The fifth meeting of the Citizens League committee studying the question whether or not St. Paul should establish a payment or services in lieu of taxes (PILOT/SILOT) program for tax-exempt entities was held on June 22. Presentations from Daphne Kenyon, Lincoln Land Institute of Land Policy, and Matt Englander, City of Boston Assessing Department, comprised the agenda.

As a resident fellow in tax policy, Ms. Kenyon led a Lincoln Land Institute study of PILOT programs across the country. She said interest in PILOT programs has risen in the last couple of decades as pressures on local budgets go up, the willingness to pay more taxes has leveled off, and non-profits are under closer scrutiny.

According to Ms. Kenyon’s report, 218 jurisdictions in 28 states have collected more than $92 million in voluntary PILOT payments from 420 tax-exempt nonprofits. It needs noting that researchers did not include payments from businesses, public institutions, such as public universities and public authorities, or state governments; they wanted to compare apples to apples. The taxing body and individual non-profits typically negotiate the amount of and timeline for payments, resulting in unreliable and uneven levels of payments. Revenue could be deposited into the general fund or be put to specific uses.

Mr. Englander is Boston’s director of tax policy and communications. He explained that the city has no payroll or sales taxes, and it is highly reliant on property tax revenues. That said, more than half of the tax base is exempt, and the remaining tax base is protected from increases of more than two-and-a-half percent.

In 2009, with a PILOT program already in place, Boston Mayor Thomas Menino formed a task force of various stakeholders and asked them to examine the relationships between the city and its major non-profits. The group was asked to set a standard level of payments to be made by all tax-exempt land owners; develop a means of measuring a non-profit’s community benefit; and, propose a new PILOT program structure that promotes sustainable city/non-profit partnerships. The task force was also asked to determine the costs to the city of providing services to tax-exempt properties. And, if they saw fit, the group was asked to recommend city- or state-level legislative changes.

The Boston task force recommended that the PILOT program should remain voluntary with non-profits owning property with as total value of more than $15-million participating. If a non-profit pays any real estate taxes on land that otherwise qualifies for tax-exemption, a credit would be granted. The payments should be 25 percent of what would be paid if the entity were not tax-exempt with a reduction of up to 50 percent for qualifying community benefits (services). The task force said the criteria for determining qualification should include how quantifiable services directly benefit Boston residents and support the city’s mission and priorities. The non-profit should offer ways in which it and the city can collaborate to meet shared goals, and the city should be transparent and consistent so non-profits can properly plan their work.

Members of the Citizens League committee had several questions for the presenters. One expressed concerns about non-profits having to pivot to services only to meet PILOT/SILOT requirements. They wondered about the collection rates of PILOT payments. A member asked if a city is proposing a new program that calls for an increase in the budget, why not take money away from other programs rather than taking money from non-profits? Another wondered if a non-profit takes on a city service in order to meet the program requirements, how will unionized city workers be affected?

Both presenters spoke of the issue of putting PILOT revenue into the general fund. They said non-profits would be more willing to make voluntary PILOT payments if they can earmark the funds. Mr. Englander suggested the city provide a menu or wish list from which the non-profit could choose services to support through their contributions. They agreed that building the necessary relationship between the city and the non-profit takes trust and time.

Copies of the Power Point slide presentations can be found on our PILOT project page, as well as minutes from the previous meetings.