Attack of the Tax-Exemption Killers

Say it again, the economy is bad for state and local government, and legislators, council members and municipal managers are scrambling to figure out how to make up shortfalls and prevent layoffs.  This is going to be another two-part article because of the original length.  Rick Cohen, nonprofit advocate in DC brings a prespective to nonprofit issues that nobody else can quite match.  Nonprofits cannot afford to be nickeled and dimed to death.  Every penny that goes out the door in taxation and fees results in lost services.  Pass this one around.  Bunnie


Attack of the Tax-Exemption Killers
by Rick Cohen

This article is reprinted with permission from Blue Avocado, a practical fast-read magazine for community nonprofits. Subscribe free by sending an email to editor@blueavocado.org or at http://www.blueavocado.org/.

If Congress tried to take away the tax exemption from nonprofit 501(c)(3) organizations, our sector would be united and up in arms. But instead we are besieged with hundreds of local attacks on the tax exemption from cities, counties, and states. In this article we'll briefly look at some of the attacks being mounted by financially starved local and state governments trying to get extra nickels and dimes from financially starved 501(c)(3) charities. And we'll conclude with some thoughts on how we inadvertently give ammunition to these attackers.

How many ways can you balance a governmental budget on the backs -- or finances -- of nonprofits? Nearly every week, all across the country, different levels of government devise strategies -- sometimes ingenious, occasionally pernicious -- to get tax revenue from already-strapped nonprofits. These include taking away property tax exemptions, adding employee headcount taxes, charging nonprofits "streetlight fees," and more.

Creating or hiking fees: Because governments have much greater flexibility in applying "fees" as opposed to "taxes," localities are finding ways to charge nonprofits for streetlights and anything else they can think of. In Yakima, Washington, the Yakima Health District ended the exemption of nonprofit-sponsored food booths at community fairs and church bazaars; this will yield the Health District all of $10,000 per year. And in two Minnesota cities -- Minneapolis and Rochester -- government is increasing the fees it charges nonprofits for streetlight use. In Minneapolis, this will raise an additional $104,000 for the city . . . hardly enough to balance the budget.

Taking off from charging nonprofits for streetlights, other localities are starting to charge nonprofits for police and fire services and even fire hydrants. Localities in Indiana have enacted nonprofit fees for consumption of public services such as police and fire. In Pennsylvania, State Senator Wayne Fontana has introduced legislation that would allow municipalities to charge nonprofits an "essential services" fee. In the village of Pewaukee, Wisconsin, the local government turned the local hydrant tax into a fee which then allowed them to levy the fee against otherwise tax exempt nonprofits and churches.

And think of the effort of the speaker of the New Jersey state Assembly to hit nonprofits in Camden -- only nonprofits and only in Camden -- with a $100 tax on each employee. In a devastated urban center where the nonprofit sector provides most essential services, this reads like no more than a slap at nonprofits and their hard working employees.

Attacks on the property tax exemption

Nonprofit property owners are in theory exempt from paying property taxes, at least on the properties they own and use for tax-exempt purposes. But many local governments are trying to charge nonprofits "payments in lieu of taxes" or PILOTs. Sometimes localities have a formula in mind; in other cases, they negotiate PILOTs on a case-by-case basis.

In a recent example of such attacks, a consortium of 102 nonprofit property owners in Pittsburg is negotiating with the city, to which it has already paid a $14 million lump sum payment in lieu of taxes (PILOT) for 2005 through 2007. The consortium's offer of $5.5 million for the period 2008 - 2010 has been rejected by the mayor as insufficient.

Typically, the target of PILOTS are large institutional nonprofit property owners such as hospitals and nonprofit universities. But not every nonprofit property owner is a Harvard University or Mass General Hospital. For example, a Billings, Montana nonprofit purchased a hotel to be used as a pre-release residential and treatment facility for female ex-offenders. Partly to mollify neighbors who objected to the placement of the facility and likely as a way to raise money, the mayor promised that the nonprofit would pay a $40,000 PILOT on the property.

