Schools need city nonprofits to invest in children's futures: Mike Foley
With passage of the recent school levy, Clevelanders have naturally been looking at their property tax bills. As a state representative and someone who supported the levy, you can imagine that I have received some loudly opinionated phone calls from opponents who are now facing larger assessments. Among the criticisms I have received are the notions that the state is not doing enough (I agree), and that poor and elderly Clevelanders are picking up the tab with this tax. While I know that businesses are contributing about half of the amount of the increase, one constituent raised the issue that large nonprofits like the Cleveland Clinic are not paying anything toward the education of our kids.
I started browsing and found that the assessed value of the Cleveland property owned by the clinic is almost 4.5 percent of all real estate value in the city. Given its footprint in the city and the work its staff does, this did not overly surprise me.
According to its most recent annual financial statement, the clinic had more than $4.9 billion in net assets (revenue over expenses). If it were a for-profit company, that would equal almost $5 billion in total profit. Looking at just the numbers, CEO Toby Cosgrove should be congratulated for running a pretty successful financial empire.
The problem is that the clinic, with all of its money and all of its property, doesn't pay a dime in property taxes. Neither does University Hospitals, a smaller but equally impressive institution that also provides first-rate medical care. While I and other residents of Cleveland just voted to increase our property tax payments so that we could have better schools, the wealthiest enterprise in the city -- the Cleveland Clinic -- makes little, if any, sacrifice for the institution in the city which has the greatest need -- the Cleveland School District.
As a nonprofit organization, the clinic is legally exempt from paying taxes. That being said, I recently learned that many large nonprofits in other large cities make Payments in Lieu of Taxes (PILOTs) to help compensate for not paying property taxes. According to a report from the Lincoln Institute of Land Policy, at least 218 taxing jurisdictions in 28 states have negotiated PILOTs from local, large nonprofits. Nonprofits in Boston make more than $30 million a year in PILOT payments.
In 2004, Policy Matters Ohio issued a report for then-Cuyahoga County Treasurer Jim Rokakis estimating that if the clinic were to pay property taxes on its Cleveland properties, it would owe the city approximately $12 million per year. University Hospitals would owe $5 million per year. I imagine with expansion and new building, these figures would be higher now.
The PILOT idea is not unprecedented in Cleveland, especially in context with the clinic. In 2005, after Rokakis pointed out some of the contradictions about the clinic's wealth and lack of property-tax payments, Cleveland negotiated a $10 million, five-year deal with the clinic for in-kind services and money. I assume that the commitment was honored, but as far as I can tell, there is no actual accounting of the $10 million commitment.
I think it is time to restart a new round of PILOT talks. The clinic is certainly able to help out the schools. While the clinic's reach as a health care leader is not only national, but global, it is also deeply rooted and embedded in Cleveland and owes much of its success to assistance it received over the years from Cleveland and Clevelanders. While I have no doubt that the income taxes paid by its employees provide great resources to the general fund of Cleveland, the institution of the Cleveland Clinic contributes nothing to our schools. While our recent levy victory was important, and a significant investment by a generally poorer population, I believe that in order to fulfill a vision of a great public school system, which many in our city have for the Cleveland School District, all financial hands need to be on deck. It seems to me that the Cleveland Clinic, our largest financial entity, should contribute to its future.