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PILOTs & Other Local Fees

PILOTs & Other Local Fees. Presented by: Yasya Berezovskiy Regina Gieler Holly Szafarek Krsni Watkins. PA 744 Professor Shea March 21, 2011. What are PILOTs?. What are PILOTs?. Payments in Lieu of Taxes

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PILOTs & Other Local Fees

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  1. PILOTs& Other Local Fees Presented by: YasyaBerezovskiy Regina Gieler Holly Szafarek Krsni Watkins PA 744 Professor Shea March 21, 2011

  2. What are PILOTs?

  3. What are PILOTs? • Payments in Lieu of Taxes • “The voluntary or negotiated payment made by tax-exempt organizations to local governments” (Murphy, 2010). • Other local fees can include: • Drainage fees • Street light fees • Elevator and fire inspections

  4. Where are PILOTs Most Appropriate? • Municipalities with heavy reliance on property tax • Areas where large amounts of total property are owned by nonprofits

  5. How are payments determined? • PILOTs tend to be secretive, ad hoc agreements • Similar nonprofits end up paying different amounts

  6. Why Nonprofits Pay • Recognize the value of services received from local governments and are willing to pay their fair share • Act of goodwill • Pressure from local government • Negotiate to avoid mandatory payments

  7. Historical Roots of PILOTs • Property tax exemption derives from British common law • Becomes the rule around the mid-nineteenth century • 1859-Kansas exempts churches from taxation

  8. Why the Current Debate? • Financial strain on local governments • Loss in federal aid • Erosion of property tax base • Increased scrutiny of nonprofits • Recent scandals • Increasing commercialization

  9. Normative/Philosophical Questions • Tax exemption as government subsidy or a nonprofit entitlement? • How voluntary are PILOTs, anyway?

  10. Arguments in Favor of PILOTs • Nonprofits benefit from core city-provided public services • Revenue generated from PILOTs can be used to improve public services, lower property tax rates for citizens, and/or pursue other public projects • Reduce taxation inequities amongst nonprofits • Export tax burden to non-residents

  11. Arguments Against PILOTs • Nonprofits contribute in nonmonetary ways • PILOTs may force nonprofits to reduce services • Inconsistency and lack of transparency

  12. Implications • Brace for more tax encroachment • Educate public • Reveal inconsistencies with corporate tax breaks

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