadelphia Considers PILOT Program

Two Philadelphia council members are pushing for changes that could potentially open the door for a payment in lieu of taxes (PILOT) program in the city.

According to The Philadelphia Inquirer, Councilwoman Blondell Reynolds Brown started the push by calling for a hearing on property tax exemptions for nonprofits in Philadelphia. The city holds nearly $13 billion in exempted property -- 10 percent of the total market value -- making it a prime candidate for PILOTs.

In addition to the hearing, which is to be held sometime this spring, Councilman Bill Green introduced legislation that would require nonprofits to prove they deserve their tax exemptions and would identify programs that should pay business taxes.

Some of the city's nonprofits are not greeting this news with open arms particularly hospitals, which would stand to pay $112 million in taxes if they were not exempt. Curt Schroder, regional executive for the Delaware Valley Healthcare Council, told The Inquirer that he is "concerned" about the discussion and hopes the council doesn't end up implementing a PILOT program.

Though Philadelphia nonprofits might not like them, PILOT programs are common in the United States. They typically arise in cities with vast hospital systems and universities such as Providence, R.I., which recently agreed to a deal with Brown University to receive doubled payments from the college. The biggest recipient of PILOTs is Boston, which collected $19.4 million from nonprofits in 2012.

In addition, a study by the Johns Hopkins University Center for Civil Society Studies featured last year in The NonProfit Times revealed that 63 percent of nonprofits reported paying fees or taxes to local governments.

You can read the full story in The Philadelphia Inquirer.

Tampa To Review Deals With Nonprofits

The city council of Tampa, Fl. has called for a review of contracts with the city's nonprofits to determine how many are falling short of their obligations.

The review was ordered after Councilwoman Lisa Montelione discovered that the Steward's Foundation had fallen short of the terms of the 25-year lease it originally signed with Tampa in 2003, according to a report on  Tampa Bay Online. In exchange for paying $1 a year to use 3 acres in Julian B. Lane Riverfront Park, the organization was to teach rowing to high school students, host competitions, and provide a training area for out-of-state college teams.

That end of the bargain was fulfilled, but the Foundation still has not built the $2 million boathouse the city ordered it to construct after a 2007 renewal of the lease. A temporary structure for the boathouse exists, but the lack of permanent structure lead to the Foundation defaulting on its agreement with the city.

The Council voted 5-2 to send out a formal default notice to the organization, which gives it 60 days to correct the problem or face eviction. Mayor Bob Buckhorn has so far decided to let Steward's continue its work in Riverfront Park while the city works out its future.

Steward's Foundation president Tom Feaster told Tampa Bay Online that the reason the boathouse has not yet been constructed is because the organization has been unable to find donors for the project, due to uncertainty about the city's plans for the park.

According to public tax filings, the Foundation spent about $100,000 on its rowing programs in 2010. Feaster has maintained that other than the issue with the boathouse, his organization is fulfilling its mission, putting over 250 students a day on the Hillsbourough River to learn teamwork and improve their fitness.

Montelione will begin reviewing the agreements with the other city's nonprofits, and suggested to the Council that they may have to end support for them if they are unable to meet their obligations.

You can read the full story on Tampa Bay Online's website.

Nonprofit Hospital To Pay Syracuse For City Services

The mayor of Syracuse, N.Y., announced today that one of the city's nonprofit hospitals has agreed to pay $50,000 for four years to help cover the cost for services such as snow plowing.

Crouse Hospital becomes only the second tax-exempt institution to agree to make payments in lieu of taxes (PILOTs) to the city after Mayor Stephanie Miner urged the city's nonprofits to help the cash-strapped city, according to an article in The Syracuse Post-Standard. The other organization to agree to such payments was Syracuse University (SU), which will pay $500,000 over five years.

Between the two agreements, Syracuse will generate $2.7 million in revenue over the next five years.

