A ‘SUBSTANTIAL’ DONATION IN LIEU OF TAXES? THE PLANET BEGINS TO DEFINE ‘SUBSTANTIAL’ … NON-PROFIT STATUS OF MEGA-COMPANIES LIKE BHS ARE OFTEN A TAX SCAM … plus … HOW TO ADDRESS THIS IN THE NAME OF FAIRNESS, FOR WE THE PEOLE
By DAN VALENTI
PLANET VALENTI News and Commentary
(FORTRESS OF SOLITUDE, WEDNESDAY, DEC. 7, 2011) — As the not-for-profit Berkshire Health Systems still has not responded to our series of questions,THE PLANET has done a little digging. We asked several key questions:
(1) What is the value of the entire BHS holdings?
We don’t have the answers to these questions yet. We also had the following questions asked by Perry Mason, a prominent area attorney:
* Who owns the BHS properties?
* Are rents fair?
* Why have officers been the same for decades?
* At what point are they shareholders?
“This is big business,” Mr. Mason writes. “You hit it. The same old people are voting to pay themselves and friends great salaries. Probably the same accountants who are paid a fortune [to provide an] ‘independent’ review, just like Wall Street. … Big business, big questions.”
Looking into the “Not-for-Profit’ Racket
Determining a net worth of the entire BHS empire becomes relevant is gauging the word “substantial.” You remember that Steven Colbert, a BHS insider responding apparently with the blessing of the company, said that in lieu of taxes (non-profits play by a different set of rules that the rest of us), BHS makes a “substantial,” voluntary “donation.”
Well, just as Mr. Colbert quibbled with us on our use of the word “monopoly” in describing BHS’ position regarding health care in Berkshire County, we want to know what “substantial” means. Give us an exact number, BHS, and we can decide for ourselves.
THE PLANET has one piece of the definition.
BMC Inc. Alone Has Property in Pittsfield Worth $118,374,460
Using the city of Pittsfield website and going to the assessor’s online abstract of what is contained in the books, Berkshire Medical Center Inc. — which is just one of 27 companies that are part of the BHS Empire — has 50 listed properties in the city. The assessed valuation of those 50 properties is $118,374,460.
Yes, we understand BHS is a not-for-profit. Yes, we understand they do not have to pay property tax. But has anyone asked why they are considered a non-profit? Has anyone asked whether, given the revenues generated there, non-profit status can be reasonably justified?
As a thought experiment, let us ask the following question: What would BHS pay in property taxes at the city’s established commercial rate of $30.95/thousand? ANSWER: It would pay $3,663,689 in taxes. We’re talking GE-type money here.
What would BHS pay if the city gave it a huge break and charged at the residential rate of $15.19? That’s the rate Mary Jane and Joe Kapanski pay. BHS would pay $1,798,108. Do you think the city could use those revenues?
Keep in mind that is just the property value of BMC. We ask, anew, then: What is “substantial”? $100,000? $300,000? $500,000? Is that anything more than chicken feed?
We don’t know, but we do know that with BMC Inc., $118.37 million doesn’t appear anywhere on the tax rolls. It’s legal, but is it right? We don’t know. THE PLANET merely asks the question so we may continue an intelligent discussion.
PILOT Program: How to Make a Tax Scam ‘Legal’
THE PLANET is also confused. Is the “substantial” contribution that BHS makes to the city a “donation” or a “payment in lieu of taxes”? Does it make a difference, legally or otherwise? If it’s a donation, it means that BHS is not obligates to pay one cent. Why would it, then? There are three possible answers:
(1) To be a good corporate citizen
(2) To buy political influence
(3) A combination of (1) and (2).
Fact is, though, that this mega-corporation — which, granted and indisputably, provides the area with a vital service and provides it as a high level of quality (a proposition that NEVER has been at issue in this discussion) — pays no taxes to do business in the city of Pittsfield. It does, however, receive municipal services. Is that fair? Just? Proper?
A Comparison of ‘Substantial’
For comparison of “substantial,” Emerson College in Boston, a not-for-profit institution, has property worth $178 million. It pays the city of Boston $139,000 annually. Northeastern University has holdings in the Hub of $1.3 billion (with a “b”). In 2009, Boston would have received $41 million in taxes — if the properties were taxable, but like Pittsfield with BHS, the city never sniffed one thin dime.
So, if BHS’s “substantial donation” to the city payment-in-lieu-of-taxes, that is, part of the formal PILOT program? According to Matthew Englander, Boston’s director of tax policy, “The PILOT program is not required by law. Institutions volunteer to participate.” The PILOT donation system began in 1985. Using Boston figures simply as a gauge, in 2009, Boston schools would have paid $190.2 million at the regular tax rates. They are, like BHS, not-for-profit. Consequently, their PILOT “donations” amounted to 4.6% of that total, or about $8.7 million in PILOT money (source: upiu.com).
Using the 4.6% figure as a guide and applying it to Berkshire Medical Center Inc.’s holdings, we arrived at a PILOT donation of $5,445,225.16 to the city of Pittsfield. Anyone want to wager that the BHS PILOT donation doesn’t approach that figure … and that’s just the assets held by BMC and not any other Pittsfield holdings. This would suggest that BMC does not participate in the formal PILOT program but rather makes a “voluntary donation” that it defines as “substantial.” Who’s kidding whom?
We ask again of BHS: Define “substantial” with a number, so we may more accurately judge whether your company’s “donation” to the city of Pittsfield — which, as you know, is hurting financially right now — is anything more than peanuts.
‘A Lot of These Organizations Shouldn’t be Tax Exempt to Begin With’
Elizabeth Daley is a former city councilor from Michigan. She is researching Boston’s PILOT program.
“A lot of these organizations shouldn’t be tax exempt to begin with,” says Daley. She says that the money spent by many such institutions is not being spent on infrastructure or on good or services that could be by any stretch considered “charitable.” Where does that money go? She says the money is too often used to pay the institutions top executives. “I think there should be mandatory taxation on a lot of these entities,” she says. Sound familiar?
This leads to an interesting question: Why is BHS defined as a non-profit company? When did it achieve its non-profit status? Are the conditions that were in place when it obtained the lucrative non-profit designation (lucrative for itself and not for city taxpayers) still in place? With the income amounts reported on its 990 Form to the IRS on Aug. 15, 2011, in nine figures, can BHS reasonably be considered “not-for-0profit”?
Time for the Pittsfield City Council and the Mayor to Get the Non-Profit in to Do Some ‘Splainin’
Should the Pittsfield City Council request that every non-profit receiving these amply generous breaks courtesy of the taxpayers make a public presentation in an open hearing on its finances? We think this is fair and reasonable. We also request that mayor-elect Dan Bianchi get on board with such an effort. A strong, united political push could get this done. It could mean millions of new dollars for the city of Pittsfield.
The City Council has the power to force these hearings. In Boston, there is such a movement now under way. The City Council there “plans to gradually ask institutions — hospitals and colleges —to pay 25% of what they would owe if they paid taxes to the city” (upiu.com, quoting the Boston Globe). We think that is a fair number for “non-profits.” Pay the taxpayers 25% of what should be your fair share.
THE PLANET recommends that the Pittsfield City Council begin traveling along this road, earnestly. You want an answer to the city’s budget woes? That might be it.
RAINDROPS KEEP FALLING, BUT NOT ON OUR HEADS. WE DDOGE THEM AS NEATLY AS NON-PROFITS DODGE THEIR FAIR SHARE OF TAXES, SO …
“OPEN THE WINDOW, AUNT MILLIE.”
LOVE TO ALL.