February 19, 2013; Source: Imperial Valley Press

Throughout the U.S., nonprofit organizations are finding their tax-exempt status under siege as local governments seek additional revenue sources to pay for basic services and infrastructure. In a number of places, as NPQ has noted many times, this takes the form of payments in lieu of taxes (PILOTs) or other fees on supposedly tax-exempt entities. In this context, it is with some interest and mild hope that we note that Calexico, a city in the southernmost tip of California, appears to be bucking this trend.

Recently, the Imperial Valley Press reported that the Calexico City Council voted 4-1 to waive development fees for the construction of a new shelter for women and children that has been proposed by the Neighborhood House of Calexico. The article states, “Councilman Bill Hodge described the waiver as an ‘exception’ and said he ‘believes it’s the humane thing to do.’” The local nonprofit, with a budget of slightly more than $2 million annually, has a mission to “serve people in need in the Imperial Valley, with a special emphasis on the needs of women and children.” Programs currently being run from its three facilities include a homeless drop-in shelter, a thrift store, a micro-business service center, and a preschool.

Calexico Mayor Maritza Hurtado cast the single dissenting vote, expressing a concern that this exception had the potential to open the floodgates, setting a precedent of fee forgiveness that other nonprofits might also expect. Development fees have been in place in the area for some time and are intended to help defray the cost of schools, roads, and water and sewer services. There has been some criticism of these fees as “hidden taxes.”

Ultimately, tax or fee exemption can be thought of as an investment or a donation that an entire community makes in a nonprofit organization. In this case, waiving the fee amounts to an $11,812 investment in the social compact the community has with the nonprofit. Communities make such investments in order to enable nonprofits to accomplish their goals of improving the quality of life in our communities. In return, the community asks for that work to be done at low cost and with the utmost transparency. We have often written about the fraying social contract between nonprofits and local governments, but we thank the City Council in Calexico for recognizing that gestures of this nature are a critical part of the fabric of our economy and society. –Rob Meiksins