8/6/2019 GII Letter on PILOTs

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Lawmakers Eye Nonprofit Payments as Possible Funding Source(5/12/11)By Goodwill Industries International Director of Advocacy and Legislative Affairs LauraWalling

As Congress kicks off the 2012 appropriations process this week, state and local lawmakersare still looking for innovative ways to increase funding levels for this year. The city of

Providence, RI, faces a $110-million deficit, enormous pension problems and the aftershocksof a three-year recession.

Earlier this week, the new mayor unveiled a plan to tax nine tax-exempt hospitals, collegesand universities, a move that could raise $7 million more in the year that begins July 1.Providence is following in the footsteps of Boston, MA, where Mayor Thomas Menino hasasked 40 major nonprofits to make partial payments on property worth $13.6 billion. Bothcities are hoping that certain nonprofits will eventually pay an amount equal to 25 percent ofwhat they would owe if their property were not tax-exempt. The cities of Newton, MA, andConcord, NH, are also considering a similar proposal.

The idea of payment-in-lieu-of-taxes (also known as PILOTS) is not limited to New England.Already, more than 115 municipalities in at least 18 states collect payments in lieu of taxes

from nonprofits, including Philadelphia, PA, Baltimore, MD and Pittsburgh, PA. It is likely thatmore municipalities will look into PILOTS in the near future in order to close budget gapswithout placing a tax burden on residents.

Oftentimes, PILOT funds are collected to help cover municipal services such as police andfire protection, snow plowing, waste management and public works. PILOTS are voluntarypayments, yet most nonprofits are fearful of repercussions if they dont make thepayments. Nonprofits have challenged PILOTS in the past, noting the sector already addsrevenues to the community by renting and supplying services to the community that the citywould otherwise be required to provide.

In a recent Huffington Post blog,The National Council of Nonprofits urged organizations toconsider the following questions before making these payments:

1) Will complying with the city's demands cause you problems with the AttorneyGeneral's Office, which enforces donor intent?

2) Is the request from the city truly voluntary?

3) Where will the city draw the line the next time if it can successfully coerce enoughnonprofits to fork over money through this strong-arm tactic? (Larger nonprofits mustrealize if they willingly yield now they will be asked to pay not 25 percent in thefuture but 50 percent, 75 percent, or more over time, just as smaller nonprofitsbeneath the level of the city's first wave of letter invoices must realize they could benext, further diverting already limited and scarce resources away from mission.)

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