March 1, 2011; Source: Philadelphia Inquirer | The rumblings about Camden's high proportion of tax-exempt property were discernable a couple of days ago. Somehow, in this poverty-stricken ward of New Jersey, City Hall's financial problems were due to tax-exempt property owners, not the city's decades of economic decline.

Now comes word that nonprofit day care centers will be receiving tax bills from the city. It is no understatement to say that the day care centers were blindsided by this. These are day care centers located in one of the poorest cities in the United States, most of their clients are poor and pay below-market rates, and the "profits" these nonprofit day care centers make on their minimal fees don't add up to stunning fund balances.

But that doesn't faze Camden officials. Rather than approaching nonprofit property owners to negotiate PILOTs, the city has declared that day care centers no longer qualify as tax-exempt entities. Oddly, the city is giving a tax exemption to schools, but it is unclear exactly what constitutes a school in Camden. Some day care centers provide educational services.

Camden's day care centers are organizing to fight this clearly dubious strategy for taxing nonprofit day care centers. This is a case study of two dynamics that nonprofits and public officials should understand: that strategies like Camden's are no more than one starving organizational category (municipalities) trying to raid another starving category (nonprofit service providers) for paltry revenues; and that the ultimate answer is not a better system of PILOTs, but a reworking of how municipalities and states raise tax revenues and devise long term solutions to what are persistent problems in public sector finance.—Rick Cohen