WHEREAS, the nonprofit sector is the single fastest growing segment of the U. S. economy; and
WHEREAS, nonprofit institutions own 25.2% of the City's total property assessment and the assessed value of nonprofit property in the City has risen from $1.2 billion in 1963, to $2.4 billion in 1979, to $3.1 billion in 1993; and
WHEREAS, non-governmental nonprofit institutions are currently afforded tax-exempt status resulting in exemptions from the payment of $45.6 million in property taxes that would otherwise be due to the City, and $55.1 million in property taxes that would otherwise be due to the School District, thereby placing additional burdens on Philadelphia's remaining taxpayers; and
WHEREAS, 52% of the City's General Fund Budget and 64% of local taxes and fees are used to support essential services which are provided to nonprofit institutions to the same extent as to taxpaying entities; and
WHEREAS, recent Pennsylvania Supreme Court interpretations of the Pennsylvania Constitution strictly limit the eligibility for tax exemption to "purely public charities," thereby calling into question the tax-exempt status of many nonprofit institutions; and
WHEREAS, the City of Philadelphia recognizes the many valuable contributions made by nonprofit institutions and yet requires reimbursement for only a fraction of the cost of providing essential services to nonprofit institutions that do not qualify as "purely public charities";
NOW, THEREFORE, by the powers vested in me in accordance with the Philadelphia Home Rule Charter, it is hereby ORDERED that:
1. It is the policy of the City of Philadelphia that:
(a) All nonprofit, non-governmental institutions in the City should pay their fair share for the municipal services and benefits they receive.
(b) All institutions currently afforded tax exempt status that do not qualify as "institutions of purely public charity" under applicable legal precedent should forfeit their tax exemptions. In lieu of such forfeiture, and in settlement of any potential legal challenge to its exemption, a currently tax-exempt institution whose exemption status is legally unclear may instead remit to the City Payments in Lieu of Taxes ("PlLOTs"), a portion of which may be in the form of Services in Lieu of Taxes ("SlLOTs").
2. There is hereby created in the Office of the Mayor a PlLOTs/SILOTs Advisory Board, whose members shall be as follows:
(a) Mayor, or his/her designee;
(b) City Council President, or his/ her designee;
(c) Finance Director, or his/her designee;
(d) Budget Director, or his/her designee;
(e) Commerce Director, or his/her designee;
(f) Revenue Commissioner, or his/her designee;
(g) Health Commissioner, or his/her designee;
(h) City Solicitor, or his/her designee;
(i) President of the Board of Education; or his/her designee;
(j) Chairman of the Board of Revision of Taxes ("BRT');
(k) Chairman of the BRT's Abatement and Exemption Unit; and
(I) Two citizens to be appointed by the Mayor.
3. The duties of the PlLOTs/SILOTs Advisory Board (the "Board") shall be as
(a) To advise the Mayor, the BRT, and the Law Department as to which nonprofit institutions the Board believes are truly institutions of purely public charity and, therefore, should be exempt from payment of taxes and/or PlLOTs or SlLOTs. In making its recommendation, the Board shall rely on the factors set forth by the Pennsylvania courts in making determinations of tax exemptions.
(b) To develop a proposed menu of SlLOTs acceptable to the City and the School District of Philadelphia as substitutes for PlLOTs, and establish a value for such SlLOTs.
(c) To negotiate, subject to the approval of the Law Department and the Board of Revision of Taxes, a PlLOTs/SILOTs agreement with each nonprofit institution whose status as an institution of purely public charity is legally unclear, which agreement shall constitute a settlement of a potential challenge to the institution's tax exemption. Each such agreement shall:
(i) Obligate the institution to remit to the City, on an annual basis for the duration of the agreement, PlLOTs in an amount equal to 40% of the amount of real estate taxes that would be owing to the City but for the institution's tax exemption; however, any agreement executed on or before December 1, 1994 shall obligate the institution to pay 33% of the amount of real estate taxes that would be owing to the City but for the institution's tax exemption. The annual payment amount shall not change over the term of the agreement, regardless of any changes in assessments or tax rates.
(ii) Allow the institution to substitute SlLOTs for up to 33% of the PlLOTs. The agreement shall specify the SlLOTs to be provided by the institution and the amount of PlLOTs intended to be defrayed thereby, pursuant to the SlLOTs menu established by the Board. Such SlLOTs may include services already performed voluntarily by the institution, but may not include any services otherwise required by law.
(iii) Covenant, on behalf of the City and the BRT, not to challenge the institution's tax exemption or to attempt to collect taxes from the institution for the duration of the agreement, except with respect to properties not used in furtherance of the institution's charitable purpose.
(d) To negotiate a comparable agreement on behalf of the School District.
(e) To negotiate a comparable agreement on behalf of the Center City District and any other special service district that may be created, where applicable.
(f) To monitor compliance with each PlLOTs/SILOTs agreement, and to refer any noncompliance to the Law Department, the BRT, and the School District.
(g) To take such other steps as may be necessary to implement a fair and uniform PlLOTs/SILOTs program.
4. In the event the Board is unable to enter into a PlLOTs/SILOTs agreement with a nonprofit institution whose status as an institution of purely public charity is legally unclear, the Board shall refer the matter to the Law Department, the BRT, and the School District, with a recommendation to institute a challenge to the institution's tax exemption.
Date: 30 June 1994
Signed: Edward G. Rendell, Mayor
Comments to the Department of Records.