July 14, 2010; Source: Times-Tribune | The City Council of Scranton, Penn., home of the fictitious Dunder Mifflin Paper Company, is taking aim at nonprofits for additional revenues, and in a very instructive way.

The University of Scranton was negotiating with the City for an aerial easement needed for a dorm construction project. The president of the Jesuit university offered an increase in the university’s payment in lieu of taxes (PILOT) from $110,000 to $165,000 during negotiations for the easement. Taking the saddle on a high horse, the City Council decided not to grant the easement because supposedly the university had connected the easement to an increase in the university’s PILOT.

The university, for its part, intimated that the council had sought an increase in the PILOT in return for the easement. As a result, even though the university is apparently increasing its “voluntary” contribution from $110,000 to $175,000, the university will forego the aerial easement and build two smaller dorm residences.

Although there are lots of confusing statements attributed to City and university spokespersons, the statement of the Council’s lawyer that the university would have to “buy” air space for the easement because it is a public right of way suggests that the city was linking essentially a zoning or building approval to a tax payment. Energized by putting the university over a barrel, the City Council plans to take aim at other tax exempt entities for revenues.

In the words of one councilman, “We will be knocking on the doors on all the nonprofits in the coming months.” This is exactly the downside of municipalities exacting “voluntary” contributions from nonprofit landowners that we have long feared. When nonprofits might need building permits or zoning approvals, the “voluntary” payment becomes mandatory, else approvals are withheld.—Rick Cohen