New property tax source for Mecklenburg?

As more local governments such as Mecklenburg County find themselves in intense revenue pain, more are looking to their well-funded nonprofit institutions, which don't pay property taxes. In programs called "payments in lieu of taxes," the nonprofits make voluntary contributions in recognition that they use local services but pay no property taxes.

A new report from the Lincoln Institute of Land Policy on "Payments in Lieu of Taxes" finds at least 117 municipalities in at least 18 states are using them. Large cities collecting PILOTs, as they're called, include Baltimore, Boston, Philadelphia and Pittsburgh.

The report notes that PILOTs aren't appropriate for all types of nonprofits. They're most appropriate, the report says, in local governments that rely heavily on property taxes, and for nonprofits owning large amounts of tax-exempt property and that provide modest benefits to local residents.

Some PILOT programs are done case by case, such as New Haven, Conn., and Yale University. Boston has a systematic PILOT program that creates more equity among the nonprofits.
The report notes that Duke University Medical Center in Durham pays a $300,000 fire service fee paid to the City of Durham.

In an era marked by teacher layoffs, library closings and cuts to important public health and educational services, is it time for Mecklenburg County to start talks with some of its larger and big-property-owning nonprofits?

Hyong Yi, the county's budget director, tells me Mecklenburg County isn't getting any payments of this sort from any nonprofits in the county and he didn't know of its being discussed locally. Nor is Charlotte budget director Ruffin Hall aware of any to the City of Charlotte.

Obviously, there are many sides to consider beyond simple tax revenue: How financially stable is the nonprofit? What services does it provide to the community that might make up for its lack of property tax payments? What services does it require from the community? Should a PILOT program apply to churches? What about nonprofit hospitals, such as Carolinas HealthCare System, which owns a ton of real estate, or Presbyterian Hospital? Several other states ended up in lengthy court battles over nonprofit hospital properties and whether they should be taxed.

The report's authors offer several cautions. A news release about the study says:

“PILOTs can provide crucial revenue for certain municipalities, and are one way to make nonprofits pay for the public services they consume,” said the report’s authors, Daphne A. Kenyon and Adam H. Langley. “However, PILOTs are often haphazard, secretive, and calculated in an ad hoc manner that results in widely varying payments among similar nonprofits. In addition, a municipality’s attempt to collect PILOTs can prompt a battle with nonprofits and lead to years of contentious, costly, and unproductive litigation.”

Counties seek revenue. But not here.

Eleven N.C. counties will ask voters in November to let them impose a new, quarter-cent sales tax. The N.C. legislature in 2007 gave counties a blanket to add the tax if county voters OK'd it. In a 12th county, Watauga County (home of Boone) voters yesterday rejected the idea, apparently with some help from the John Locke Foundation.

While quarter-cent sales tax votes have had mixed results for the last three years, interestingly, seven of nine counties that have already voted this year passed it. (In addition to Watauga, Davie County voters in February, nixed it.) Here's a rundown from the N.C. Association of County Commissioners.

The measures had a generally mixed record in 2007 and early in 2008. None of the ones on the ballot in November 2008 passed – remember, the financial world had just collapsed.

Harnett County (home to Lillington - corrected 1:51 p.m.) is even going for a third try this November. Well, hey, the third time (last May) was the charm for Onslow County (home to Jacksonville. N.C.).

The 2007 legislation also offered counties the option to impose a land transfer tax – paid when a home is sold – if voters OK it. Of course, the state's Realtors erupted like Mount St. Helens when that one passed the legislature. A number of counties put it on the ballot right away, without taking time to build community support. Not surprisingly, given the hot opposition from Realtors and developers, none of the land transfer tax measures to date has passed.

Mecklenburg hasn't opted to try either one, though it has eviscerated its public library system and its county park and recreation budget, and county cuts played a role (state budget cuts did, ) in massive public school teacher and staff layoffs this year and last. Whether the local pols disinclination to put either option on the ballot is a result of sticking a finger into the political winds, or sane tax policy, or is a response to pressure from Realtors, to whom our politicians pay close heed – I'll let you take your pick of those options.

In general, compared to property taxes, sales taxes go down easier with voters, although economists tend to point out that compared to property taxes they're more regressive and less stable. But usually you pay sales taxes in small amounts, so people don't notice them as much as those big propery tax bills.