April 28, 2010; Source: Worcester Telegram | You have to read this article as much for the comments posted online as for the specific content. It is a story of a hotel in downtown Worcester, Mass. The owner defaulted on the mortgage and owes various lenders $16 million. Our guess is that its property tax payments were as infrequent as its mortgage payments. A federal judge has placed the hotel in the hands of a receiver.

Picture the situation: hotel built in 1982, allowed to deteriorate, parking garage across the street, both properties eyesores, rarely used anywhere near to capacity as other hotels in and around Worcester long ago drove this Crowne Plaza into oblivion. So the Massachusetts College of Pharmacy and Health Sciences has stepped in and has offered to buy the hotel and garage for $16.8 million and convert it into student housing, classrooms, and laboratory space. The college will put $2 million into renovations, pay full taxes (like the hotel probably didn’t) for the first year, and make a payment in lieu of taxes amounting to 20 percent of assessed taxes thereafter.

You would think everyone would be ecstatic that the college is going to acquire, improve, and occupy the properties, generate a downtown activity presence that the failing hotel probably hasn’t done in years, and help downtown Worcester avoid looking like a small city ghost town as has happened to so many others. Plenty of comments to the Worcester Telegram suggest just the opposite, that this was the nonprofit college “stealing land”, removing properties from the tax rolls, and reducing tax revenues.

We need a full education campaign in the nonprofit sector that explains not only how many business properties don’t pay full taxes (let’s guess whether the Crowne Plaza got tax incentives to move to downtown Worcester in the first place back in the 1980s) and how a nonprofit replacing a semi-vacant, non-taxpaying eyesore is a heck of a lot better than what’s already there.

But the comments revealed something else. Worcester isn’t just hitting nonprofit colleges for PILOTs. It apparently gets payments from smaller nonprofits such as the Boys and Girls Club and something called Matthew 25, among others. With all the big city attention to taxing tax exempts, the sector had better pay attention to what’s happening in the small cities that are off the radar screen of the national newspapers.—Rick Cohen