On June 11, the City of Baltimore announced a “Payment in lieu of taxes” (PILOT) agreement with the Maryland Hospital Association (MHA) and the Maryland Independent College and University Association (MICUA).
Due to a budget shortfall brought on by the recession Baltimore City had been considering tax and fee increases, including a new $350 bed tax on colleges and hospitals.
“Baltimore is important to us. Its fiscal health is important to us. The well-being of its citizens is important to us. Johns Hopkins cannot thrive to its fullest potential without a healthy Baltimore. Baltimore’s colleges and hospitals recognize that Baltimore is in a tough place right now. We recognize that, during this economic crisis, Baltimore needs special help from us. And, with this agreement, we have stepped up to meet that need,” Hopkins spokesperson Dennis O’Shea wrote in an email to The News-Letter.
“But the principle that non-profits should not, in general, be subject to taxes is also very important. It is important to Johns Hopkins, therefore, that the city, in this agreement has again recognized the special contributions that non-profits make to the quality of life in Baltimore. We are pleased that it has reiterated the importance of preserving our tax-exempt status.”
Carmela Coyle, President and CEO of MHA echoed O’Shea view in a statement on the city’s website.
“The recession has hit everyone, including Baltimore’s hospitals, who are and always will be a part of the city…Working with the Mayor and the City Council, this agreement helps the city address its fiscal challenges, provides budget predictability for hospitals who are also working their way out of financial difficulties similar to those the city faces, and retains hospitals’ critical tax-exempt status. We appreciate the Mayor’s willingness to work with us on this agreement.”
Under the terms of the agreement, MICUA and MHA member institutions will pay $20.4 million to the city over the next six years. $5.4 million will be paid to the city during each of the first two years.
O’Shea wrote that this is because these two yeas are “when the budget problems are expected to be the worst.”
The members of MICUA and MHA will also see a 2 percent increase in their energy tax (from 6 percent to 8 percent) and a 14 percent increase in their telecommunications tax (from $3.50 per line to $4 per line and from 35 cents per Centrex line to 40 cents per line).
In return, Baltimore City agreed not to raise any more taxes for during the six year period of the agreement and not to impose the bed tax.
Because it is such a large institution, Johns Hopkins will be paying a large portion of the $20.4 million payment. The University will pay 21 percent of the payment while the Johns Hopkins Health System will pay 33 percent of the payment. That means that combined they will pay $11.07 million over the next six years.
While technically a tax-exempt institution, O’Shea pointed out that Hopkins already contributes to city through a few taxes and fees that do affect it.
“Keep in mind also Johns Hopkins already pays almost $10 million a year in taxes and fees to the city: the current energy and telecom taxes (about to be increased as I mentioned above), parking and hotel taxes, and even property taxes on property not used for exempt purposes. We also indirectly pay property taxes on properties that we rent (we pay rent to the landlords, who pay property taxes to the city.),” he wrote.
He pointed out that with the PILOT agreement, “The upside is that these taxes will not be increased any further during the six years of the agreement. So there will at least be predictability in our obligations over the next six years, which is helpful in budgeting.”
—Peter Sicher, Magazine Editor