Philadelphia’s public schools are in a state of crisis. The school district is running a $300 million deficit and the city had to assure the district that it could come up with $50 million so schools could open on time last month.
While the district’s dire fiscal outlook is nothing new, it has generated speculation that the city could ask nonprofits like Temple to make payments in lieu of taxes, or PILOTs, to create another revenue stream for the city.
Randi Weingarten, president of the American Federation of Teachers, has gone after the tax exemptions, calling on the city to tell nonprofits to pay their fair share. More recently, a school district parent at a School Reform Commission meeting in September said it was time to look at universities and hospitals that are tax-exempt, the Inquirer reported last month.
Temple has never paid a PILOT to the city and university officials maintain that the services Temple provides the city are greater than anything a payment would bring to the city.
“There’s a lot that Temple provides itself without receiving city services,” said Ken Lawrence, senior vice president for government, community and public affairs. “That’s not even touching the volunteer contributions that we make through our students, through our employees.
“Temple makes a vast contribution, which we can’t even quantify, that would be far beyond any PILOT or property tax,” Lawrence said.
Though Temple declined to comment in favor of or against the PILOTs, Ken Kaiser, interim chief financial officer and treasurer, said the impacts of the payments would leave the university with two options: raise revenue or cut from the budget. He said cutting the budget would be tough because it has already been slashed in recent years and warned that the other option could come out of students’ pockets.
“Raising revenue generally comes down to one thing and that’s tuition,” Kaiser said.
The city, under then-Mayor Ed Rendell, instituted a PILOT program that at one point netted more than $9 million, but has dwindled since Rendell left office.
Philadelphia’s tax-exempt property represents more than 10 percent of the total property value in the city, according to a 2006 study from the Chronicle of Philanthropy that is cited in a report by the Lincoln Institute of Land Policy. Though there haven’t been changes to the way nonprofits are treated, the city is going to audit nonprofits next year to make sure they are living up to a nonprofit status, said Mark McDonald, Mayor Michael Nutter’s spokesman.
Councilman Bill Green introduced legislation earlier this year that would require nonprofit entities to annually certify the tax-exempt status of nonprofit corporations and the tax-exempt status of the real estate they own.
The legislation, which was signed by the mayor in June, potentially could affect universities, said Richard Doran, a spokesman for Green. But, Doran said, it depends on the results of their nonprofit certification with the city.
Under the laws, nonprofit entities conducting commercial activity outside of their “charitable, religious or educational mission” on their property would be subject to property taxes on that real estate.
“We’re just trying to make sure as much taxable income is brought in as possible,” Doran said.
While comparing PILOT programs elsewhere, Lawrence referenced Boston, which received $23.2 million in payments during fiscal year 2013 – more than $6 million from Boston University alone.
“You’re always going to find that Boston is kind of the PILOT place,” Lawrence said. “They get a lot of money from PILOTs.”
The difference between the cities, however, is that Boston does not have a wage tax, which Lawrence said creates a different situation in Philadelphia.
“There are other taxes that we’re paying in Philadelphia that Boston just doesn’t have,” he said.
“The important thing is to consider the value that the eds and meds bring to the city of Philadelphia in terms and in terms of services beyond a PILOT that we bring,” Lawrence said.
Contact Sean Carlin at firstname.lastname@example.org or follow on Twitter @SeanCarlin84.