PORTLAND — As property values increase, the city hopes to tap into revenues from nonprofits.
The payment in lieu of taxes, or PILOT, program was reviewed Nov. 28 by the City Council Economic Development Committee.
“According to the city tax assessor, the amount of tax-exempt real estate within the city of Portland has risen to approximately $2 billion as of June 30, 2017, and this amount may be understated,” city Finance Director Brendan O’Connell said in a Nov. 14 memo to the committee.
O’Connell said the valuations are at least 21 percent of city property valuations, pegged at $7.76 million by the assessor’s office. The current city budget was drafted on valuations of $7.8 billion.
The committee began looking at ways to draw revenue from tax-exempt properties in September. There is no existing formal policy now, and any program will have to be voluntary, since nonprofits cannot be compelled to pay taxes.
On Tuesday, O’Connell said it may be February 2018 before councilors again look at a the program, since former committee chairman Councilor David Brenerman has retired and new committee assignments have not been made. Once the committee is filled, it will have to set priorities for 2018.
What is evident is the city gets little return from nonprofit property owners. O’Connell said the city budgeted $575,000 in PILOT revenue this year, an increase of $5,000 from fiscal year 2017.
In fiscal year 2017, ecoMaine, which converts solid waste to energy from collections in communities throughout southern and central Maine, contributed $370,000. The Portland Housing Authority contributed $150,000, O’Connell said.
“One of the pieces of backup info the Economic Development Committee requested for presentation the next time this is discussed is a list of the largest exempt property owners cross-referenced with any current PILOT payments,” O’Connell said in an email.
A PILOT program will offer a chance for revenue, but O’Connell’s memo said it is also needed for clarity “and to create a more even playing field within exempt property owners.”
Such a program could also alleviate the tax burden on owners of non-exempt properties, and establish some guidelines for expanding nonprofits looking to remove some properties from tax rolls. The current combined municipal and school budgets require $168 million in property tax revenues.
“When you look at other cities in the Northeast, typically the hospitals and private universities owning massive amounts of property are making a significant PILOT contribution,” O’Connell said.
Information provided to the committee outlined nonprofit contributions in Boston from schools and hospitals in fiscal year 2016, including $6.1 million from Boston University and $6.8 million from Massachusetts General Hospital.
The draft of the city PILOT program suggests exempting the first $2 million in valuations from any tax-exempt property to protect smaller nonprofits, with the nonprofit then asked to contribute 25 percent of the remainder to help pay for services it may use or consume.
A separate deduction for services provided to the community by a nonprofit, including scholarships, summer job programs, partnerships on public health initiatives or local schools could also be in the policy.
In his memo, O’Connell suggested a five-year phase in for existing nonprofits beginning in fiscal year 2020. The city would initially seek 10 percent of the PILOT revenue, increasing it to 50 percent by fiscal year 2025 before seeking full amounts after that.