November 19, 2015; Daily Hampshire Gazette
PILOTs—payments in lieu of taxes—are back, this time in the small city of Northampton in western Massachusetts. The Daily Hampshire Gazette reports that city councilors, after little debate, voted unanimously to endorse the PILOTs, a proposal put forward by the mayor.
The program asks 10 of the city’s largest nonprofit, tax-exempt property owners to make voluntary contributions to city coffers. During the public debate over the proposal, advocates and opponents of the idea weighed in, including Smith College, which was in opposition.
The college is Northampton’s largest taxpayer and one of its largest employers. While its spokesperson said it is committed to working with the city, it questions whether PILOTs are the most appropriate approach, proposing a different voluntary contribution program with greater flexibility.
“I would leave the nonprofits alone and just expect the city to live within its means,” added the chairman of the local Republican organization.
Cities in the eastern U.S. often look to PILOTs to help them deal with the fiscal realities they confront—a need for new revenue in the face of declining state funding. Northampton is home to a number of large tax-exempt nonprofits, including Smith, a nationally renowned, independent women’s liberal arts college.
Northampton’s PILOT program exempts social service agencies, calls for a phasing in over five years and extends a community service credit to organizations which pay part of their PILOT obligation through in-kind services. Boston has a similar PILOT program.
These nonprofits point out that they are integral to the community and “provide an economically stabilizing effect.” But PILOT advocates say that the city provides them services in return.
Earlier in November, the same New Jersey judge that called nonprofit hospitals a “legal fiction” ruled that Princeton University has the burden of proof when it comes to its property tax exemption, a ruling that is likely to result in a settlement that increases its PILOT payments to the town quite significantly. As other hospitals and universities face the “whether” and “how much” questions of PILOT payments, this context should be taken into account.—Larry Kaplan