Reasons Orange needs to establish a PILOT Program
Orange residents are fortunate to have access to some of the finest educational, medical, and cultural institutions in the county. However, this benefit is not without its costs. These institutions are situated largely on tax-exempt land. Property taxes are a critical part of Orange city revenue, funding police, fire and public works services. Residential and commercial taxpayers are left to cover the cost of providing these essential city services to exempt institutions. As these institutions grow, so too does the property tax burden placed on taxpayers.
PILOTs originate from the tax-exempt status given by the Internal Revenue Service to universities, hospitals, and other non-profit entities and are exempted from paying their host city property tax.
Non-profits enjoy the same level of service the rest of the residents of the given city or county enjoy.
PILOT program payments to host city are completely voluntary.
Every city can create a custom PILOT Program for each tax-exempt organization
Can be a one-time contribution or an annual donation or financial participation into: fire stations, police stations, parks, community events, or whatever is needed by the city.
Agreements can be 5, 10, or 20 years long
Annual PILOT Program donations can have annual increases based upon annual revenue, # of students, # of hospital beds, or based upon a mutually acceptable solution.
Many cities have a high percentage of their property tax base that is tax-exempt from property taxes. As an example, Providence, RI has 39.3% of their tax base exempt from property taxes, Boston, Mass 24%, Springfield, Missouri 19%, Worcester 27%. Therefore the cities rely on the balance of the non-tax exempt commercial and residential real estate property owners to shoulder those costs.
We are all having our financial challenges, we would just like these tax-exempt organizations to participate financially in supporting their host city.
Regards,
Jeff Lawrence
Sara May
Regional Vice President, Hospital Association of Southern California
(714) 663-0294
smay@hasc.org
August 14, 2024
Mayor Dan Slater
City of Orange Councilmembers
300 E. Chapman Avenue
Orange, CA 92866
Subject: August 15 City Council Meeting - Agenda Item #5.4
Dear Mayor Slater and members of the Orange City Council,
First, I’d like to extend my sincere gratitude for your leadership and dedication to public service during this challenging time. I recognize the responsibility you bear in addressing the city budget crisis, and I appreciate the innovative solutions that the council has put forth in response to this pressing situation.
Among the solutions being considered, there is an effort to explore an ‘In Lieu of Payment’ program that could solicit payment in lieu of taxes from tax-exempt organizations. I strongly urge this council to exclude hospitals from any new programs that would result in higher costs.
Hospitals throughout the state are facing severe financial challenges. In Orange County, 46% of hospitals were operating at a budget deficit as of 2023. Imposing new fees would only exacerbate these challenges, and financial stability is critical for hospitals to sustain their operations and continue providing high-quality care.
Hospitals exist to serve the community. Diverting funds from these institutions would directly impact the resources available to care for vulnerable residents who rely on emergency medical and other health care services.
Any threat to the financial stability of hospitals could result in a reduction of services and limit reinvestments into technology, infrastructure staffing, and other necessary aspects of delivering high-quality care. This in turn could limit access to care – especially for the most vulnerable residents.
When health care providers face higher operational costs, such as those resulting from new fees or increased expenses, these costs are passed on to health insurance companies. In turn, insurers may raise premiums for their policyholders to cover the increased payouts to providers. This results in patients paying more for their health insurance coverage. This would come at a time when the affordability of health insurance premiums are already in question. Hospitals already play a significant role in boosting your local economy by creating jobs and driving consumer activity throughout the city. In Orange County alone, hospitals employ nearly 7,000 individuals, contributing to an economic output of $3 billion.
In summary, imposing any new fees on the hospitals is not a viable solution to the city budget crisis and it would only create negative impacts for the residents in the City of Orange.
Sincerely,
Sara May
Regional Vice President
Hospital Association of Southern California
Reasons Orange needs to establish a PILOT Program
Orange residents are fortunate to have access to some of the finest educational, medical, and cultural institutions in the county. However, this benefit is not without its costs. These institutions are situated largely on tax-exempt land. Property taxes are a critical part of Orange city revenue, funding police, fire and public works services. Residential and commercial taxpayers are left to cover the cost of providing these essential city services to exempt institutions. As these institutions grow, so too does the property tax burden placed on taxpayers.
PILOTs originate from the tax-exempt status given by the Internal Revenue Service to universities, hospitals, and other non-profit entities and are exempted from paying their host city property tax.
Non-profits enjoy the same level of service the rest of the residents of the given city or county enjoy.
PILOT program payments to host city are completely voluntary.
Every city can create a custom PILOT Program for each tax-exempt organization
Can be a one-time contribution or an annual donation or financial participation into: fire stations, police stations, parks, community events, or whatever is needed by the city.
Agreements can be 5, 10, or 20 years long
Annual PILOT Program donations can have annual increases based upon annual revenue, # of students, # of hospital beds, or based upon a mutually acceptable solution.
Many cities have a high percentage of their property tax base that is tax-exempt from property taxes. As an example, Providence, RI has 39.3% of their tax base exempt from property taxes, Boston, Mass 24%, Springfield, Missouri 19%, Worcester 27%. Therefore the cities rely on the balance of the non-tax exempt commercial and residential real estate property owners to shoulder those costs.
We are all having our financial challenges, we would just like these tax-exempt organizations to participate financially in supporting their host city.
Regards,
Jeff Lawrence
Sara May
Regional Vice President, Hospital Association of Southern California
(714) 663-0294
smay@hasc.org
August 14, 2024
Mayor Dan Slater
City of Orange Councilmembers
300 E. Chapman Avenue
Orange, CA 92866
Subject: August 15 City Council Meeting - Agenda Item #5.4
Dear Mayor Slater and members of the Orange City Council,
First, I’d like to extend my sincere gratitude for your leadership and dedication to public service during this challenging time. I recognize the responsibility you bear in addressing the city budget crisis, and I appreciate the innovative solutions that the council has put forth in response to this pressing situation.
Among the solutions being considered, there is an effort to explore an ‘In Lieu of Payment’ program that could solicit payment in lieu of taxes from tax-exempt organizations. I strongly urge this council to exclude hospitals from any new programs that would result in higher costs.
Hospitals throughout the state are facing severe financial challenges. In Orange County, 46% of hospitals were operating at a budget deficit as of 2023. Imposing new fees would only exacerbate these challenges, and financial stability is critical for hospitals to sustain their operations and continue providing high-quality care.
Hospitals exist to serve the community. Diverting funds from these institutions would directly impact the resources available to care for vulnerable residents who rely on emergency medical and other health care services.
Any threat to the financial stability of hospitals could result in a reduction of services and limit reinvestments into technology, infrastructure staffing, and other necessary aspects of delivering high-quality care. This in turn could limit access to care – especially for the most vulnerable residents.
When health care providers face higher operational costs, such as those resulting from new fees or increased expenses, these costs are passed on to health insurance companies. In turn, insurers may raise premiums for their policyholders to cover the increased payouts to providers. This results in patients paying more for their health insurance coverage. This would come at a time when the affordability of health insurance premiums are already in question. Hospitals already play a significant role in boosting your local economy by creating jobs and driving consumer activity throughout the city. In Orange County alone, hospitals employ nearly 7,000 individuals, contributing to an economic output of $3 billion.
In summary, imposing any new fees on the hospitals is not a viable solution to the city budget crisis and it would only create negative impacts for the residents in the City of Orange.
Sincerely,
Sara May
Regional Vice President
Hospital Association of Southern California