Reassessing nonprofits' free ride

The Buffalo News reported that as they struggle for revenue, municipalities look to tax-exempt entities to pay their 'fair share'

The New York Power Authority's 2,900-acre spread in Lewiston, including its massive Niagara Power Project, is assessed at $1.8 billion.

The Canisius College campus is assessed at $69 million.

And the assessment for Millard Fillmore Suburban Hospital in Amherst is $37.7 million.

But they -- and scores of similar facilities owned or operated by nonprofits -- pay no village, town, city, school or county property taxes.

Now, local government officials here and across the country want to change this.

"It's an attempt to put a burden of the tax levy on the not-for-profits that are using services," said David C. Marrano, the Lancaster town assessor, who is negotiating payment agreements with nonprofits in the town. "At what point as a government do we ask these organizations to pay part of their fair share?"

Officials are prodding the operators of hospitals, senior housing facilities and private universities to pay something in place of property taxes.

At least 117 municipalities in 18 states -- most in the Northeast -- have reached payment in lieu of taxes, or PILOT, agreements with nonprofit organizations in the past, according to a report by the Lincoln Institute of Land Policy.

Private colleges are frequent targets of revenue-seeking governments. Several Ivy League schools, along with Syracuse University and Schenectady's Union College, pay their host cities.

Syracuse will receive $2.5 million over the next five years from the university -- its largest owner of tax-exempt property -- in a deal reached last month, the Post-Standard newspaper reported.

Locally, the Niagara Falls Bridge Commission, the Episcopal Church Home & Affiliates and Hospice Buffalo all have reached payment agreements with their host communities.

Recent court cases have given the government officials leverage in negotiating these agreements, while in other cases the payments are worked out as part of the project approval process.

"We have been a partner with the Town of Cheektowaga since the origination," said Maureen Lehsten, chief financial officer for Hospice Buffalo, which operates the Center for Hospice and Palliative Care. "We work really well together. They've supported us in our growth on the campus in Cheektowaga."

Boston, Pittsburgh and other cash-strapped municipalities have become more aggressive in negotiating these agreements as they seek new sources of revenue to balance their budgets.

In response, nonprofit leaders defend their tax-exempt status and tout the services they provide that otherwise would be a government responsibility.

But it's a matter of fairness to government officials, who say exempting so many parcels from property taxes shifts too much of the burden onto other businesses and homeowners.

"We don't have anywhere to go except the taxpayer," said Mike Johnson, the Town of Lewiston's finance director.

These nonprofit institutions provide valuable services: treating the sick and poor, housing the elderly and infirm and tending to the public's spiritual or educational needs.

For this reason, schools, churches, hospitals and government offices are for the most part exempt from property tax.

Those institutions often must pay special district taxes such as water, sewer or fire.

In cities and older villages, where government buildings, religious institutions and similar structures tend to be concentrated, tax-exempt properties can account for a large proportion of all properties.

Vast sums of money
In Lewiston, where Niagara University, the Power Authority and other entities hold vast tracts of land, 67.7 percent of property in the town is not taxable, said Linda E. Johnson, the town assessor.

"We have probably the largest amount of tax-exempt land in Western New York," she said.

In Buffalo, developer Rocco Termini pointed to the construction of the new federal courthouse, at a site that previously held tax-paying businesses, and the tax-exempt research properties at the Buffalo Niagara Medical Campus.

"The costs, they're not distributed among all the buildings. Fifty percent of the buildings downtown are paying 100 percent of the tax load," Termini said. "I think everybody should pay something."

In Amherst, nearly 30 percent of property is tax exempt, said Town Assessor Harry Williams.

What if the exemptions didn't exist?

Read more here.