Wednesday, April 29, 2009
This story in The Daily Princetonian discusses efforts of a local citizens' group to pressure Princeton University to contribute more money to the local government. Over the past decade or so, many municipalities have cut deals with large nonprofits for "payments in lieu of taxes" (PILOTs) to offset at least some of the lost revenue from tax exemption. The article in the Princetonian notes that Princeton contributed over $1 million to the Princeton local government under a PILOT agreement, and choose to pay another $8.9 million in taxes on property that they could have requested exemption for.
The article is a very nice summary of the debate over PILOTs and tax exemption for large nonprofits in urban communities. On the one hand, Princeton would pay as much as $35 million in taxes if it were not exempt. Exemption pushes up taxes on non-exempt property, making homes less affordable and potentially driving out older and working-class residents. On the other hand, Princeton claims, probably correctly, that it brings a huge amount of economic activity to the area - and, after all, it is an educational organization, which have traditionally been exempt from taxes.
With the economy in the shape it's in, the debates over PILOTs and what contributions large, exempt nonprofit institutions should and/or do make to their local communities will likely rage on, and I suspect we'll see a lot more arguments over PILOTs, as well as possibly some narrowing in the grounds for exemption under state laws.