Wednesday, March 7, 2012

Hartford Latest to try PILOTs

This story in the Hartford Business Journal on-line details the efforts of Hartford to implement a PILOT (payment in lieu of taxes) program, aimed at the largest nonprofits in the city.  Like Boston, which has a PILOT program, Hartford has a number of very large nonprofits (mostly hospitals and universities) that are exempt from property taxes (although the state actually does reimburse the city some $40 million for its property).  Like Boston, over half the property in Hartford is tax-exempt as the result of either state or private charity ownership.  And like Boston, the revenue lost is huge - Hartford estimates that the value of exempt property is $3.6 billion (yes, that's "billion").  And like Boston, the charities complain that everything they do helps economic development - so they shouldn't have to pay taxes.  Hmmm . . . Wonder if Microsoft enhances the economic development of Redmond, WA - and the last time I checked, Microsoft paid taxes . . . 


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Ahhhh, John, there you go again! One of these days, when I get out of this rut I am in, I am going to finish my very very very rough draft article on PILOTS. I hope I can get to it this summer. Ok, Microsoft enhances Redmond, WA. But let’s assume the owners take, say, a modest 35% of the profits unto themselves each year. Might that be 35% less available for community enhancement? How much more enhancement might Redmond, WA experience if the owners eschewed all profits and promised to churn them back into the business? There may or may not be a dollar for dollar correlation, but the Code deals in rough justice. Certainly tax exemption does. If I agree that both for profit and non-profit entities provide community enhancement, would you then agree that there is a distinction by degree between the enhancement that Microsoft provides and the enhancement that say, Boston University, provides? We could, of course, reduce Boston University's property tax by the percentage difference in community enhancement it provides relative to an equally wealthy taxable entity, (rather than completely exempting BU) but all tax codes deal in rough justice and besides the administrative costs of doing so would result in diminishing returns at some point. Anyway, there must be a difference in the amount of enhancement an organization brings to its community to the extent the entity is subject to the "nondistribution constraint." Cheers!


Posted by: Darryll K. Jones | Mar 8, 2012 11:33:23 AM

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