Philly universities brace for PILOTs

WITH THE school district in financial crisis and the city projecting dangerously low fund balances in the coming years, some officials are calling for "payments in lieu of taxes," or PILOTs, from nonprofits that are exempt from paying property taxes.

Fearing the onslaught, a dozen Philadelphia colleges commissioned a report released today that highlights their existing contributions to the city and makes the case for what it calls the "Philadelphia Model" of working with nonprofits rather than against them.

At times, the report, by Econsult Solutions, reads like a warning shot in what could become a contentious battle between the city and some of its most recognizable institutions. Citing the fallout from decisions to pursue nonprofit payments in Boston and Pittsburgh, the report describes PILOTs as "an approach that often turns partners in a common cause into adversaries by expending time and resources in conflict rather than in mutual service."

That language didn't faze City Councilman W. Wilson Goode Jr., who has proposed several funding increases for the school district this fall and considers PILOTs another opportunity.

"I'll be extremely blunt: The universities should be the first ones to take an interest in public education beyond their pet projects, and if we're fighting for our kids, then I don't care who we have to fight," Goode said.

The report's author, Econsult vice president Lee Huang, said the report was not intended to threaten the city, but to demonstrate the benefits of the status quo. Still, Huang noted that extracting PILOTs from schools that spend immensely on community services and neighborhood improvements will likely mean a reduction in those programs.

"A collaborative approach says, 'Let's do this together.' And a transactional approach says, 'I'll take from you,' " Huang said.

The report says the 12 colleges support 84,000 jobs in Philly, contributing almost $11 billion to the local economy and $211 million in taxes.

It also argued that Philadelphia's universities already contribute more to the tax base than those in other cities, because the city relies more heavily on its wage tax, which nonprofits must pay. In places like Boston where property taxes account for most of the revenue, pursuing PILOTs is more reasonable, the report said.

Council president Darrell Clarke is open to the idea of PILOTs and "thinks the discussion needs to happen," spokeswoman Jane Roh said yesterday.

Asked whether the city should pursue PILOTs in light of the schools crisis, Mayor Nutter was cool to the idea.

"We're willing to look at a variety of strategies and ideas, but that doesn't get away from the larger, longer-term, more stable source of funding, which certainly is [the responsibility of] both the commonwealth of Pennsylvania and the city of Philadelphia," he said yesterday.

Following a law spearheaded by Councilman Bill Green, the city this year will require nonprofits to certify that they have retained federal tax-exempt status. The administration will also begin auditing tax-exempt properties this year to ensure the land is being used for nonprofit purposes.

The Econsult report was funded by a group calling itself the "Higher Eds," which includes the University of Pennsylvania, Drexel, La Salle, Holy Family and the Community College of Philadelphia.