Not-for-Profit?

This is Randy Feldman.

There is a lot of talk in Worcester about PILOTs; not the kind that fly airplanes but the kind that means Payments in Lieu of Taxes.

This demand is generally aimed at Worcester’s colleges and universities, thought it could easily also be directed at other non-profit organizations, such as UMASS Memorial Health Care.

I’m not sure if a PILOT program is the best way to have non-profits give more back to the communities who allow them to pay virtually no taxes, but I am sure it is time to take a real hard look at whether or not all non-profits should be treated the same way for tax purposes.

After all, what exactly do UMASS Memorial Health Care, where the CEO earns nearly 2 million per year and other upper management people and physicians earn hundreds of thousands of dollars have in common with Friendly House or Pernet Family Services? Yet UMASS salaries pale in comparison to the recently retired salary and severance package granted to the retiring CEO of “non-profit” Blue Cross Blue Shield who earned $8.6 million in total compensation in 2010 plus $1.8 million in severance this year and nearly $1 million next year. But that pales in comparison to the $19 million per year given in 1996 to the then CEO of Blue Cross Blue Shield.

What exactly do these mega non-profits have in common with Abby’s House or Friendly House or the local United Way? Not much it seems to me.

Maybe we need another level of taxation between none for non-profits and 35% for corporations? Maybe we should look at the percentage of money that goes into direct services or look at salary structure to determine whether or not an entity is really a not-for-profit organization. Maybe the IRS should have another middle designation for mega, business-oriented non-profits.

In Worcester, non-profits control over 21% of the property base, so the importance of this taxation issue, here and nationally, is enormous.

Let’s look at all the taxpayer support these nonprofits already receive. Medicare, Medicaid, student aid, government loans, direct government funds (like from the National Institute of Health or state Mass Science Center) and taxpayer backed bonds for building construction are all ways that non-profits benefit from taxpayer subsidy and commitment, not just by their not having to pay property or sales taxes.

And what building they have built. UMASS Medical School is now constructing the $405 million Albert Sherman Science Center. Before that the taxpayer-backed bonds were issued to build UMASS Medical School’s $115 million Access Building, the $100 million Aaron Lazare Research Center, as well as another $70 million for infrastructure improvements and $10 million for a stem cell registry and cell bank.

Other Worcester colleges, either through direct taxpayer funding, student aid, tax credits, or taxpayer-backed guarantees for bonds being issued have also supported college buildings like Holy Cross’ $63 million science center and WPI’s $63 million Gateway Park Project.

The taxpayer has also provided a tremendous amount of direct funding for the biotechnology industry in Worcester and Massachusetts.

Non-profits do our city, state, and country a whole lot of good. Yet when salary structures get too outlandish, like at Blue Cross Blue Shield or at Boston University, which builds student dormitories with taxpayer support which mimic the high end condos of Donald Trump, it’s time to somewhat treat these non-profits like the semi-profits that they have become.

This is Randy Feldman on True Talk 830 Midday Report.