Allentown will be asking tax-exempt, non-profit organizations – including its colleges and hospitals -- to voluntarily contribute money or services to help increase revenue for the city.
Exactly which non-profits will be asked to participate has not yet been determined, but City Council member Jeanette Eichenwald wants to concentrate on those that own substantial amounts of property inside city limits but don’t pay any property taxes.
The concept is called PILOT, an acronym for “payment in lieu of taxes.” A variation on the theme is SILOT: “services in lieu of taxes.” But organizers may call Allentown’s program something else, because they fear PILOT is a dirty word to many non-profits.
Eichenwald chairs an ad hoc city committee that met for the first time Wednesday night to begin looking into the issue. She said the committee ultimately will determine who will be asked to participate based on the value of their real estate, not the size of their budgets.
She said the city is fortunate that both its health care and educational institutions already provide important services “we cannot live without.” She added some of those services are mandated by the federal government but many are not.
“We are grateful and appreciative for all they have done for the city,” she said. “But what we’re talking about here today is money. Show me the money, in addition to the services.”
She said state law prohibits cities from forcing non-profits to pay any money. “The operative words here are voluntary cooperation.” She said most cities that already have initiated such programs request 25 to 33 percent of what non-profits would pay in property taxes -- in money and/or additional services. “The real estate is calculated as if it were still in private hands and the non-profit voluntarily agrees for 25 to 33 percent.”
The ad hoc committee was created last week by City Council President Julio Guridy, who asked Eichenwald to serve as chairwoman.
Eichenwald told City Council she has been trying to get Allentown to move forward on the issue for several years.
“It definitely is the trend,” she told council. She said both and large cities across the country that face financial difficulties are “talking to non-profits to see if they would offer some payment in lieu of real estate taxes, from which they are excused.”
She noted Bethlehem is much further along in developing a PILOT program.
In addition to Eichenwald, City Council members Jeff Glazier and Ray O’Connell serve as council’s representatives on the committee. At Eichenwald’s suggestion, the committee also includes two members of the administration: Debi Bowman, Allentown’s deputy finance director, and Vicky Kistler, city health bureau director.
After the committee determines what large non-profits it would like to participate, and what in-kind services they already provide to Allentown, representatives of those entities will be invited to a meeting long before any final recommendations are made. Eichenwald said other cities’ programs that included non-profit representatives very early in the discussion have been more successful.
“It’s important to have them at the table,” agreed O’Connell.
“They can bring information and context we don’t see,” said Glazier.
Kistler warned non-profits will go into a defensive mode as soon as they hear the acronym “PILOT.” She suggested not even using it. “What we have to do is build cooperation and partnership.”
Eichenwald said, “We can use our own terminology of mutual cooperation.”
Another initial idea kicked around was sending fake tax bills to non-profits so they see the cost if they did pay property taxes.
Francis Dougherty, the city’s managing director, also attended the meeting, as did Joe Celentano, a Muhlenberg College senior who is working as an intern in the city clerk’s office and did initial research for the committee.
Dougherty warned it is not in the city’s best interest to embarrass, humiliate or attack institutions that don’t give anything, even if they should, “but are still providing service to our citizens.”
“I have no desire to humiliate, embarrass or attack,” said Eichenwald.
“We’re not looking to have this be adversarial,” agreed O’Connell. “Instead of payment or services, it’s a partnership for the betterment of the citizens of Allentown.”
Dougherty said about six years ago Mayor Ed Pawlowski’s administration explored PILOT with the city’s major non-profit organizations. He said that included an “extensive and aggressive outreach” to meet with leaders of the major institutions.
“We were successful in seeing a modest increase in voluntary donations to the city,” said Dougherty. “But nothing came close to our lofty goal of getting $1 million a year from these organizations, which was the goal that drove our program. Nothing beyond those modest increases were ever taken in since then.”
Dougherty said the city’s greatest relationships have been with its medical community “rather than our educational community.”
Glazier said he can think of only five “meds and eds” in Allentown. He said about 20 percent of properties in the city are non-taxable.
Before the meeting Eichenwald said she is not interested in including houses of worship among the non-profits.
Kistler wondered if more non-profits are in the city “than we recognize.”
“Religious institutions,” said O’Connell.
Glazier doesn’t expect downtown churches “to cough up any cash,” but their congregations could provide community services.
“As non-profits buy up property, it comes off the tax roll,” said Eichenwald, adding some of those properties are very valuable.
Kistler suggested a PILOT provision could be built right into any city-owned property turned over to a non-profit that now doesn’t have to pay taxes on it.
Dougherty said state legislation is pending final approval in Harrisburg that would increase the number of tax-exempt organizations in every city in the state. “This is not a good thing,” he told the committee. “This is the opposite direction from where we want to go.”
He recommended City Council should pass a resolution opposing final passage of that legislation.
The ad hoc committee plans to meet again in early March.