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Cash-Strapped Cities Put The Squeeze On Nonprofits

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Cash-Strapped Cities Put The Squeeze On Nonprofits

Economy

Cash-Strapped Cities Put The Squeeze On Nonprofits

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GUY RAZ, host:

Budget crunches are hitting cities hard too. And so cash-strapped cities and towns are cracking down on those who don't pay taxes even those who don't have to - universities, hospitals and museums, which are all tax exempt - are now being pressed to pay millions of dollars to help support city services.

As NPR's Tovia Smith reports now, Boston has just launched one of the most aggressive efforts in the country.

TOVIA SMITH: From the nation's founding, those doing the Lord's work, healing the sick, or educating the masses have all been given a pass on paying taxes. The thinking has been: We owe them more than they owe us. But in these hard financial times, that thinking is changing.

Mr. RON RAKOW (Commissioner of Assessing, Boston): I think we've reached a point where something needs to give here.

SMITH: Boston's Assessing Commissioner Ron Rakow says no one wants to be an ungracious host. Boston wouldn't be Boston, he says, without its many world-renowned universities and hospitals.

But, Rakow says, those institutions benefit like everyone else from city police or snowplows, for example. And they need to help pay for it.

Mr. RAKOW: We are glad that they are part of our city. But we can no longer afford to give 100 percent tax subsidy to these institutions when, you know, they are such a big portion of our city.

SMITH: Many nonprofits have been volunteering for years to make payments in lieu of taxes. But Boston's no longer willing to just take what it gets, and it's now sending out pseudo tax bills, asking nonprofits for 25 percent of the usual rate.

The city says institutions can pay half in kind, with scholarships or free care. Ultimately, Boston can't force nonprofits to pay, but Rakow says he will be posting who does and who doesn't.

Mr. RAKOW: The ones that maybe aren't doing as much as some of the others - it certainly is going to put them in a place where they're going to need to explain to the public why.

SMITH: Not surprisingly, the so-called guidelines for giving aren't playing so well among some nonprofits.

Mr. RICHARD DOHERTY (President, Association of Independent Colleges and Universities in Massachusetts): I think when you come up with a formula that is a percentage of assessed value, that simply looks too much like a tax.

SMITH: Richard Doherty is with the Association of Independent Colleges and Universities in Massachusetts.

Mr. DOHERTY: The tax exemption is not a loophole. It's a very deliberate public policy that recognizes that if it weren't for these private, not-for-profit entities, government would be forced to be providing higher education and health care, and that cost would be absolutely staggering.

SMITH: Doherty says many non-profits are already giving the city as much as they can, and some of the top givers are balking at the demand for more.

Rich Copp is a spokesman for Partners HealthCare, which owns Massachusetts General Hospital.

Mr. RICH COPP (Spokesman, Partners HealthCare): I would say that before we consider increasing the size of our contribution, we are hoping that others reconsider their level of contribution to be more consistent and fair.

SMITH: One admitted under-giver, Beth Israel Deaconess Medical Center, has been asked to increase from $170,000 to nearly three million. CEO Eric Burins says it will.

Mr. ERIC BURINS (CEO, Beth Israel Deaconess Medical Center): You never like to get a letter from the tax commissioner, but we thought that it was inevitable that the city was going to have to seek some recalibration of the contribution that these institutions were making to the tax base.

SMITH: Around the nation, other cities like Providence and Pittsburgh have also been putting the squeeze on nonprofits, but Penn State Professor Donald Heller says cracking down on schools and hospitals is unlikely to prompt a groundswell of public support.

Professor DONALD HELLER (Education, Pennsylvania State University): I think people tend to be saying: Look, if there's anybody abusing the system, it's not the public charities out there; it's the corporations that are getting away with not paying any taxes. And that's where we ought to be looking, not at trying to wring a few million dollars out of the universities in Boston or Cambridge.

SMITH: But to some, the line has blurred between universities and corporations. Boston City Council President Steven Murphy says many are now sophisticated, financial giants, for example, staging big-name rock concerts in their tax-exempt sports arenas.

Mr. STEVEN MURPHY (President, Boston City Council): And really, they're using the tax exempt purpose of medicine or education to get around the fact that they're on a huge land grab here. And, you know, at some point in time, you got to say: Hey, man up.

SMITH: If the cities don't say it, in some cases the taxpayers will, like in New Jersey where angry residents filed suit accusing Princeton University of, quote, "not paying its fair share."

Tovia Smith, NPR News, Boston.

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