Sam Katz, who might, maybe, could run as an independent candidate for mayor later this year, released the first of what he promises will be a number of proposals about the city. This one is about funding education and it can be found on Katz's website.
Reading through it yesterday, I stumbled upon a dirty word on the fourth page. It's the "P" word. No, not that one. It is the word PILOT.
PILOT is the acronym for payment in lieu of taxes, and if you want to get the CEO of any large university or hospital upset, just mention it. To them, it is a dirty word because it refers to the practice of nonprofits, which are exempt from most taxes, ponying up money for the cities where they are located.
There's a mini-trend going on here that is worth noting. Earlier this year, Council President Darrell Clarke mentioned how a form of PILOTs might be a good idea.
Now, we have another politician pushing the idea.
Katz says that religious institutions, K-12 schools, social service agencies, and others that help "at-risk constituencies" should remain exempt from the local property tax, but not the giants of the city's "Eds and Meds" sector, such as the University of Pennsylvania, Temple, Jefferson, Drexel, etc.
He believes they can contribute $45-$50 million a year to help the public schools.
When he was mayor, Ed Rendell had a program of voluntary contributions by nonprofits that yielded about $9 million a year. But, like all voluntary programs, the contributions all but stopped when Rendell moved on.
Discussion about PILOTs always centers on the question: What exactly is a nonprofit?
Would you call the University of Pennsylvania, with its $5 billion annual budget, its $7 billion endowment and its 15 hospitals, a charity or a multi-billion-dollar business?
Rendell has made it clear where he stands, citing Penn President Amy Gutmann's $2.1 million annual salary.
"Amy Gutmann earns every nickel of that and she does a tremendous job," Rendell said. "But it's hard to say the University of Pennsylvania is a charity."
(That's a lovely rhetorical two-step: pat on the back, then a punch in the face.)
In 2012, the city's largest 17 nonprofits -- all of them colleges or hospitals -- grossed $12.1 billion and had $1 billion in profits -- though they are not called that. On the federal disclosure forms (called IRS Form 990), which all nonprofits must file, the bottom line is called "Revenue Less Expenses."
Call it what you will, this is a huge amount of money. If these 17 had to pay taxes (like the rest of us), I estimate it would yield $225 million a year in revenue for the city and the schools.
Cities that have PILOTs (including Boston) usually settle on a fraction of the dollar when determining payments. It's a bow both to the good works these institutions do perform and also to the fact that they are big and powerful players in the local political ecosystem.
PILOTs are to these mega-nonprofits what the dawn was to Count Dracula.
Expect them to push back on any plan to use PILOTs, but as Katz and Clarke have proven, it certainly is a worthy topic to debate in this election year.