As the need for more revenue deepens, cash-strapped municipalities such as Galloway Township may increasingly continue to turn to colleges, such as Richard Stockton College, as well as other nonprofit groups, to request payments in lieu of the taxes (PILOT’s) on their property.
Private colleges and other nonprofit organizations, such as hospitals, churches, and soup kitchens, are exempt from paying property tax in all 50 states. The foregone revenue from the property-tax exemption may well total as much as $32-billion nationwide.
As municipal budgets are stretched thin, mayors and local politicians have called on their colleges and other such groups to compensate cities and counties for the services they use. Many of those agreements have appeared to be haphazard, secretive, and calculated in an ad hoc manner.
Moreover, payments in lieu of taxes have shown not to be structured as a reliable long-term source of funds. Municipalities and nonprofit groups should work collaboratively to negotiate plans for payments in lieu of taxes that are transparent, equitable, and predictable in providing the long-term stability that our community requires.
Any such plans should clearly articulate the methods for deciding which nonprofit groups will make payments in lieu of taxes. For example, PILOT amounts might be based on square footage to determine payments. Yet another alternative can be to factor in an organization's annual operating income.
To go even further, another example could be to seek payments equal to 25 percent of the property taxes that would be owed if the nonprofits' real-estate holdings were fully taxable. Galloway municipal government and local nonprofits should work to hammer out payment plans that are transparent to the public and predictable so future budgets can be set.