"Crouse Hospital understands we cannot succeed as a city without our large non-profit institutions and that our large non-profit institutions cannot succeed without a vital and healthy city,” said Mayor Stephanie A. Miner in a press release. "This agreement shows Crouse’s leadership and how important it is to have strong partnerships with our leading employers—our nonprofits—to ensure we can move this community forward in challenging times."

The push to get more of the tax-exempt organization in Syracuse -- 50 percent of properties in the city fall under this classification -- is part of Miner's efforts to convince Albany that the city is doing all it can to resolve its current fiscal problems. The state government is reluctant to offer assistance until it gets those assurances.

In a letter to the city's nonprofits dated Nov. 1, Miner wrote that she believes that "our local efforts will not be complete until we as a community demonstrate that ALL our major nonprofit institutions are adopting the same bold thinking we are asking Albany to consider."

So far, however, the mayor has only gotten Crouse and SU to agree to make voluntary payments. Organizations including St. Joseph's Hospital Center and the State College of Environmental Science and Forestry have already rebuffed Miner's calls for payments.

Syracuse is among a growing list of cities that have called on nonprofits to make payments in lieu of taxes to help with fiscal issues. In October, the government of Pittsburgh, Pa., began dialogue with local tax-exempt organizations to make contributions to the city.

Pittsburgh To Begin PILOT Dialogue With Nonprofits

The city of Pittsburgh on Tuesday began new dialogue with nonprofits to develop a system for payments in lieu of taxes (PILOTs). The move was urged by state officials.

Pittsburgh becomes the latest city, following the example of Portland, Maine, to attempt to get payments from nonprofits. It comes after Pennsylvania's Intergovernmental Cooperation Authority (ICA) approved the city's 2013 budget and five-year plan, according to a report in The Pittsburgh Post-Gazette. The plan was approved on the condition that Pittsburgh Mayor Luke Ravenstahl form a task group on nonprofits by Dec. 31 and report on its findings by June 30.

In a letter to Mayor Ravenstahl, ICA chairman Dana Yealy wrote that the task force should examine how other cities handle PILOTs and make recommendations as to how much nonprofits should contribute in a similar program in Pittsburgh. In a statement, Ravenstahl thanked the ICA for "supporting the city's ongoing efforts to receive fair nonprofit payments."

The meetings of the task force must be public, wrote Yealy, and he added that the ICA reserved the right to rescind approval of the city's $469 million budget if Pittsburgh doesn't comply with the directive.

This is not Pittsburgh's first experience with PILOTs. The approval of the city's 2012 was briefly rescinded after there was concern that not enough was being done to get payments from nonprofits. The Tuesday directive by the state was motivated by the fact that the city's largest source of nonprofit contributions -- the Pittsburgh Public Service Fund -- is set to expire at the end of 2013. The city anticipates around $2.6 million from that fund this year, though the amount contributed by nonprofits is not disclosed, something Yealy wants changed with future PILOT agreements.

The fund is the largest source of funds from nonprofits, but the city also has some private contracts in place, including agreements with 10 to 20 nonprofits that were just renewed. Those agreements will net the city $450,000 to $500,000 this year.

You can read the full story in The Pittsburgh Post-Gazette.

Portland Set To Develop PILOT Program

Nonprofits in Portland, ME could be contacted by officials in the future, as the city begins to develop a proposal that would seek payments in lieu of taxes (PILOTs) from tax-exempt properties.

Portland's City Council Finance Committee directed staff Thursday to create a proposal for contacting the owners of the city's nearly 1,300 tax-exempt properties, according to a report in The Portland Press Herald. That proposal would need to be approved by the City Council, and officials said that it could take years to develop a successful PILOT program for the city.

Although Portland does not have a formal policy regarding payments in lieu of taxes, there are currently 14 nonprofits that contribute money to the city, with those groups paying about $623,000 in fiscal year 2010-11. The largest contributor of those organizations is Ecomaine, a nonprofit waste management company owned and operated by 21 municipalities in southern Maine. Ecomaine makes annual payments of $357,000.

