There are more than 45,000 parcels of property within the city of Springfield, with a total value of about $7.5 billion. Of those, 2,266 are legally exempt from paying taxes.
That’s not an insignificant figure: the property value of exempt parcels totals $1.47 billion, according to a recent report by City Hall’s financial staff. The vast majority of these parcels are owned by the city, state or federal government; the rest include religious organizations, large institutions like hospitals and colleges, and social service agencies. While these institutions don’t contribute to the tax base, they do rely on city services, from roads to police and fire protection. According to the report, Springfield’s colleges alone consume $1.8 million in city services each year.
While the city has been making steady fiscal progress since its darkest days earlier this decade, when it was threatened with budgetary collapse, there are still major challenges: dwindling property values, high unemployment, difficulty attracting and retaining businesses, severe cuts in state aid. Meanwhile, exasperated property owners have watched their tax bills climb; the average homeowner now pays about $2,700 a year in property taxes.
To taxpaying property owners who are feeling the pinch, one logical solution might be this: getting some of the tax-exempt landholders to start kicking in for their share of city services. That’s the idea promoted by City Council President Jose Tosado, who at their Sept. 28 meeting will ask councilors to consider establishing a payment-in-lieu-of-taxes, or PILOT, program in the city, as a means of generating new revenue and spreading out the tax burden.
“I don’t see a lot of new development in the city,” Tosado told the Advocate. “I think this is a fair way of moving forward.”
So far, the idea is meeting with mixed reviews.
*
Tosado is not the first to suggest a PILOT program. In 2000, Councilor Carol Lewis-Caulton pushed for the city to seek payments from what she called “super nonprofits”—namely, colleges and hospitals. Her proposal didn’t pass, but the idea was brought up again five years later by a consultant hired by the Finance Control Board, which oversaw the city’s budget at the time. Again the idea went nowhere; according to Tosado, the city then lacked the recordkeeping technology to implement the plan.
But now, he says, the time is right to take up the idea again. (While Tosado is referring to recent rising tax rates and falling state aid, there’s another interesting angle of timing: he’s widely believed to be preparing for a mayoral run next year.)
A municipality cannot force a nonprofit to pay a property tax equivalent; indeed, the laws that exempt them were based, in part, on the belief that these entities already contribute, in other ways, to the good of the community. Typically, when a city or town raises the subject of a PILOT program, the institutions that stand to be affected are quick to point out the good they do for the city. In response to the 2005 Control Board report, in 2007, American International, Western New England and Springfield colleges—whose combined tax-exempt land value at the time was $175.8 million —commissioned their own report, which pointed out all they contribute to “the economy, the culture, and vibrancy of Springfield,” from scholarships for city residents to combined payrolls of $18.5 million.
The city already receives voluntary financial contributions, totaling about $5 million, from some tax-exempt institutions, according to the recent City Hall report. In addition, Baystate Medical Center gives the city about $500,000 a year for public health programs, a deal negotiated when the hospital began developing large parcels of land in the North End.
Like Lewis-Caulton before him, Tosado said he’s looking to target the largest nonprofits. Religious institutions and government agencies that own land would not be included in a PILOT program. At the Sept. 28 meeting, Tosado said he will introduce figures showing much city land is exempt from the tax rolls, and how much in services those property owners consume. From there, he’d like to see a series of conversations with representatives from the business and nonprofit sectors to discuss an equitable PILOT program. One idea, he told the Advocate, would be to require affected property owners to make payments to the city as a condition of getting necessary special permits.
*
While Tosado maintains that a PILOT program would relieve the tax burden borne by business owners as well as homeowners, the city’s business community has historically been cool to the notion. Russ Denver, president of the Affiliated Chambers of Commerce of Greater Springfield, told the Advocate that while his group will consider Tosado’s idea, it has opposed earlier PILOT proposals.
“A lot of those not-for-profits provide services and goods to the city that benefit the city and its residents beyond what they would pay [in taxes],” Denver said; if they’re required to make tax payments, it could mean they spend less money on those other services. In particular, Denver opposes Tosado’s suggestion of tying payments to special permits—a move, he warns, that could lead to affected institutions rethinking major development projects that benefit the city.
Mayor Domenic Sarno and Tim Rooke, chairman of the Council’s Finance Committee, both told the Advocate that they agreed with the general sentiment of a PILOT program but needed more information about Tosado’s proposal before they could take a position. Like Denver, Sarno objected to tying payment requirements to permits, a tactic he called “punitive.” Rather, the mayor said, he’d like to see all the affected parties reach an agreement cooperatively. “You know my style,” he said. “I want all the stakeholders at the table so that they’re able to have input. & My style is to work together.”
Tosado is braced for some opposition to the idea, including resistance from officeholders who don’t want to rankle major institutions in the city. Most politicians, he noted—himself included—rely on those institutions for campaign support, and perhaps won’t want to bite the hand that feeds. “There are always pitfalls on this, and the pitfall is, obviously, politics,” he said.
