March 28, 2012; Source: Daily Pennsylvanian

Philadelphia Mayor Michael Nutter has been taking it on the chin for Philadelphia’s comparatively limited effort to get nonprofit property owners to ante up payment in lieu of taxes. Holly Otterbein’s “It’s Our Money” series for the Daily News has detailed the dwindling PILOTs of Philadelphia’s “eds and meds,” including the University of Pennsylvania now paying the city nothing. Apparently, under Mayor Ed Rendell, the nonprofits made PILOT payments, but under Nutter, the payments from nonprofit property owners have dwindled. “In 1995, the city reaped more than $9 million annually from PILOT arrangements with more than 40 nonprofits,” Otterbein reports. “But by 2009 the money had fallen to just $687,000 from 17 institutions. In 2011, only $383,700 trickled in from nine nonprofits.”

Located in Philadelphia, the University of Pennsylvania is one of only two Ivy League schools to lack a PILOT arrangement with its host communities (oddly, Columbia University in New York City is the other). Penn pays Philadelphia zero, as do Philadelphia’s other well known higher ed institutions like Drexel, Temple, St. Joseph’s, and La Salle.

Although Penn did strike a deal with the city in 1995 to make a voluntary annual contribution of $1.93 million, which Penn described as “our fair share,” the deal expired five years later and was not renewed. Penn’s argument, according to Penn President Amy Gutmann, is that it contributes in other ways. Penn has long had a major community development effort going in West Philadelphia and the University City District, often seen as a model for university-community partnerships, and supports the Penn Alexander School. Penn Vice President for Government and Community Affairs Jeffrey Cooper wrote, “It is clear from local policies that the services delivered by the ‘eds and meds’ in Philadelphia’s non-profit community outweigh any benefit that might be obtained through a voluntary PILOT program.” When the state legislature put pressure on nonprofits in 2009 to make PILOT payments to municipalities, a representative of the Pennsylvania Association of Nonprofit Organizations wrote, “PILOTs can adversely affect charities’ ability to provide programming and serve the needy in the community…[and] deplete critical charitable resources that the charity uses.”

Interestingly, an op-ed in the Daily News by the representatives of two other 501(c) organizations—in this case, labor unions—took the eds and meds (and Mayor Nutter) to task for Philadelphia’s basically PILOT-less municipal finances. Catherine Scott, president of American Federation of State, County & Municipal Employees District Council 47, and Bill Gault, president of the Local 22 Fire Fighter and Medic Union, expressed strong feelings that the exempts ought to be paying for the public services they use “such as police, fire and emergency medical, roads, snow removal, street lighting, trash collection, clean air, clean water, comprehensive library services to help with research and the like.”

“If these institutions don’t contribute to the costs of providing those services, then the financial burden falls on those citizens who do pay property taxes,” they wrote. “As with all costs, the greater the pool of payers, the less the individual financial burden. Most residents’ taxes would decrease if the deadbeats paid something—paid anything.”

“Residents are subsidizing costs of non-Philadelphia parents who send their children to the costliest private educational and medical institutions in America,” the two union leaders added. “Every Philadelphian or non-resident who shops in the city pays an additional 2 percent sales tax to cover the costs of providing services to the cheapskates.”

“What is good for Philadelphia is good for Penn,” they concluded. “Nonprofits’ free ride hasn’t been good for Philadelphia taxpayers.” That statement bodes ill for the nonprofit sector’s political standing in the city of brotherly love.—Rick Cohen