1:57pm

Fri April 27, 2012
Development

Syracuse's nonprofit problem: Not enough land on the tax rolls

Four major hospitals; three large colleges; dozens of churches, charities and government buildings.

They drive Syracuse's economic and cultural activity. But leave the city's bank account hurting for revenue.

In all, Syracuse nonprofits and other tax-exempt properties make up 56 percent of the city. That's land City Hall can't collect taxes on.

Add to that properties with temporary tax breaks given to encourage development.

Add to that more than 3,000 smaller plots throughout the city that are vacant or delinquent on their taxes.

"This is characteristic of the type of problem the city has in collecting property taxes," says Common Councilor Khalid Bey, chair of the council's economic development committee.

"Essential fairness"

The relatively small amount of land left for the city to tax has left Syracuse struggling to pay the bills. City Hall is now trying to come up with new ways to generate revenue, including negotiating "service agreements" with the city's larger nonprofits.

"I think it's just in recognition of the essential fairness of paying for the services you receive," says Common Councilor Pat Hogan.

Hogan argues that city services - like fire and police protection, snow plowing on city streets, etc. - are used by the employees of Syracuse's colleges and hospitals. Hogan says the nonprofits should therefore help pay for those services.

Syracuse is not alone in this problem.

Cities from Providence, R.I. (home of Brown University) to Rochester, Minn. (home of the Mayo Clinic) are turning to their nonprofits for financial help.

"I don't think any of these institutions want to exist in a city where the infrastructure of the city is falling apart," councilor Hogan says.

Negotiating table

So far, Syracuse has been successful with its largest property holder: Syracuse University.

In a deal worked out last year by Mayor Stephanie Miner, SU will cut the city a check for $500,000 for each of the next five years.

But the half-million-dollar payment pales in comparison to what the school would pay if its land holdings were fully taxable.

According to the city's assessment office, SU would have to pay roughly $24 million a year for its $624 million in property.

Getting other nonprofits to offer token payment may be even more difficult.

Mayor Miner met with officials at Upstate Hospital earlier this week but didn't get very far. Since Upstate is a state entity, it legally can't enter into such an agreement, according to hospital spokesman Dan Hurley.

Another major Syracuse healthcare provider, St. Joseph's Hospital, broke ground this week on another expansion.

The physical growth of local nonprofits may create jobs, says councilor Bey, but as they gobble up more land, they further erode the tax rolls.

"While they empower one of our economic engines, they're killing our other one," Bey says.

Carrots

And then there are the tax breaks the city voluntarily hands out.

In an effort to spur economic growth, Syracuse has granted payment-in-lieu-of-taxes (PILOT) deals to large property holders like the Destiny USA shopping mall.

While PILOTs eventually expire - and bring in a reduced amount of taxes while they're in affect - Bey says the city should be wary of giving away the farm.

"We are running out of carrots," he says. "I think we have very little wiggle room. We need to come up with a plan to begin movement back in the other direction."

Bey says the process for awarding tax incentives should be more streamlined, and that they should be used specifically for troubled properties.

But not everyone agrees.

"If we were simply to say, 'We can't afford to give any more tax breaks,' then things would come to a standstill," says Bill Ryan.

Ryan is both the mayor's chief of staff and the chairman of the city's industrial development agency - the arm of local government that dishes out tax incentives.

If Syracuse were to put an end to PILOTs and other sweeteners, Ryan says, "we'd be worse off than we are now."

New Model?

Both CenterState CEO, an economic booster for the region, and the mayor say one current project could serve as a model for future nonprofit expansion in Syracuse.

But it's not without controversy.

Syracuse University wants to build a new bookstore and fitness center just off its main campus. SU owns the land, but the facility would be built and operated by a private developer.

The city would then enter into a PILOT agreement with that developer.

Proponents of the model say its a win for the city: Syracuse would be able to collect at least some property taxes where previously it was collecting none.

Still, the project has yet to win approval from the Common Council.