Councilor John Anton, chairman of the Finance Committee, indicated to The Herald that the program they eventually adopt could be modeled after the one that exists in Boston. The Massachusetts city doesn't require nonprofits to participate in their PILOT program, but guidelines and payments formulas were set up for those that do.

Should a PILOT program be adopted, it would be used to support public services in Portland. You can read the full story in The Portland Press Herald.

Report: More Cities Seeking PILOTs

A new report from the Lincoln Institute of Land Policy revealed that at least 218 local governments have received payments in lieu of taxes (PILOTs) worth $92 million per year from about 490 nonprofits.

The report, titled "Payments in Lieu of Taxes by Nonprofits: Which Nonprofits Make PILOTs and Which Localities Receive Them," surveyed local government officials in 599 jurisdictions with the largest nonprofit sectors in 2011. Authors Adam H. Langley, Daphne A. Kenyon, and Patricia C. Bailin acknowledged that while PILOTs can refer to many different types of payments, their definition "excludes any payments from for-profit companies or public entities (e.g., housing authorities) and any payments from nonprofits that are not voluntary, such as fees."

Findings of the study included:

• Although more than 90 percent of all PILOT revenue comes from "eds and meds," college payments are found to be more important than those from hospitals. PILOTs from colleges and universities accounted for about two-thirds of payments, while hospitals contributed only a quarter.
• The Northeast accounts for about 75 to 80 percent of PILOTs, with the greatest activity coming in Massachusetts and Pennsylvania.
• Most nonprofits make fairly small PILOTs while most revenue generated comes from a small number of multimillion-dollar PILOTs. As a result, the average PILOT for all nonprofits ($292,952) is nearly 10 times larger than the median ($30,000).
• PILOTs generate little revenue in most cities, accounting for less than 1 percent of total general revenue in 165 out of 181 localities that contributed to the survey.
• Most PILOTs go to cities and towns, but at least seven school districts and four counties also receive PILOTs.

The NonProfit Times has reported on PILOTs in recent years. Most recently, we reported that Brown University agreed to double its payments to Providence, R.I., increasing the university's payments to the city to $31.5 million over 11 years. According to the Lincoln Institute Report, Brown is one of 10 nonprofits that contribute the most money to cities. The other organizations on that list include Harvard University, Boston University, Massachusetts General Hospital, Dartmouth College, Brigham & Women's Center, Massachusetts Institute of Techology, and Yale University.

If you are interested in reading the rest of the Lincoln Institute Report, you can view the PDF here.

NJ City Asks Nonprofits For Revenue

The City Council of Lawrence, N.J. is asking nonprofits to "voluntarily" contribute 25 percent of what they would pay in property taxes, in an attempt to generate revenue for the town.

Nonprofits hold more than 90 plots of land in Lawrence Township and account for $287 million of its assessed property value, according to a report in The Times of Trenton. Two of the largest organizations in the town, Lawrenceville School and Rider University, are already making payments to the town, but those fall short of what is now requested.

If the two schools were to agree to a 25 percent contribution, Lawrenceville would have to pay more than $217,852, and Rider University would have to contribute around $141,470. They gave $35,000 and $65,000, respectively, during the last budget year.

"The time has come that we not only seek financial support from Rider University and The Lawrenceville School for voluntary contributions, but, as a matter of equity, we request a voluntary contribution from all tax-exempt organizations in Lawrence Township," said Councilman Greg Puliti in a statement announcing the plan.

While the Lawrence council's plan is voluntary, some experts believe that organizations will see the move as a threat. Linda Czipo, executive director of New Brunswick, N.J.-based Center for Nonprofits, wondered aloud to The Times what will happen when cash-strapped organizations decline to make the payments.

Lawrence is certainly not the first U.S. city to make such a request to local nonprofits. Brown University in Providence, R.I. recently agreed to double its payments to the city, and the Memphis, Tenn. City Council approved a new payments in lieu of taxes (PILOT) program in the beginning of July.

