Philadelphia considering taxing city nonprofits
Cash-hungry cities nationwide, many of them in the Northeast, are increasingly turning to the expanding nonprofit sector to help pay for city services.
With $3.5 billion in Philadelphia real estate holdings, the University of Pennsylvania is the city's second-biggest owner of real estate, behind the City of Philadelphia itself, at $7.5 billion. Including Penn, five of the 10 largest property owners in the city are nonprofits. The others are governmental.
Philadelphia is not new to the world of PILOTs.
Former Mayor Ed Rendell had a PILOT program that collected a total of $28.72 million in cash and an additional $27.3 million in services, mostly from hospitals and universities, from 1995 through 1999.
When Philadelphia's five-year agreements with about 40 nonprofits expired in 1999, the program nearly disappeared. Einstein Healthcare Network has continued its annual voluntary contribution of $25,000 in cash and $50,000 in services.
The American College of Physicians, a trade group for internal medicine doctors, pays property taxes on a portion of its headquarters and made a $30,243 PILOT in 2012.
"Even as a nonprofit, we feel it is important to contribute to city services that ACP might benefit from directly or indirectly, such as fire and police," spokeswoman Allison S. Ewing said.
City officials did not respond to a request for a full list of voluntary contributions for 2012.
A Pennsylvania Supreme Court decision last year made it easier for local taxing authorities to challenge the tax-exempt status of nonprofits, inspiring Green to act.
Bigger nonprofits might not be so receptive.
"We can appreciate where the city stands by way of revenue," said Peter Grollman, vice president, government affairs, community relations, and advocacy at Children's Hospital of Philadelphia.
Asked if Children's, whose annual revenue has nearly tripled over the last decade to $1.9 billion, would be willing to participate in a PILOT program, Grollman said: "I think it's something that we would have to take a look at."
The hospital prefers to direct where its money goes.
"As we look at what we do by way of any investment in the community, as you can expect, we want to do what we can to improve the lives of children," Grollman said.
One nonprofit expert questioned that view.
"To object to paying PILOTs by saying it prefers to direct its dollars to working with children misses the point of PILOTs," said Laura Otten, executive director of the Nonprofit Center at La Salle University.
"PILOTs aren't for charitable purposes. PILOTs are the cost of doing business as a charitable organization," she said.
David B. Glancey, director of special projects in Penn's office of government and community affairs, said Green's proposals seemed redundant and designed to boost enforcement.
Glancey said Penn already makes substantial annual contributions to the city, including $1.8 million in property tax, $2 million to the University City District, $825,000 for the Penn Alexander School, and $30 million for police and security on its campus and the surrounding area.
Penn also owns $294 million of taxable property.
Sam Katz, chairman of the Pennsylvania Intergovernmental Cooperation Authority, a state-appointed board that oversees Philadelphia's finances, said he expected that any revenue from PILOTs would do little more than allow City Council to approve a slightly lower tax rate.
"The likely effect will be shifting the burden, not increasing the size of the pie," Katz said.
