by Chuck Hoven
(Plain Press, January 2014) As part of a National Day of Action to Reclaim the Promise of Public Education, the Cleveland Teachers Union joined with Common Good Ohio to host a meeting on December 9th in downtown Cleveland to call for the creation of a Payment in Lieu of Taxes (PILOT) program in the City of Cleveland. The program would ask large nonprofit organizations, which are not required by law to pay property taxes, to make a voluntary tax payments.
Common Good Ohio Chairperson Scherhera Shearer noted the last two State of Ohio budgets resulted in massive cuts to education. She said in 2012 Cleveland voters stepped up to the plate and passed a 15-mill property tax levy to support the operating costs of the Cleveland Metropolitan School District. She called for the creation of a PILOT program “to begin to press Cleveland’s largest hospitals to pay their fair share of taxes.”
The call for the creation of a PILOT program was supported with data from a new report by Policy Matters Ohio, which indicates that nonprofit, government and tax abated property accounted for 44.9% or the real property value in the City of Cleveland in the 2012 tax year. This means that the owners of 55.1% of the real property in the City of Cleveland are asked to pay 100% of the property taxes collected.
The report, authored by Zach Schiller and Chris Hileman and complied on behalf of the Cleveland Teachers Union and Common Good Ohio, is titled Hospitals Would Owe Tens of Millions If Exempt Properties Were Taxed. The report is an update of one commissioned by then Cuyahoga County Treasurer Jim Rokakis in 2004 to study the possibility of creating a Payment in Lieu of Taxes program. The 2004 report by Policy Matters Ohio looked at 2003 tax valuations and determined that 36% of the real property value in the City of Cleveland was exempt or abated.
In just nine years the value of tax exempted or tax abated property in the City of Cleveland has grown from 36% to 44.9% of the total real property value in the city. Cleveland’s portion of exempted and abated property is significantly higher than Cuyahoga County’s percentage of exempt or abated real property value which now sits at 20.2%. In turn, Cuyahoga County’s percentage is higher than the state as a whole.
The study focuses on Cleveland’s two large nonprofit hospitals Cleveland Clinic and University Hospitals, which together in 2012 had exempt property worth $2 billion in value in Cuyahoga County. Of that tax exempt property $1.6 billion of it is located in the City of Cleveland. This figure, up significantly from the 2003 value of exempt properties owned by the two hospital systems reported at $960 million. The report states that the figure is likely to continue to grow as the hospitals have pending applications for tax exemptions on newly built or acquired properties.
The Policy Matters Ohio study estimates if the two large non profit hospital systems were to pay property taxes on their properties in Cleveland it would mean the yearly collection of an additional $34.2 million in property taxes in the City of Cleveland, the Cleveland schools’ portion of that amount would be an additional $20.5 million per year. According to the study, the $20.5 million in property taxes if paid by the two hospital systems would amount to “nearly 30 percent of the annual amount that the school district’s 15 –mill levy approved by voters last year was expected to generate.”
State Representative Mike Foley, who helped to create the organization Common Good Ohio, said the health care sector is the largest driver of the local economy and hospitals are huge owners of land in the City of Cleveland. With the amount land they own in the City of Cleveland, their nonpayment of property taxes has a huge impact on the City of Cleveland and its schools system, said Foley.
Representative Foley said the expectation is that the amount of uncompensated charity care provided by the two large hospitals will “go way down” as a result of Medicaid expansion and the implementation of the national Affordable Care Act. This charity care is part of the justification for the property tax exemption given to the hospital systems.
Cleveland Teachers Union President David Quolke called for hearings in Cleveland City Council and greater community discussion on the creation of a PILOT program. He said discussions about the provision of wrap around services by the hospitals would be a good start for dialogue about the creation of a PILOT program. He said there are no shortage of opinions as to whether the dollars from the two hospitals should come in the form of cash or in kind services.
Common Good Ohio Chairperson Shearer referred to the sacrifices of Clevelanders to pay for the 15-mill levy passed last year and said “It is crazy to ask the every day person to pay more if these large nonprofits are not chipping in.”
Quolke and Shearer called for dialogue in Cleveland City Council and at the Cleveland School Board to begin the process of gaining support for a PILOT program. Quolke noted the sacrifices made by Cleveland voters to support the schools at a time when “most residents are struggling to make ends meet.” Referencing the Policy Matters Ohio report, Quolke called on the “large nonprofits to support our schools and our children.”
Zach Schiller of Policy Matters Ohio noted the presence of PILOT programs in other cities. He said hospitals similar to Cleveland Clinic and University Hospitals, such as Massachusetts General in Boston/Cambridge, were making payments in lieu of taxes now. Referring to the PILOT program, he said, “It is something being done in other cities. Look at other places and see what should be done in Cleveland.” He urged those present to look at the full report at www.policymattersohio.org.
Representative Foley, seeing Cleveland City Councilman Terrell Pruitt in the audience, put him on the spot — asking him if he would support hearings in Cleveland City Council on the PILOT Program. Councilman Pruitt said, “I definitely think this is important. Something we need to look at. I’m on board to find out more about this issue.”
Cleveland Teachers Union President Quolke asked that letters be written to the Cleveland School Board encouraging them to take up this issue. He said, “We want to make sure this issue gets a fair hearing.”
Editor’s Note: The next meeting of Common Good Ohio is on Monday, January 6th at 5:30 p.m. at St. Clair Superior Development, 4205 St. Clair Avenue. Residents interested in working to help form a PILOT program are urged to attend. To get involved, contact Michael Cook at firstname.lastname@example.org or at 216-262-6343.