In their insatiable quest for new revenue, lawmakers in Hartford have seized on the state’s large nonprofit organizations, suggesting that their tax-exempt status might be an anachronism in an era of expansion.
But a proposal championed by House Speaker Brendan Sharkey, though it initially went too far, might eventually prove to be an effective compromise and at least a partial answer to dwindling tax rolls for municipalities that host more than their share of nonprofits.
The revised bill, which cleared the House on an 82-60 vote after midnight May 22, would allow currently tax-exempt medical facilities to maintain their tax exempt status. However, if the medical facilities’ owners purchase new property already on the tax rolls, they’ll have to pay taxes on it.
Sharkey had wanted to make the move retroactive, which hardly seems fair since those hospitals purchased the additional properties in good faith and under the nonprofit business model.
The bill passed by the House also requires colleges to pay property taxes when they acquire residential properties with 20 housing units or fewer but only if they use them to house students. However, that provision applies both to existing holdings and to future purchases. But I think it should only apply to future purchases for the same reason the hospital tax shouldn’t be retroactive.
The topic is of particular concern to Sharkey, whose district includes Hamden’s Quinnipiac University, which has been expanding at breakneck speed for at least 20 years. It’s one thing for colleges to build new facilities on their existing campuses, but when they acquire new land and take it off the tax rolls, there are consequences.
“These are not your typical small, struggling nonprofits — these colleges and hospitals are very large entities, nearly indistinguishable from traditional private sector businesses, except they don’t pay taxes,” Sharkey said. “They put a strain on municipal services such as police, fire, and public works, but it’s the host town’s families and businesses that must pick up the tab in the form of higher property taxes.”
That last sentence is the key. I can’t speak directly to Sharkey’s motives but my own view that large nonprofits should pay more property taxes stems from my desire to provide homeowners and small businesses with relief and to avoid significant cuts in crucial municipal services.
I don’t want these nonprofits to pay more taxes simply so that towns and cities can hire more workers and expand the size of government. Indeed, with falling birth rates and declining enrollments, school districts should be reducing their payrolls. Unfortunately, the state’s dreadful Minimum Budget Requirement makes such cuts a challenge, but I digress.
In Sharkey’s back yard sits Yale University, which is in effect a corporation with a $2.5 billion annual budget and an endowment of almost $24 billion. Yale pays only a fraction of what it would owe to its host city New Haven if its all its holdings were on the tax rolls.
Sharkey’s bill does not include some other institutions that could clearly afford to pay a lot more than they are now. Take the elite independent schools such as Choate and Hotchkiss, private boarding schools with assets and facilities that are the envy of many colleges.
In 2013, the Hotchkiss head of school had a total compensation package of almost half a million dollars, while the school’s finance director was pulling down close to $350,000, even as Hotchkiss faculty members residing in tax-free homes sent dozens of their own children to the public Salisbury Central School at a cost of several hundred thousands of dollars to town taxpayers.
There’s also a movement where I work in Berkshire County, Mass., to get the Boston Symphony Orchestra, whose venerable summer home, Tanglewood, has been in Lenox and Stockbridge since 1937, to make significant payments in lieu of taxes. Closer to home, it looks like the Bushnell and the Wadsworth are safe from the Sharkey attack for now.
If it passes, Sharkey’s bill should eventually be expanded to include private schools and other large nonprofits whenever they expand by acquiring new land and taking property off the tax rolls. There’s no good reason small businesses and rank-and-file homeowners should be footing the bill for police and fire protection for multimillion dollar organizations, nor for the education of the children of teachers in tax-free homes on private school campuses.
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