Wednesday, June 30, 2010
This blog has previously addressed the practice of soliciting payments in lieu of taxes (“PILOTS”) from nonprofits by revenue-strapped local governments. See, e.g., Massachusetts Municipalities Join Others Seeking PILOTs; Boston, Palo Alto Seek Nonprofit Payments and a "Church" in Illinois Fights Property Taxes; Anything Can be Tax Exempt: More on Pilots too; Debate on PILOTS, the sequel; More on PILOTS and Nonprofit Charities Paying Their Fair Share; Pittsburgh Mayor Reaches Deal with Nonprofits; Indiana Bill Would Impose PILOTS on Nonprofit Organizations.
The following are some recent stories concerning PILOTS.
From the Boston Globe: Here are the first two paragraphs of Boston University negotiating PILOT agreement with Brookline.
Boston University could pay Brookline almost $400,000 in lieu of taxes in the upcoming fiscal year in what town officials said Tuesday is the first agreement of its kind with the school.
Though the final details of the payment in lieu of taxes, or PILOT, program are still being ironed out, town and university officials said Tuesday they are confident they will be able to sign off on the agreement in early July.
And again from the Globe: Progress on BU Payment:
Talks are underway for the largest payment in lieu of taxes likely in Brookline, according to Stephen Cirillo, the town's finance director. He briefed selectmen Tuesday on the status of PILOT talks with Boston University, the town's largest taxpayer, and which also owns the highest value tax-exempt properties. The town and the university have agreed on a payment equivalent to 25 percent of the taxes that would otherwise be due on its holdings, Cirillo said, or roughly $380,000, starting with the fiscal year beginning July 1. Cirillo said that he and the university negotiators hope the eventual agreement will serve as a national model for such deals. Over the last few years, the town has negotiated PILOT agreements with several smaller nonprofit entities with tax-exempt property.
At a recent meeting of the Dallas City Council, ideas for raising revenue included the use of PILOTS. The Dallas Morning News reports as follows:
One idea was a program to try to get large non-profits who use city resources to voluntarily contribute to the city in lieu of taxes, which they are legally exempt from paying.
The practice, known as PILOT - Payment in Lieu of Taxes, is used by cities across the country, including Baltimore, Boston , Cambridge, Detroit, Indianapolis, Milwaukee, Minneapolis, New Haven, Palo Alto, Philadelphia , and Pittsburgh, according to city staffers.
"There are many different ways that they may charge the PILOT," said Jack Ireland of the city manager's office. "It may be based on a percentage of the taxable value, or it could be some negotiated rate to cover the cost of police and fire, or in some of the northern cities they use it to cover the cost of snow removal and the [sic] such."
Nearly 12,000 properties in Dallas valued at $10.7 billion have tax-exempt status, city officials say. They include cemeteries, charities, schools, hospitals and religious organizations. They also include about $1.2 billion worth of hospitals and medical buildings classified as charitable. Applying the city's property tax rate to the hospitals and medical buildings alone would generate $8.8 million in annual revenue, city officials noted.
Additionally, as noted on our sister TaxProf Blog, Town Wants Princeton to Increase Payments in Lieu of Taxes, Bloomberg reports that Princeton is facing pressure to increase its PILOTs. According to the story,
[t]he university would pay about $28 million in additional property taxes if all of its land were taxed, said Princeton Borough Councilman Kevin Wilkes. The college owns 43 percent of the borough’s assessed land value and 13 percent of adjoining Princeton Township’s, Wilkes said.
What does Princeton already contribute to the community? The Bloomberg story continues:
The university is already the largest taxpayer in Princeton Borough and Princeton Township, Durkee said. It paid $8.2 million last year in property taxes on housing for staff, faculty and some graduate students as well as for parking lots and other commercial facilities. It contributed an additional $1.6 million in sewer fees last year, according to the university….
The university doesn’t pay property taxes on academic, administrative and athletic facilities. Instead, it made a $1.2 million payment in 2009 in lieu of taxes, part of a six-year agreement that expires at the end of 2011.
Princeton University also pays $35,000 a year to support the First Aid & Rescue Squad and $100,000 a year for a staff position at the fire department, the university said. It gave $60,000 to the borough in 2008 to launch a free jitney service to the train station for residents, and community members can visit the art museum and children’s library on campus at no charge. The university helped restore the Garden Theatre, on Nassau Street bordering the college, in 2001. That same year, it gave a $500,000 gift to the school system for a new high school library.
The university employs about 5,300 people, and each year it helps generate more than $1 billion in economic activity, according to a 2008 college-issued report.
But, according to the rest of the story, Princeton’s PILOTS lag those of Harvard and Yale:
Harvard University, which has the largest university endowment in the U.S., made $4.14 million in voluntary payments in lieu of taxes in 2009 to Cambridge and Boston, the two cities where its campuses are located.
Yale University, which has the second-largest endowment in higher education in the U.S., increased its annual voluntary payment in lieu of taxes to its hometown, New Haven, Connecticut, to more than $7.5 million in 2009 from $5 million.