Chicago Will Levy Fees on Cash-Strapped Nonprofits

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January 6, 2011; Source: The Gazette | Chicago is facing a major budget shortfall—over $630 million—and Mayor Rahm Emanuel and the city’s aldermen are resorting to cuts and revenue-generating measures to bridge the gap. Among these options is a levy on nonprofits.

The Gazette reports about the phased-in elimination of fee waivers for water, sewer, and other city services for nonprofits which Chicago officials say will generate millions of dollars for the refurbishment of the city’s aging water infrastructure, including the replacement of hundreds of miles of water and sewer pipes.

Payments-in-lieu of taxes or PILOTS, are an attractive solution for cash-strapped state and local governments. They have been increasingly in use this past decade, as municipalities feel more justified in demanding that nonprofits pay their fair share. After all, these are tough times, and everyone is pitching in.

While this might not be much of a burden for larger nonprofits, such as universities and medical centers, with multimillion-dollar budgets, PILOTS can be devastating for community-based organizations that are having a hard time as it is to stay afloat. These nonprofits are doubly slammed with funding cuts and increased demand from struggling individuals and families. Now they are hammered by additional government levies.

Jimmy Lago, chancellor of the Roman Catholic Archdiocese of Chicago, said in a testimony to the City Council that the water and sewer fees will cost the Archdiocese, with its 643 water accounts for parishes, schools, and other facilities, more than $2.1 million. Lago stressed that the financial burden on Chicago parishes and schools will increase on average upward of $10,000.

“Adding these additional taxes and fees would have a very harmful impact on many inner-city parishes and schools and the other struggling schools and religious facilities that surround them,” Lago testified. “For some parishes, these fees could range to more than 20 percent of their annual revenue.”

State and local governments are justified in seeking ways to cut costs and increase revenue. Shifting the burden on nonprofits, which they rely on to provide for those most in need, however, might not be the best approach.

The Rev. Donald Craig, a parish priest, warns that the city’s move might force some nonprofits to close their doors. He points out that nonprofits provide a variety of services for Chicago’s homeless, elderly, disabled, children, and low-income families.

“Are they all going to City Hall for food or housing or clothing?” Craig asked. “I think not.”— Erwin de Leon