Payment-in-lieu-of-taxes programs targeting nonprofits are gaining traction in cash-strapped U.S. cities.
Governments are taking their public burdens and putting them on the backs of nonprofits, at a time when the demand for our services is skyrocketing.
Cities around the country facing economic hardship are starting to look toward nonprofits for new revenue.
The Intergovernmental Cooperation Authority, a group appointed several years ago by the Pennsylvania state legislature to help the city of Pittsburgh resolve its financial troubles, has asked the city to create a task force to determine how much money tax-exempt nonprofits should pay for city services each year, according to the Tribune-Review.
Nonprofits own about 40 percent of Pittsburgh real estate and benefit from city services such as road maintenance and police and fire protection, but they pay little to assist with those costs, city officials said.
A public service fund was set up for the nonprofit community and had contributed about $19 million to the city’s coffers.
“This type of payment-in-lieu-of-taxes (PILOT) program for nonprofit organizations is not uncommon at the state and local level,” said Chris Vest, director of public policy at ASAE. “Particularly during this prolonged period of economic downturn, many state and local governments have looked at a PILOT program to offset declining revenues and offset the nonprofit’s use of local services.”
“Governments are taking their public burdens and putting them on the backs of nonprofits, at a time when the demand for our services is skyrocketing,” Tim Delaney, president and CEO of the National Council of Nonprofits told the Wall Street Journal.
“The payment is typically voluntary,” said Vest. “Some states and municipalities have tied the PILOT fee to a nonprofit organization’s real estate property value.”
ASAE hasn’t taken an official stance on PILOT programs but has communicated their increasing prevalence to the association and nonprofit communities.