One more slight digression before moving on to the conclusion of the assessment series...
Among the many theories about why tax bills are are so high in places like Hudson is the widespread notion that nonprofit institutions are to blame. The theory goes that the local tax burden would be lighter if there were fewer buildings owned by local nonprofits that are not obligated to pay property taxes.
But is this really an issue, or is the theory misplaced? As in the rest of our analysis, it is helpful to define terms—rather than speaking inexactly about “nonprofits”— and actually look at some real-world data.
Key questions to consider are: Who are these nonprofits; what portion of Hudson property is untaxed; and is it reasonable to think that parcels currently untaxed may someday become taxable?
It’s important to realize that even untaxed properties are assessed. The value of these properties does not result in a tax bill to their owner, but it does count toward the Citys total market value. This plays into the State’s adjustment rates when computing adjustment rates for school taxes across districts which span more than one town.
Over a decade ago, in 1999, tax assessment data indicates that some 45% of the value of local property was off the tax rolls. Today, according to the 2010 tentative roll, the number has dropped to more like 35%, a small but definite improvement. That drop is attributable in some small part the City auctioning off several dozen foreclosed properties over the past ten years, putting them back on the rolls. The sale of these properties was a positive step to bolster the City coffers and tax base, though many feel that those auctions have not always been handled as wisely and objectively as one would hope.
But another reason for that drop is that while taxable assessments have risen 174% since 1999, assessments for the remaining 350 or so untaxed parcels have not kept pace, rising only 90% over a decade—some 84% less than the rest. This gap would appear to be suppressing the City’s the total assessed value, which helps determine equalization rates for paying school taxes. But that’s the fault of assessors, not of the nonprofits themselves.
Now, returning to the remainder of that list of questions... Who are these nonprofits? And: Is it realistic to imagine that any of them might change over to taxable status?
One problem arises about what people really mean when they refer to “nonprofits.” For one thing, there is a common misunderstanding about whether a nonprofit organization can make money. So long as any profits are related to the pursuit of entity’s charitable purposes and are used to further that mission, and its officers and employees are not excessively compensated beyond the value of their services, nonprofits can do many of the same things as ordinary corporations (e.g. market merchandise, produce performances, sell food, and so on.)
There also are many different kinds of untaxed properties—not all of them technically nonprofit organizations. If you want to get up to speed on the New York State tax laws regarding nonprofit organizations, here is a good place to start.
Buildings and land owned by the City, County, State, or School District are not taxed (as it would be kind of silly for our government and public institutions to tax themselves). Similarly, churches, libraries, and other civic institutions are generally not taxed, including most hospitals.
There are also a handful of local property owners with Payment In Lieu of Tax (PILOT) plans. But there is little that can be done to alter those until they expire... even if the City deemed some of the PILOTs that were handed out to have been a mistake, unless they default or somehow violate their contractual agreements with Hudson.
And then there are cultural, service and social organizations (arts groups, VFWs, ethnic clubs, conservation organizations, and the like). These are what most people have in mind when they refer to as nonprofits. A search of public databases such as Guidestar shows that there are some 162 nonprofit organizations recognized by the IRS which have a Hudson address.
However, even that figure is misleadingly high when one considers that many of those groups (such as the American Bowling Congress) are not actually located in Hudson; they just get their mail delivered to the 12534 ZIP code, usually because their accountant is there. Of the remainder, few of these nonprofits actually own buildings or land.
Indeed, the vast bulk of untaxed property in Hudson is the kind that will probably never be moved back onto the tax rolls, unless our entire national tax code were to change drastically. Things like water and sewer facilities, the two fire stations, the police station, the few remaining churches, the hospital, County buildings, the Elks Lodge and D.A.R. and American Legion, the schools, the Post Office, etc. are just not going to switch over to taxable status. Nor should they.
(Moreover, even in the unthinkable scenario where Hudson stopped being the County seat, and all of the above institutions moved elsewhere, it is pretty unlikely that this glut of buildings would all get back on the tax rolls in our lifetimes. And considering how much local employment depends on the public and nonprofit sectors, the net effect would almost certainly be negative for many years.)
Meanwhile, the actual number of buildings owned by cultural organizations (the Opera House, TSL, Stageworks, Operation Unite, et al.) is comparatively quite small... And even if all of these switched over to for-profit status, the difference in any single property owner’s bill would be negligible. They just don’t represent a large enough chunk of that 35% off the rolls. All told, the cultural groups probably amount to about 1% of the City’s total assessed value.
Where the City could continue to make some progress in bolstering the tax base is in properties currently held by its development agencies. The Hudson Community Development and Planning Agency (HCDPA) currently owns about two dozen parcels, few of them assessed over $25,000. These numbers seem artificially low, probably due to assessors paying less attention to untaxed parcels. But even if all of these went back into the taxable column, again it would not be likely to be noticed by the other taxpayers.
As such, this analysis concludes that the whole "nonprofits are to blame" line of thought is neither valid nor useful. Arguably, there may be a handful of organizations or institutions whose properties (e.g. rentals not related to their central mission) should not qualify for tax exemptions. But these are few and far between. STAR tax exemptions—which are not included in the figures above, but which may result in 5-10% of a municipality’s taxable value going untaxed—account for a far greater “hit” to local revenues.
Rather, the focus of those seeking tax reform and fairness should remain on (A) securing reasonable, balanced, justifiable assessments for all property owners, both small and large; and (B) encouraging City leadres to be disciplined in its annual budgeting process and spending habits. As mentioned above, the one area concerning nonprofits where some improvement ought to be made is keeping the assessments of untaxed parcels changing at a rate close to that of the taxable ones, so that the City’s total assessed value and equalization rates are not skewed. But again, that’s the job of the assessor, not the fault of nonprofits.