You can read the full story about Lawrence's payment request in The Times of Trenton.

Trash Fee For NYC Nonprofits?

New York City council members plan to oppose a measure by Mayor Michael Bloomberg that would impose a garbage-collection fee on nonprofits, universities, and religious organizations.

The measure, which was included in the city's recently approved $68.5 billion budget, would raise $17.2 million in revenue for the city but requires the permission of the City Council. According to a report in The Wall Street Journal, that doesn't seem likely to happen.

Councilman David Greenfield (D-Brooklyn) has indicated that a majority of the council's 51 members oppose the legislation. He has already introduced legislation barring the Bloomberg administration from instituting a trash fee, and claims he has support for the bill from 31 council members.

The idea of the trash fee originated in May 2011, when Sanitation Commissioner John Doherty informed the council that his department was considering it. The hope was that this fee would give organizations an incentive to recycle items rather than using the garbage. It would also take taxpayers off the hook, as they currently foot the bill for organizations' garbage collection.

Most of the opposition from the City Council comes on behalf of small organizations. Critics say that the proposed fee could have a negative impact on these institutions' operations. David Zigun, executive director of Coney Island USA, told The Journal that the fee amounts to a tax, and that his organization -- which is currently dealing with a deficit -- would have to lay off employees as a result.

You can read the full story in The Wall Street Journal.

Memphis Considers New PILOT Program

The Memphis, Tenn. City Council voted 9-1 to approve a committee that would determine whether the city needs to form a new system to get nonprofits to make payments in lieu of taxes (PILOTs).

The Commercial Appeal first reported on the council's decision to take up the vote. The newly approved committee will focus its efforts on nonprofits that earn $15 million or more annually. They will then decide whether the city needs to adopt a new system to replace its current one.

As it stands now, the city's PILOT program is more of an incentive tool to get businesses to move to Memphis and Shelby County. Organizations that get a PILOT then pay taxes on what the land is worth at pre-development levels. If they choose to exit the program, they would then pay full taxes on the property.

Robert Lipscomb, director of Memphis's Division of Housing and Community Development, estimates that 30 percent of the properties in the city are tax-exempt.

Council member Janis Fullilove, who sponsored the resolution, said that she wanted to determine whether nonprofits should be made to enter the current program, or whether a new system should be developed like the one in Boston. In April, the Massachusetts city began demanding that nonprofits pay up to 25 percent of what they would owe if their property was not tax-exempt.

Boston isn't the only city to make nonprofits enter PILOT programs. The NonProfit Times reported that, in 2010, 63 percent of organizations paid some form of fees and taxes to local and state governments. And, over the last decade, PILOTs have been used in at least 117 cities in at least 18 states, according to a study from the Lincoln Institute of Land Policy in Cambridge, Mass.

You can read the full story in The Commercial Appeal.

County Controller Says Nonprofits Should Pay Up

The controller for Allegheny County, Pa. said yesterday that, in light of the higher taxes residents are seeing, nonprofits should be forced to give up their tax-exempt status.

According to a report in The Tribune-Review, Allegheny County Controller Chelsa Wagner made the statement Monday in what was billed a "taxpayer alert." "Residents are seeing their taxes go up and their services go down," Wagner said in the alert. "We’re saying the free riders need to be held accountable." Wagner estimated the county could raise $95 million by taxing around 26,500 tax-exempt parcels. 


Under Wagner's proposal, nonprofits that want to keep their tax-exemption to send an application to the Office of Property Assessments every year, explaining why the deserve a tax break under the state's charities law. Despite her strong push for change, state officials seem skeptical that such a law could be passed. State Senator Wayne Fontanta (D-Brookline), said he received almost no support when he introduced a bill that would have allowed local governments to tax nonprofits on the value of their land, and County Executive Rich Fitzgerald questioned why Wagner did not introduce the plan she is proposing when she was a state representative from 2007 to 2012.


