Developing a Payment-In-Lieu-of-Taxes (PILOT) Program

State law exempts federal and state properties, educational institutions, medical institutions, charitable organizations, and religious organizations from paying property taxes. In Newton, tax-exempt institutions own over two billion dollars of property, which is more than the value of all of Newton’s commercial and industrial property combined. If these tax-exempt institutions paid at the residential property tax rate, the added revenue would be over $18 million each year and if they paid at the commercial tax rate, this number would almost double.

Despite paying no property taxes, these organizations use city resources. They use Newton’s roads and are protected by our Police and Fire Departments. Many municipalities ask for Payments-in-Lieu-of-Taxes (PILOTs) from the tax-exempt institutions they host to help defray some of the costs of providing services to those organizations. Newton currently has no active program of soliciting PILOTs from tax-exempt entities and consequently receives only a small fraction of what many comparable communities realize from this source.

Summary of Proposed Solution

The City will reach out to the tax-exempt institutions we host, engaging them in a discussion about the benefits provided to them by being located in Newton and offering them the opportunity to help support these valuable services. This program should include:

i) Positive, constructive relationships with our tax-exempt entities;

ii) Clear lines of communication;

iii) Public education; and

iv) Regular, respectful requests for participation.

Discussion and Implementation Plan

i) Positive, Constructive Relationships

Tax-exempt organizations in Newton have the same types of concerns as for-profit businesses. Tax-exempt organizations (as well as businesses) should be afforded the same opportunities as residents to initiate customer service requests in our NewtonStat database (see page 21). By engaging them in an ongoing dialogue about the services they value (snow plowing, street maintenance, care of public spaces, etc.), we will be able to build strong partnerships that will make them eager to participate in supporting the services they enjoy.

ii) Clear Lines of Communication

We must maintain clear lines of communication between Newton City Hall and the tax-exempt institutions in our community. That means providing them with a point of contact and Newton City Hall and meeting with them regularly to learn about their needs and concerns.

iii) Public Education

The leaders and users of many of these organizations are also Newton residents. By educating the public about the importance of our PILOT program and the valuable services we provide to non-profits, we will help to build support for the program. Also, we can recognize the organizations that take a leadership role in participating in the program.

iv) Requests for Participation

Few non-profits will participate in the PILOT program without being asked. We should offer polite reminders about the value of services we are providing to them coupled with respectful requests that they participate in our PILOT program.