Even more troubling for nonprofits than across-the-board PILOTS is the make-it-up-as-you-go calculation of PILOTs from community to community. Is Harvard's $2.2 million PILOT payment plus $5.2 million payment for water and sewer to Cambridge fair and proportional compared to Yale's $7.5 million to New Haven or Vanderbilt's $2.5-$3 million payment to Nashville? Shouldn't the PILOT paid by nonprofit hospitals in Pittsburgh, say, be commensurate with the PILOT charged in Lancaster, both localities in the same state, governed by the same nonprofit legislation?

Rick Cohen writes this Washington Nonprofit Insight column for every other issue of Blue Avocado.

Successful Legislative Visits

Successful Legislative Visits
by Bunnie Riedel, Host, Nonprofit Conversation

Most nonprofits are faced with having to deal with legislation from time to time.  Whether it's local city council ordinances or state or federal pieces, nonprofits find themselves needing to educate their legislators about their issues. 

I recently created a guidesheet about how to have an successful legislative visit and want to share it here.  While the guidesheet addresses visiting legislators on Capitol Hill, it can also be applied to any visit with any legislative decision maker.

Don’t drop in, make an appointment: It is more impressive to your legislative office when you are able to come to Washington, D.C. for a visit. But even if you can’t come to D.C. meeting with the legislative office in your home district is still important. Call the district office and make an appointment.


You can find your Representative’s local office here by going to your Representative’s home page.

House of Representatives
You can find your Senator’s local office by going to your Senator’s home page.

Senate

Ask to speak with the appointment secretary and be prepared to tell him/her that you’d like to meet with your Representative to discuss your issues or a particular piece of legislation.

The challenge of meeting with legislative aides. It is highly likely you will be meeting with a legislative aide and that poses a challenge. Most legislative aides are working on a variety of issues and may not be working on your issue at all. So be careful not to use “industry” language or terms they may not be familiar with, never assume they understand acronyms.  Frequently newer staff will appreciate any materials you may want to give them as it helps them explain your issue to the legislator.

Be brief. Be prepared to get only fifteen or so minutes with the legislator, staff or aide. Prepare in advance what you are going to say, if necessary take notes with you.

Know your legislator. Even if you have met your legislator before, do you really know how they vote on issues or what issues they are interested in? Go to their website, see what committees they serve on, find out what their interests are. Are they interested in veteran’s issues? Is their interest early childhood education? Look up their voting record at Project Vote Smart see how they vote on your issues or issues that are similar.  Look up their campaign finance record, did they receive money from organizations or businesses that have interests contrary to yours.  Their receipt of donations may not always be an indicaton of how they will vote on a particular issue, but it is information you should know.

Don’t be afraid to ask someone who personally knows the legislator to come with you for the visit. Do you have a friend who knows the legislator? Is there someone at your Rotary or Kiwanis Club? How about your local League of Women Voters or Republican or Democratic Party? Having someone with you who personally knows the legislator can be very helpful.

Travel light. There are times when legislative offices on Capitol Hill will meet with a group of people (say 15-20). That is not advisable when meeting in the district office. If you are doing a group visit in the district office keep the number at no more than five. This prevents the legislator or staff from feeling overwhelmed or “ganged” up on. If you are working with a large group of people who all want to have a visit, break up the large group into smaller groups and conduct the visits separately.

Be punctual. As with most things in life, being late doesn’t make a good impression. If you can’t be on time, be early. If you can’t make the meeting, don’t cancel, do what you can to get someone you trust to go in your place.

Be polite, briefly introduce yourself. Always be polite (especially to the appointment secretary). Give a brief introduction of yourself and a brief one or two sentences as to why you are there.

Don’t do all the talking. Nobody likes being in a “one-way” conversation. Ask questions, listen, find out what is on their mind. Don’t interrupt even if what they are saying is something you completely disagree with, wait until they are done and then offer them “engaged feedback.” “I hear your concern that this bill might be a burden to the taxpayers, but can I give you some examples of how that won’t be the case?” (By the way, never respond with “that’s not true”).

Be positive. Thank him or her for their support in the past, if there is no record of support for this issue, find out what other issues they have been supportive of and thank them for that.

Make it personal. All politics is local as Tip O’Neill once said. Politics are local and they are personal. Explain why your issue is a personal issue. Use examples from your nonprofit work or the community.Tell stories that will be remembered. Stay away from broad sweeping examples, get specific.

