With already a $2.8 million shortfall in the upcoming fiscal year’s tentative budget, a $146 million liability in police and firefighters pension funds and a persistent and pervasive economic slump, the City’s nine aldermen are hoping that some of the local not-for-profits will share the financial load.
Some 80 churches, two major hospitals, one major university, two public school districts and a smattering of private schools, a major international humanitarian organization and several local charitable organizations are exempt from paying property taxes on non-income-producing property they own in Evanston. Taking parkways, streets, sidewalks and alleys into account as well, 42 percent of the property in Evanston is off the tax rolls.
Only one of these property-tax-exempt organizations, Rotary International at 1560 Sherman Ave., pays property taxes in full, aldermen said at a recent meeting.
A subcommittee of the City Council’s Rules Committee is looking for ways to induce major not-for-profits to contribute to the City coffers. Discussion at recent meetings of the subcommittee centered around two main ways to do this: charging a fee for discretionary zoning, and getting tax-exempt entities to pay the City a proportionate share of what the property taxes would be.
Subcommittee chair Ann Rainey, 8th Ward, said, “I don’t want to begin unless everyone is committed to this. We are looking at property-tax-exempt entities [for money]. Are we all on the same page?”
Alderman Elizabeth Tisdahl, 7th Ward, said, “We should look at it, yes.” Alderman Steve Bernstein, 4th Ward, said, “We have to exact that which we can from anybody who can pay. How we do it is the question.”
Alderman Edmund Moran, 6th Ward, said he thought the issue was “worth exploring and discussing, but I’m not going to hold out a lot of hope. One problem is with equal applicability. We have two school districts, a multitude of churches and seven of our top 10 employers are not-for-profits. It’s a very tough subject for us to talk about – selecting who would be the target. … I think there are some organizations that are natural targets. It’s a tough battle, and I have built-in skepticism.”
Alderman Delores Holmes, 5th Ward, said any program would have to be implemented “across the board.”
Ald. Rainey said she felt the amount of property being taken off the tax rolls by not-for-profits is “an assault on our community.”
Payments in Lieu of Taxes
A payment in lieu of taxes (PILOT) program is a voluntary program under which the City and a property-tax-exempt organization agree on an amount the organization will pay to the City.
The payment can be either annual or ongoing, and it often nominally addresses services received from the City.
In a 2005 memo to the City Manager, Corporation Counsel Jack Siegel said, “A voluntary payment in lieu of tax policy is legal and desirable public policy as long as there is no element of coercion or denial of services in the absence of such an agreement.”
Ald. Bernstein said, “We have to do this; we have no choice. When the 1800 Sherman building came off the tax rolls there was recognition that a certain not-for-profit’s land use impacts the community.” He added, “We can ask the not-for-profits to contribute. Let them decide how much.”
Ald. Holmes suggested an “educational forum,” to which the City would invite tax-exempt entities and solicit their help. “The education piece is super-important. Call the community in and ask for help.”
Interim City Manager Rolanda Russell said, “We want to engage them in helping solve the problem.”
Payment for Discretionary Zoning
Another proposal is to require not-for-profit organizations to agree to pay the City’s portion of the property taxes as a condition to obtaining a zoning variance.
In the same 2005 memo, Mr. Siegel also said the City has “the authority to impose a payment in lieu of taxes provision in ordinances granting special uses or land-use ordinances which involve the exercise of discretion on the part of the City Council.”
Ald. Bernstein said the City can “charge for [discretionary] zoning relief.” He said the City should alert not-for-profits that if they seek zoning variances from the City, they must pay a share of the property taxes if they receive the variance. “Going in, we have to have a mandate: If you’re going to seek relief and get it, you’re going to have to pay x amount of the property tax.”
Aldermen agreed that the amount should be tied to the City’s portion of the property tax, which is about 20 percent of the overall property tax bill.
Ms. Russell said she thought it would ease confusion “if we have a philosophical statement that we’re not selling zoning.”
Finance Director Martin Lyons said, “We can look at the [payment] as a condition to granting the variance – a way of getting payment back for services rendered to not-for-profits.”
The Rules Committee has asked the Plan Commission to consider an ordinance – to be drafted by the City’s legal department – that would assess a charge for the receipt of certain zoning relief.
Payment of property taxes by not-for-profits is a mixed bag in Evanston. Not all not-for-profit organizations in Evanston are exempt from paying property taxes, and some that are entitled to that exemption – the Center for Independent Futures and Rotary International, for example – do not avail themselves fully of that benefit. Finance Director Martin Lyons told the RoundTable he is preparing a report on PILOT payments in the City.
CIF makes an annual payment in lieu of property taxes, said Alderman Elizabeth Tisdahl, 7th Ward. Rotary International pays the full amount of property taxes on its property at 1560 Sherman Ave., “”because they want to be a good citizen,”” said Alderman Steve Bernstein, 4th Ward.
The state exempts certain charitable organizations from paying property taxes because their contribution to the community is thought to be sufficient benefit. Hospitals, for example, receive their tax-exempt status by virtue of the charitable care they are supposed to give to those in need of medical care who appear at their doors.
Northwestern University’s exemption comes from its charter.
In the past several years the Attorney General has challenged the validity of the property tax exemption for hospitals, prevailing in a few cases to have the tax-exemption revoked by showing that hospitals did not provide enough charitable care to justify it.
And just last week the Illinois Supreme Court agreed to hear an appeal by Provena Covenant Medical Center in Urbana, which had its tax-exempt status revoked in 2003.