Read the article here:
Should nonprofit entities in the city of Hudson be asked to kick in something to the city coffers to make up for their tax-exempt status? Depends on who you ask.
City Treasurer Eileen Halloran, who will be leaving her post at the end of this year to run for Fifth Ward supervisor, is looking for ways to shore up the city’s fading revenues. In doing so, she has begun casting her eyes on the nonprofit sector.
But leaders of two associations of nonprofit organizations warned that this would be a fruitless effort.
The city’s properties have a total assessed value of $576,124,599, she said in a recent interview. Of this, $188,635,900, or 32.74 percent, is totally exempt from taxation.
If you remove from this total all properties owned by the city of Hudson, Columbia County, the Hudson City School District, New York state and the U.S. federal government, that leaves $112.5 million, or about 20 percent of the city’s total value.
Of this, $51.8 million, or 46 percent, represents the assessed value of Columbia Memorial Hospital.
Another 34 percent is tied up in housing exemptions, such as affordable housing, nursing care, the Firemen’s Home and the Home for the Aged.
“Within that, I see inequity,” Halloran said. Hudson Terrace, Bliss Towers, Schuyler Apartments, Providence Hall and Housing Resources of Columbia County all make PILOT payments, she said: “They’re contributing. But there are other housing entities that make no contributions to pay for the cost of services.”
The Firemen’s Home, assessed at $23 million, is one of these, she said. Another is the Home for the Aged, assessed at $1 million.
“If some of the not-for-profit housing developments are contributing to the cost of services, I think it’s only fair that all not-for-profit housing developments contribute by way of PILOTs [payment in lieu of taxes],” Halloran said.
“I’m trying to understand what goes on in other places, nationally,” she said. “We’re going down a familiar path, from what I’ve read.”
The tax rate equals the tax levy, or total amount to be raised by taxes, divided by the total taxable value in the city. To change the tax rate, Halloran said, you can either spend less, reducing the levy, or increase the city’s taxable value.
To reduce spending means looking beyond the 75 percent of the budget that’s tied in up fixed costs like pensions, health care and debt service. “We can squeeze a little out of our hiring practices; but that needs the will of the Common Council, and you have to balance it with the needs of the department.”
Cutting spending alone won’t make much movement, she said, with the increases in health care and retirement alone making up nearly 2 percent of the budget increases every year.
“So to look for tax relief, we have to go to the bottom line number, the total taxable value,” she said.
Why should not-for-profits contribute to city revenues?
First, Halloran said, they are users of services the city provides, such as police and fire protection, street lights and code enforcement — “all the things it takes to run this city.’
Second, she said: “While the benefits of the services offered by the not-for-profits are not confined only to people living within the city of Hudson, the city of Hudson taxpayers are completely picking up the tax burden the hospital (for example) would pay if it were not tax-exempt.
“But the hospital is not restricted to serving the people of Hudson,” Halloran said. “Nor should it be.”
She stressed that this is not an adversarial relationship.
“Hospitals want to be good community citizens and provide service,” she said. “We are at the point where we have to have tax relief. We need to look at not-for-profits, starting with the ones that are taking away the biggest chunk of the assessments.”
Halloran’s first solution is a voluntary PILOT.
If that were unachievable, her second solution would be to create fees for services, such as police and fire, that everyone would contribute to, profit and not-for-profit alike.
Mayor William Hallenbeck Jr. said the treasurer had never brought this idea to him, but that he’d be open to hearing about it.
“One would think that if a treasurer has these proposals and were acting in good faith, she would bring (them) to the mayor and the Common Council president,” he said.
Council President Don Moore said the idea is worth looking into.
“But I think so because a city in our situation needs to examine all legitimate options,” he said. “We have yet to determine whether this is wise and productive for the city tax base and the organizations that would be affected.”
In a conference call, both Michael Clark, president of the Nonprofit Coordinating Committee of New York, and David L. Thompson, vice-president of public policy for the National Council of Nonprofits and an expert on PILOTs, strongly objected to Halloran’s ideas.
“The state Appeals Court has ruled repeatedly,” Clark said, “that if you qualify for tax exemptions, the local government can’t change the criteria. And, if you aren’t taxable, you can’t make payments in lieu of taxes, because you don’t pay taxes.”
Clark said similar programs that were tried in Boston and Chicago were unsuccessful “once you focus on the nonprofits.”
“If you set up a program like that, it’s complicated to administer,” he said. “You have to monitor the payments, monitor the impact on the non-profit: How many people did they have to lay off. They don’t have a lot of money. The bottom line is there’s a cost side to PILOTs as well as a revenue side.
“You’re asking them to stop doing what they’re doing with the money and do something else,” Clark said. “So they’ll lay off staff, those staff will stop paying payroll taxes and in some cases you’ll lose the non-profits.”
Thompson questioned the idea of “cherry-picking” services such as police and fire.
“The reason charities are tax-exempt is that we are required to earn it every day by pursuing the public good,” he said. “Those who cherry pick rarely bring up free health clinics (and other services provided by hospitals). Nonprofits do a lot of things that government doesn’t want to do itself because nonprofits do it better and cheaper.”
Cities and towns are not paying the full cost of what the nonprofits are doing for them, Thompson said.
“We are usually losing money on the work we do,” he said.
The reason charities are tax-exempt, he said, is that they have to give up profits, privacy and politics.
Profits, he said, because “they return the money to the community.”
Privacy, because in order to engender the trust needed to raise needed funds, they need to be “more transparent than the government.”
And politics, because running campaign ads, engaging in elections and the like are given up when an organization become nonprofit.
Clark said the power to change a tax-exempt status resides with the state and not the municipality, and that a city could spend a lot of time and money (on this issue) only to find out the time and money were both wasted.
