Does the Slippery Slope Start with Trash?
A post by James V. Toscano
Once upon a time, there existed a fairytale love fest between nonprofit organizations and the municipalities in which they operated. Reciprocity was the rule, encouragement the standard. Access to tax-exempt municipal bonding had to be one of the great added benefits of this relationship, especially to those high budget, capital-intensive groups such as hospitals, colleges and museums.
Cities and towns recognized the major contributions made to their citizens by nonprofit organizations. Health, education, and culture are necessities for any growing region trying to attract investment, business and an educated work force, with many other nonprofits adding a full menu of functions, from social services, youth groups, sports activities all the way to cultural amenities.Here in the Northland, major headquarters companies generously funded arts and education to be able to compete in recruiting MBAs, graduate engineers and scientists and other needed and scarce workers. Where else in the Midwest does a community have two major orchestras, The Minnesota Symphony and the St. Paul Chamber Orchestra, two significant visual arts institutions, the Minneapolis Art Institute and the Walker Arts Center, and a whole host of theaters led by the Guthrie Theater and the Children’s Theater Company?
Over the last thirty years, healthcare experienced rapid expansion, largely thanks to municipal bonds funding state-of-the-art hospital and clinic facilities dotting the landscape and bringing excellent care to the population.
What Happened?
And now, we read about cash-strapped municipalities thinking about charging nonprofit organizations fees for various city services.
New York, one of the leaders in using munis, as federal tax-exempt municipal bonds are called, has been prominent in this win-win partnership of the past. Now New York City leaders are talking about requiring nonprofits to pay the full cost of garbage services. Clearly, this will precipitate a waiting line to assess charges for police and fire protection, street cleaning and maintenance, road construction, social services, general costs of government, and who knows what else?
This is not the first time this need has propelled city governments to think about tapping revenue of major nonprofits. Over the years, all across the country, calls for payments in lieu of taxation (PILOTs) have been made by mayors and councils looking for increased revenue. And, in a random way, one can spot various nonprofits, again the larger ones, making voluntary payments to cities for various activities, often, however, not tied to a specific service.
Now, we are witnessing the switch from voluntary to mandatory, required payments by nonprofits. Will the ultimate effect be the elimination of property tax exemption for nonprofits all across the country? Every element of nonprofit tax exemption may be up for grabs.
Everyone Needs Revenue
As expected, nonprofit organizations, their associations and lobby groups, their boards and their proxies will wage a spirited campaign against potential levies. Their arguments are strong and their allies are powerful. Services provided by such organizations not only bring learning, arts, joy and a vast variety of enhancements to life in the community, nonprofits also are one of the leading providers of the safety net that holds the local society together.
The problem is the need for revenue by government; the answer is to find new sources ostensibly without the political liability of raising property taxes. And there sit the big hospitals and other nonprofit organizations.
Governments have authority to tax, with various states having different levels of taxing power and delegated authority to municipalities. Whether in city hall or legislative chambers, the fight will be waged, without any clear outcome.
The reality is that most nonprofits, including the big ones, are as cash-strapped as the municipalities, counties and states in which they operate. Seemingly, their balance sheets should prove the point. Nevertheless, the politics of contemporary America seem to point to the joining of this battle in the same way the Obama administration is trying to cap charitable deductions..
Enlightened Advocacy
Advocacy for nonprofits seminars and training are breaking out all over the map. State associations are beefing up their advocacy staffs. Nonprofit organizations are paying more attention to activities in the legislative arena. Nevertheless, we need to go upstream from the present activity.
One organization is already staking out this new territory. Bob Egger, founder and president of the Washington DC Central Kitchen, is organizing a national group, CForward, to educate candidates for political office about nonprofits and their importance and contributions to our society, including our major role in the economy.
One major question that CForward will ask each candidate for political office is whether they have planks in their election platform on their position on nonprofits and their place in the community.
We do need an overall nonprofit political strategy necessarily nonpartisan, not the relatively liberal political attitudes demonstrated in the past. We now need to stake out a public stance on the legitimacy and place of nonprofit organizations in the society, the economy and, yes, the polity.
Our appeal must be broad. We are more than a failure of the marketplace, as the economists suggest, more the embodiment of that voluntary spirit so noted by Tocqueville over 150 years ago.
This voluntary spirit is embedded in our national psyche. And it leads to over 75% of us reporting that we volunteer for organizations. Nonprofits need to ensure that our significant contributions to strengthening the society are recognized not only by political entities but by the citizenry at large.
It is up to us.
Copyright 2012 The Good Counsel, division of Toscano Advisors, LLC. May be duplicated with citation.