U.S. cities' revenue boost from nonprofits meager-report

Sept 28 Fri Sep 28, 2012 6:01pm EDT

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Sept 28 (Reuters) - Hopes that large payments by nonprofits could fatten lean local budgets, such as that announced by Brown University, do not fully achieve the desired results, according to a report on Friday.

As struggling cities seek new sources of revenues, voluntary payments by private colleges, hospitals and others to their hometowns make up only 0.13 percent of general revenue, the Lincoln Institute of Land Policy said in the report.

The local governments are putting pressure on the big nonprofits within their borders to help defray costs for providing police, fire and sanitation services.

The payments, which nonprofits sometimes agree to pay because they are exempt from property taxes "will never be a panacea for cash-strapped governments," the institute said. "They simply do not generate enough revenue."

Even so, the payments can provide useful funding to towns and can benefit the nonprofits by strengthening relationships with their hometowns, the researchers said.

Lincoln found that at least 218 localities in at least 28 states have received the payments in lieu of taxes, or PILOTs, since 2000. The payments are worth more than $92 million altogether annually.

The report, the most comprehensive known compilation of PILOT payment data, is the first update of a study Lincoln published in 2010, when it found that at least 117 municipalities in at least 18 states had used PILOTs.

The increase in number is not necessarily evidence that more cities are collecting PILOTs, because the survey used an expanded methodology and reached more municipalities in its update, Lincoln researchers said.

RELATIONS WITH NONPROFITS

Cities across the United States have come under increasing budgetary pressure because of shrinking tax revenue collections, cuts in state aid and other factors.

Some have made high-profile moves recently to get more money from major institutions.

In Providence, Rhode Island, Mayor Angel Taveras got several of the city's major nonprofit institutions to boost their payments, announcing on May 1 that Brown University would double its annual voluntary contribution to nearly $8 million for five years.

And Boston, home to one of the largest networks of colleges and universities, has implemented what Lincoln said was the "most comprehensive" PILOT program in the nation.

Lincoln used data from its 2011 survey of local government officials in 599 jurisdictions, it said. The report, which didn't examine payments from public entities or for-profit companies, found that nearly 80 percent of PILOT programs nationwide were concentrated in the Northeast, with the biggest share in Massachusetts and Pennsylvania.

The vast majority of PILOT revenue comes from universities and hospitals, rather than from smaller charities and other nonprofits and a handful of multimillion-dollar PILOT payments account for most of the revenue received nationwide, Lincoln said.

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