As cities across the country debate asking for more money from local nonprofits, Evanston officials said they are not planning to change the types of fees they receive from Northwestern.
While all non-profit institutions are exempt from paying property tax, most pay other fees. Chicago Mayor Rahm Emanuel has discussed requiring nonprofits in the city to pay a water tax. Many other cities, particularly those with universities or government buildings, ask their nonprofits to make Payments in Lieu of Taxes, where the institutions make voluntary payments to the city that cover a portion of what they would otherwise pay in property tax.
“The city is going to re-evaluate all revenues and expenses from all residents and businesses in the community” when it calculates its 2012 budget, Assistant City Manager Marty Lyons said. However, he said it does not plan to implement a PILOT program.
While a final budget will not be set until the fall, residents proposed ideas such increasing an athletic tax the University pays on tickets it sells and sharing use of NU facilities with the city to help reduce the deficit.
Before a final plan is decided upon, the city wants to reach out to NU and other institutions to see where they can partner and where services overlap and can be cut, Lyons said.
NU pays many city taxes other than property tax. The biggest ones are the athletic ticket tax and parking tax, said Eugene Sunshine, senior vice president for business and finance.
Lyons said the parking tax was a county tax, and Evanston did not receive any of the revenue. However, Sunshine said the school pays a tax on each permit it sells, even though the University provides its own parking.
“There’s no service we get in return,” Sunshine said. “It’s just a flat out tax.”
Sunshine included water on the list, but Lyons said it could not be counted as a tax. The school was paying for a utility, he contended.
“You pay for whatever you use,” he said. “We just happen to be the ones running it.”
In addition to taxes, NU must pay inspection and sewage fees, among others, according to Sunshine. The revenue from any tickets written by University Police goes to the city. NU leases a building free of rent for city use.
“They, in turn, charge us for parking permits,” Sunshine said.
One of the largest fees NU pays is for building permits. City officials often ask the University in advance when it is planning to build or renovate a building so they can factor the additional fees into their budget.
“The city loves us for this because we do a lot of construction,” Sunshine said.
NU has made direct purchases for the city as well. Last year the University bought a fire truck for the fire station closest to campus and plans to buy the city an ambulance in the future. NU has bought bikes for the Evanston Police Department and is considering chipping in to help the city purchase a new salt dome.
While NU does not pay property tax on buildings it owns, it does so indirectly on buildings in which it leases space. The cost of the tax is usually included in the buildings’ rent, Sunshine said.
In addition to campus, NU has bought three buildings in Evanston whose previous owners paid property tax. The other buildings it owns in the city were bought from non-profit organizations and so were not taken off the tax books, Sunshine said.
Nonprofits’ exemption from property taxes is a sore spot for cities nationwide. For cities with large hospitals or universities, such as Providence, R.I., or many government buildings, such as Boston, Mass., the city receives no property-tax revenue from much of its land.
These two cities, along with 115 other municipalities, have begun asking for voluntary PILOT payments from tax-exempt institutions. Proponents of the programs say these payments are crucial to help cities recover from the Great Recession, according to David L. Thompson, vice president for public policy at the National Council of Non-Profits. A November 2010 study by the Lincoln Land Institute concluded that PILOTS can be successful when used in conjunction with other programs and when the city and non-profit work together on the details of the agreement.
Thompson said he thinks otherwise.
“I’ve used the word ‘cherry picking,'” he said.
Cities claim that non-profits benefit from services they do not pay for, such as fire and police. However, by definition nonprofits provide services to the city free of charge, Thompson said.
“Nonprofits contribute to the community through employment and economic development,” he said.
While nonprofits should help their city, PILOTs are not the way to demand that, he added. Although, PILOTs are voluntary payments in theory, in reality the city usually asks for them and regulates a payment schedule.
City governments often ask nonprofits to help reduce budget deficits because it is easy to point to them as an institution with large resources that does not pay money to the city, Thompson said. That view is incorrect, he added.
“The deal is that we give up great reward for the public good,” Thompson said. “In return we get the tax-exempt status.”
