After another light-hearted April Fools Day and the cheery promise of April showers’ importance to May flowers, the deadline for filing federal income tax returns (April 18 this year) can be a dark day, rekindling people’s resentment about taxes generally, from sales to property.
Meanwhile, it seems the trend in helping local-government finances focuses on spending cuts, not boosting revenues — especially raising taxes. However, officials could help stabilize civic finances while easing burdens on taxpayers if they’re strong advocates for everyday people and seek balance by bargaining with some institutions that don’t pay property taxes: nonprofits.
Such companies are vital to communities, of course. They also benefit from their locations, area residents and tax-funded infrastructure like streets and sanitation plus public services such as police and fire departments. So there ought to be better sharing of fiscal responsibilities.
Such an option exists: Payments In Lieu of Taxes (PILOT) programs, where jurisdictions work with local hospitals, colleges and other institutions to bargain for voluntary payments instead of the property taxes that the nonprofits would otherwise pay except for their tax-exempt status.
Resistance would be expected. For example, a Chicago ordinance mandating any nonprofit working in public health and family support to sign a “Labor Peace Agreement” to not interfere with union organizing by its employees before qualifying for city grants of taxpayers’ money was a longtime debate until the City Council there approved it 41-2 on March 14. (In exchange, workers would not be able to strike, boycott or otherwise halt business at the nonprofits.) The overwhelming support occurred despite strong opposition by dozens of affected enterprises including the YMCA/YWCA and Catholic Charities.
The privilege of owning real estate without paying property taxes irked the late Jack Bradley, a former Journal Star colleague who for a time served on the Peoria County Board. I once asked him how he thought multi-million-dollar nonprofits would react to a conversation about chipping in to County coffers, and he shrugged and said, “Let their consciences be their guide.”
There’s a significant potential. For example, by itself, Peoria County’s taxable Equalized Assessed Valuation assessment is $3.4 billion (a third of its approximate fair market value), according to Peoria County Supervisor of Assessment Dave Ryan. Separately the City of Peoria’s taxable EAV is $2 billion. About 5.3% of parcels in the City of Peoria are tax exempt, and 4% of Peoria County parcels outside the city are tax exempt.
That means the City of Peoria misses out on about $106 million, and the County about $136 million if all property was taxable.
PILOT arrangements aren’t new. The federal government last year paid Illinois $1.4 million for nontaxable federal land, according to Interior Department data.
“Many types of nonprofit organizations, such as hospitals, universities, and cultural institutions, occupy valuable real estate that, because of their nonprofit status, are exempt from property taxes,” said Chicago Alderman Timmy Knudsen. “A number of municipalities have asked nonprofit organizations to make payments in lieu of taxes to supplement local revenue and to cover the cost of essential services.”
In fact, according to statistics from a decade ago, some communities received substantial PILOT contributions from an assortment of nonprofits: Boston in 2012 got a total of $19.4 million from 33 nonprofits; Baltimore in 2011 received
$5.4 million altogether from 15 nonprofits; and Pittsburgh in 2011 got a total of $2.6 million from 46 nonprofit contributors.
“Under the Illinois Constitution, the only property-tax exemptions allowed are government, religious, educational and charitable,” Knudsen said. “State law does allow taxing districts to enter into mutually acceptable agreements with owners of any exempt property whereby the owner agrees to make payments to the taxing district for the direct and indirect cost of services provided by the district.”
Naturally, any additional revenue government budgets receive would depend on joint approval of a deal negotiated by the parties, depending not just on conscience but annual revenues, offsetting investments in the community, etc. Some nonprofits barely meet payroll; others have wealth and influence making their standing as institutional citizens quite powerful.
But any PILOT would make a positive difference, and nonprofits that willingly help defray county or city expenses would take meaningful steps toward balancing their relationship with the taxing bodies on which they depend without currently financially supporting them.
Taxpayers subsidize various ventures such as hotels, retailers and other private projects through incentives, abatements, Tax-Increment Financing, etc. Is it too much to ask nonprofits to share taxpayers’ costs of maintaining the community we share?
We may never know. One need not be jaded to think it’s doubtful that local taxing bodies would initiate talks with — much less stand up to — prominent nonprofits that own real estate. But if some elected representative truly prioritizes regular taxpayers unwittingly underwriting nonprofits, they could start a fruitful discussion.
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April 4, 2023 at 06:17AM