Bob Spaulding • November 14th, 2006

UNIVERSITY AVENUE PROPERTY TAX STUDY:

Part 5:PROPERTIES EXEMPT FROM PROPERTY TAX

UNIVERSITY AVENUE PROPERTY TAX STUDY:

Part 5:PROPERTIES EXEMPT FROM PROPERTY TAX

Bob Spaulding • November 14th, 2006

Bob Spaulding • November 14th, 2006

TAX STUDY | PROPERTIES EXEMPT FROM PROPERTY TAX

EXEMPT FROM PROPERTY TAX IN MINNESOTAEXEMPT FROM PROPERTY TAX IN MINNESOTA

Source: Minnesota Statutes Chapter 272.02; Dakota County Asessors Office Summary

Public schools

Public hospitals

Public burying grounds

Academies, colleges, universities, and seminaries of learning

Churches, church property, and houses of worship

Public property used exclusively for public purposes

Property used for the control of air, water, and land pollution

Manure pits certified by the State

Electric power distribution lines

Transitional housing

Wind energy conversion systems

Waste water treatment systems operated by a municipality

Institutions of purely public charity (see next slide for clarification)


EXEMPT FROM PROPERTY TAX IN MINNESOTAEXEMPT FROM PROPERTY TAX IN MINNESOTA

Source: Northstar Research Institute v. Hennepin County; Dakota County Asessors Office Summary

Institutions of Purely Public Charity: Defined

The “Northstar Factors” - From Northstar v. Hennepin County (1976)

1. Whether the stated purpose of the undertaking is to be helpful to others without immediate expectation of material

reward.

2. Whether the entity involved is supported bydonations and gifts in whole or in part.

3. Whether the recipients of the “charity” are required to pay for the assistance received in whole or in part.

4. Whether the income received from gifts and donations and charges to users produces a profit to the charitable

institution.

5. Whether the beneficiaries of the “charity” are restricted or

unrestricted and, if restricted, whether the class of persons to whom the charity is made available is one having a reasonable relationship to the charitable objectives.

6. Whether the dividends, in form or substance, or assets upon dissolution are available to private interest.


PERCENTAGE OF EXEMPT PROPERTY LOCALLYTaxable Market Values, 2006


Source: Ramsey County Assessor’s Office

27% Exempt

73%Pays

Ramsey County Saint Paul





University Avenue, Excluding Capitol Grounds


EXEMPT PROPERTY EXEMPT PROPERTY


REVENUE LOSSESMacalester College: $222 million

St. Joseph’s Hospital: $114 million

St. Paul College: $73 million

EXPENDITURESHow do you quantify the expenditures a city makes

on average for a hospital? A college? A government building?


PAYMENT IN LIEU OF TAXES (PILOT)Summary


PILOT Programs allow municipalities to get property tax revenue from properties that

would not otherwise pay property tax, such as government buildings, colleges, hospitals and

charitable institutions.

Depending on the structure and intent of the program, the Payments can come directly from the affected properties, or a higher level of government can compensate a lower level of government for the existence of non tax-

generating properties in the area.




The most extensive PILOT Program is in Connecticut, where the state government

compensates municipalities for taxes lost by non-profits, colleges, and hospitals, at a

rate of 77% of the revenue the property would generate if it were not exempt.

However, even in Connecticut, the funding level for the program is subject to the whims

of the state legislature.

Other programs operate in Michigan, and through the Canadian National Government.

The United States Federal Government also compensates states for certain types of

federal lands that don’t pay taxes.




Source: Cost Estimates of Payment in lieu of Taxes on Charitable Institutions and Hospitals, MN Council of Non-Profits Budget Project

Before any Minnesota city could initiate a PILOT program, the state Legislature would

have to approve its use in Minnesota.

As part of the Property Tax Reforms enacted in 2001, some state leaders investigated the

possibility of allowing Minnesota Cities to establish PILOT Programs.

A 2000 Study from the Minnesota Budget Project looked at how much Cities could raise

statewide by instituting a PILOT Program on specifically hospitals and charitable

properties at a rate of 38% that of peer properties. The study suggested St. Paul would have

gotten an estimated $612,614, or about 1% of its total

tax levy.













tax levy.













tax levy.

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Bob Spaulding • November 14th, 2006