Wagner specifically singled out five organizations in Allegheny County: University of Pittsburgh Medical Center (UPMC), University of Pittsburgh, Carnegie Mellon University, West Penn Allegheny Health System,  and Duquesne University. A UPMC spokeswomen responded to Wagner's report by saying that nonprofit medical and education organizations have driven the economic recovery in Western Pennsylvania, and that UPMC has contributed its fair share to the county. The medical center paid $176 million in federal and state employment taxes last year, in addition to contributing $565 million in charity and uncompensated care.


You can read the full report in The Tribune Review.

Some Nonprofits Drowning In Water Fees

Nonprofits don't pay property taxes but, as The NonProfit Times explained, they often end up paying money to the government anyway. This come in the form of payments in lieu of taxes (PILOTs).

Newsmax reported today on one such PILOT that is being debated in an Oregon court. Some cities are starting to charge nonprofits and churches double for their water bills. This is the case in Canyonville, Ore., where a city ordinance states that nonprofits, churches, and schools will be charged this amount in lieu of taxes. The city of Canyonville boasts that its residents pay less for water than neighboring towns.

Canyonville Christian Academy (CCA), established in 1924, told Newsmax that the extra charges for water date back nearly 30 years, totaling about $200,000. The law is written to cover all nonprofits that use water, but CCA believes that the regulations targeted 10 churches and four Christian schools. CCA informed the school of what they considered to be improper billing in June, but they said nothing was done to solve the problem. The school offered to resolved the issue on Oct. 19, 2011 by taking a small amount of the surcharges of the last six years in the form of credits on future bills. That offer was rejected.

Believing the law to be unconstitutional, CCA appealed to the Douglas County Circuit Court in Roseburg, Ore. to give a ruling on the matter. If the court rules in the school's favor, it could potentially trigger similar lawsuits in the future.

You can read the full story in Newsmax.

Boston Mayor Proposes Incentives For Nonprofit Hiring

It doesn't take a rocket scientist to realize that jobs are hard to find in this market.  That's why federal and local governments are trying to come up with ways to boost hiring.  One example of this is developing in Boston, MA, as The Boston Globe reports that Mayor Tom Menino is proposing financial incentives to boost nonprofit hiring as part of a 10-point jobs proposal.

According to the report, hospitals and other nonprofit jobs that hire unemployed Bostonians would receive a $1,000 credit that would be deducted from the amount they would pay each year in lieu of taxes.  This credit would be increased to $1,500 if the individual had been unemployed for six months or more.

Whether these incentives will be enough to encourage nonprofits to hire remains to be seen.  The article quotes some experts, such as the president of the Boston Municipal Research Bureau, who believe the credits are too modest to have a big impact, especially in lieu of federal budget cuts and Boston's recent insistence that nonprofits pay more to the city.  To read the rest of the article, head on over to The Boston Globe.

NPTtv Summary: More US Cities Want Nonprofits to Pay Up

Note: This is a summary of a story from the latest episode of The NonProfit Times TV.

First it was Boston, now Providence and DC are demanding payments from nonprofits.

In Providence, Mayor Angel Taveras is following in Boston's footsteps by asking nine nonprofit hospitals and universities to make payments of $24 million; roughly 25% of the real estate taxes they would pay if they were for-profit. The reason for this increase?  The city is currently dealing with $110 million budget deficit and, according to Mayor Taveras, nonprofits control nearly 40% of real estate in Providence. This would effectively negate a 2003 payments in lieu of taxes (PILOTs) agreement with the four universities targeted under this new plan (Brown, Johnson and Whales University, Rhode Island School of Design, and Providence College).

Meanwhile, DC Mayor Vincent Gray has thought of a different way to get payments from nonprofits.  He wants the governing council to pass a law that would impose a 6% tax on tickets to art institutions. If passed, the tax would impact over 200 nonprofit organizations in DC.