Big cities have lots of civic institutions, including universities and hospitals. Tax exempt, they don't pay property taxes, and since property taxes are the primary way cities earn revenue, that makes it harder to fund operations.
In Canada, nonprofits mostly still have to pay property tax, unless they get an exemption, which is pretty hard. The municipality has to believe it gets big benefits in return.
Over the years, many cities including Providence Rhode Island, Pittsburgh, New Haven Hartford--50% of the city's property is tax exempt, Philadelphia and Boston have tried to get decent sized "payments in lieu of taxes" from major nonprofits and they've been unsuccessful. (In Connecticut, the state reimburses jurisdictions for a percentage of lost property tax issues due to tax exemptions. Decades ago under Nixon, the federal government had a similar program for cities and federal undertakings.)
In Philadelphia, rather than submit to any kind of tax, the University of Pennsylvania, its hospital system, Drexel University and Amtrak's 30th Street Station joined together to fund the University City District business improvement district through annual contributions.
So the fact that Boston has managed to get a 5 year agreement, and about $20 million per year from Boston University is a big deal ("BU to pay city of Boston more than $104 million over five years in record deal," Boston Globe). It's a mix of money and in-kind services, but the cash part is still pretty hefty.
Now for Harvard, MIT, the big hospitals, other universities....
https://www.desmoinesregister.com/story/news/local/des-moines/2026/07/16/des-moines-budget-cuts-mayor-connie-boesen-letter-kim-reynolds-public-services/90867001007/
ReplyDelete'We need help': Des Moines mayor asks state, hospitals for payment
Des Moines' mayor is asking the state, hospitals and other tax-exempt property owners in the city to make voluntary payments to help patch up a projected budget hole.
In letters addressed to the State of Iowa, local hospitals, and a university, Des Moines Mayor Connie Boesen asked entities to provide a payment in lieu of taxes (PILOT), voluntary payments to help cover the cost of services like public safety, road maintenance and snow and debris removal provided to nontaxable properties, as first reported by Axios.
Payment in place of taxes would allow the city to offset the costs of maintaining services for the tax-exempt properties, shifting a portion of the burden off of Des Moines taxpayers
"I came up with it after we found out how much we're going to have to cut again. I said, 'It's time,'" Boesen told the Register. "We need help. We cannot keep cutting services in a community that we're trying to rebuild."
Broadlawns was the only entity that responded to the letter as of July 15, Boesen said. Hospital leaders said they were willing to learn more about the mayor's request.
The city is facing an estimated $12 million budget deficit in fiscal year 2028, which begins on July 1, 2027, and an additional $5 million hole the following year. City Manager Scott Sanders attributes the deficit to a state property tax law revamp, which implements a 2% growth cap on local governments' general fund levies.
The city's general fund, which pays for all city operations and departments, is largely funded by property taxes.
The extra funds could mean not cutting as many essential services and amenities that residents want, Boesen said.
Meanwhile, about 40% of property in Des Moines is non-taxable, Sanders said during a public budget meeting July 9. This includes property owned by the state and non-taxable organizations such as nonprofits, churches and schools.
While it's difficult to estimate the value of the city's non-taxable property, Sanders said it's also likely that about 40% of the city's building values are not taxed, which equates to at least $30 million or more of potential loss each year.
"We see the need to lower our property tax rate to improve affordability for residents, businesses, and other community members who call Des Moines home," Boesen wrote in the letter to the governor. "This goal becomes harder to achieve when the cost of doing business does not account for who is contributing to the same services our property taxpayers pay for."
The city started using the voluntary payment program in the late 1990s, with Des Moines hospitals pledging to pay about $860,000 per year, according to Des Moines Register archives.
Some of the hospitals that were making payments to the city more recently have not paid the city in the last four or five years, Sanders said at the July 9 meeting.
In the last fiscal year, 2026, the city received $5,000 from the Community Foundation of Greater Des Moines; nearly $1.4 million from Des Moines Water Works; $700 from Hoyt Sherman Place; about $42,000 from Metro Waste Authority; nearly $1.3 million from the Water Reclamation Authority; and about $744,000 from the Des Moines Airport, according to city data.