Robert Leonard, a spokesman for the Firemen’s Association of the State of New York, which owns and operates the Firemen’s Home, had no comment.
Vincent Dingman, chief financial officer of CMH, did not return calls in time for publication.
The city’s properties have a total assessed value of $576,124,599, she said in a recent interview. Of this, $188,635,900, or 32.74 percent, is totally exempt from taxation.
If you remove from this total all properties owned by the city of Hudson, Columbia County, the Hudson City School District, New York state and the U.S. federal government, that leaves $112.5 million, or about 20 percent of the city’s total value.
Of this, $51.8 million, or 46 percent, represents the assessed value of Columbia Memorial Hospital.
Another 34 percent is tied up in housing exemptions, such as affordable housing, nursing care, the Firemen’s Home and the Home for the Aged.
“Within that, I see inequity,” Halloran said. Hudson Terrace, Bliss Towers, Schuyler Apartments, Providence Hall and Housing Resources of Columbia County all make PILOT payments, she said: “They’re contributing. But there are other housing entities that make no contributions to pay for the cost of services.”
The Firemen’s Home, assessed at $23 million, is one of these, she said. Another is the Home for the Aged, assessed at $1 million.
“If some of the not-for-profit housing developments are contributing to the cost of services, I think it’s only fair that all not-for-profit housing developments contribute by way of PILOTs [payment in lieu of taxes],” Halloran said.
“I’m trying to understand what goes on in other places, nationally,” she said. “We’re going down a familiar path, from what I’ve read.”
The tax rate equals the tax levy, or total amount to be raised by taxes, divided by the total taxable value in the city. To change the tax rate, Halloran said, you can either spend less, reducing the levy, or increase the city’s taxable value.
To reduce spending means looking beyond the 75 percent of the budget that’s tied in up fixed costs like pensions, health care and debt service. “We can squeeze a little out of our hiring practices; but that needs the will of the Common Council, and you have to balance it with the needs of the department.”
Cutting spending alone won’t make much movement, she said, with the increases in health care and retirement alone making up nearly 2 percent of the budget increases every year.
“So to look for tax relief, we have to go to the bottom line number, the total taxable value,” she said.
Why should not-for-profits contribute to city revenues?
First, Halloran said, they are users of services the city provides, such as police and fire protection, street lights and code enforcement — “all the things it takes to run this city.’
Second, she said: “While the benefits of the services offered by the not-for-profits are not confined only to people living within the city of Hudson, the city of Hudson taxpayers are completely picking up the tax burden the hospital (for example) would pay if it were not tax-exempt.
“But the hospital is not restricted to serving the people of Hudson,” Halloran said. “Nor should it be.”
She stressed that this is not an adversarial relationship.
“Hospitals want to be good community citizens and provide service,” she said. “We are at the point where we have to have tax relief. We need to look at not-for-profits, starting with the ones that are taking away the biggest chunk of the assessments.”
Halloran’s first solution is a voluntary PILOT.
If that were unachievable, her second solution would be to create fees for services, such as police and fire, that everyone would contribute to, profit and not-for-profit alike.
Mayor William Hallenbeck Jr. said the treasurer had never brought this idea to him, but that he’d be open to hearing about it.
“One would think that if a treasurer has these proposals and were acting in good faith, she would bring (them) to the mayor and the Common Council president,” he said.
Council President Don Moore said the idea is worth looking into.
“But I think so because a city in our situation needs to examine all legitimate options,” he said. “We have yet to determine whether this is wise and productive for the city tax base and the organizations that would be affected.”
In a conference call, both Michael Clark, president of the Nonprofit Coordinating Committee of New York, and David L. Thompson, vice-president of public policy for the National Council of Nonprofits and an expert on PILOTs, strongly objected to Halloran’s ideas.
“The state Appeals Court has ruled repeatedly,” Clark said, “that if you qualify for tax exemptions, the local government can’t change the criteria. And, if you aren’t taxable, you can’t make payments in lieu of taxes, because you don’t pay taxes.”
Clark said similar programs that were tried in Boston and Chicago were unsuccessful “once you focus on the nonprofits.”
“If you set up a program like that, it’s complicated to administer,” he said. “You have to monitor the payments, monitor the impact on the non-profit: How many people did they have to lay off. They don’t have a lot of money. The bottom line is there’s a cost side to PILOTs as well as a revenue side.
“You’re asking them to stop doing what they’re doing with the money and do something else,” Clark said. “So they’ll lay off staff, those staff will stop paying payroll taxes and in some cases you’ll lose the non-profits.”
Thompson questioned the idea of “cherry-picking” services such as police and fire.
“The reason charities are tax-exempt is that we are required to earn it every day by pursuing the public good,” he said. “Those who cherry pick rarely bring up free health clinics (and other services provided by hospitals). Nonprofits do a lot of things that government doesn’t want to do itself because nonprofits do it better and cheaper.”
Cities and towns are not paying the full cost of what the nonprofits are doing for them, Thompson said.
“We are usually losing money on the work we do,” he said.
The reason charities are tax-exempt, he said, is that they have to give up profits, privacy and politics.
Profits, he said, because “they return the money to the community.”
Privacy, because in order to engender the trust needed to raise needed funds, they need to be “more transparent than the government.”
And politics, because running campaign ads, engaging in elections and the like are given up when an organization become nonprofit.
Clark said the power to change a tax-exempt status resides with the state and not the municipality, and that a city could spend a lot of time and money (on this issue) only to find out the time and money were both wasted.
Robert Leonard, a spokesman for the Firemen’s Association of the State of New York, which owns and operates the Firemen’s Home, had no comment.
Vincent Dingman, chief financial officer of CMH, did not return calls in time for publication.