Have your supporting materials ready. Be sure to have a copy or copies of the bill you are visiting about, don’t make them look it up. Have talking points. If you have petitions that have been signed or letters of support that have been written, have those with you.

Ask for a commitment or ask when you might be able to have a commitment. If you are meeting with an aide, you probably won’t get a commitment at the meeting. Ask the aide when you should follow up for a commitment. If they aren’t sure, ask if you can call them in one to two weeks as a follow up. Generally, unless your legislator sits on the committees that deal with your issues, they haven’t seen the bill yet and probably won’t give you a direct commitment. Ask your legislator when you can follow up for a commitment on the bill. Ask if there is any other information or materials you could provide to help them in their decision.

Thank them for their time.  Sounds simple, but it is very important.

Finally, the League of Women Voters offers the following excellent advice about what to do or not do.

What to do:

Address your Senator or Representative properly.

Identify yourself immediately at each contact. Public officials meet too many people to remember everyone.

Know the status of the legislation. Refer to a bill by number whenever possible.

Use your own words.

Be brief and explicit, courteous and reasonable.

Establish your own credentials or expertise on the subject of legislation under consideration.

Give legislators succinct, easy to read literature; highlight important facts and arguments. Their time is limited.

Call the chair or members of a committee holding hearings on legislation in which you are interested if you have facts that you think should influence his or her thinking.1

Get to know legislative staff and treat them courteously. Their cooperation can make or break your chances to reach the legislators themselves.

Always keep off-the-record comments confidential.

Call to say you approve, not just to criticize or oppose.

In a letter include your address and sign your name legibly.

Keep the door open for further discussion in spite of any apparently negative attitudes.

What not to do.

Don't begin, "As a citizen and tax payer" (your elected representative assumes you are not an alien, and s/he knows we all pay taxes).

Don't apologize for taking his or her time. If you are brief and to the point s/he will be glad to hear from you.

Don't be arrogant, condescending or threatening toward legislators or their staff.

Don't argue or back recalcitrant legislators into a corner where they take a definite position against you.

Don't make notes of a conversation while talking to a legislator.

The Art of Collaboration

I had the pleasure of meeting Jerry Adams about a year ago and the pleasure of seeing the Human Services Coalition (HSC) of Prince George's County in action at a conference this summer. What the HSC does is fantastic! It leverages its members' capabilities and helps those Nonprofits build capacity. There cannot be a more important time than now for Nonprofits to come together, share resources and support one another. I am reminded that whatever issues we face in our communities, it is usually Nonprofits at the forefront of solving those issues and providing service. I hope this article gives you some great ideas and be sure to visit their website to see how dynamically the HSC is serving its community. Bunnie

The Art of Collaboration: The Human Services Coalition of
Prince George’s County

by Jerry Adams, Executive Director

Incorporated in 2001 the Human Services Coalition of Prince George’s County (HSC) has hit its stride over the last three years. HSC has gone through the pretty typical growth pattern that many if not all emerging nonprofits that are now members of the coalition go through. We pretty much serve as an example to our member organizations as to how to become a sustainable nonprofit organization. Here is what has transpired:

The founders of the HSC were themselves executive directors of thriving nonprofits in Prince George’s County. They saw an extreme need for an organization that would 1) build the capacity of so many struggling nonprofits to deliver the best services to more people, and 2) advocate for resources and public policies that would enable nonprofits to be more effective and efficient. As with most start-up nonprofits, they had very limited funds. They committed themselves to be the volunteers who would start addressing the capacity building and advocacy needs with the help of a part-time consultant. After the first two years of trying to develop a program offering that was based on grouping organizations into affinity groups according to the type of services they provided (Youth, Aging, Disability, etc.), the leadership felt that they were not being very effective. The organization had no clear membership, and no committee structure to engage members in the work of the coalition. Something had to change.

In 2003, two of the HSC leaders went to visit the Howard County Association of Community Services, a very successful coalition of service provider organizations, to see how they were structured. Upon their return, they recommended a complete restructuring of the HSC. A Membership dues-paying structure was implemented. Four new committees were formed to engage the membership in developing and delivering a set of services to members: Membership, Public Policy, Programs, and Annual Conference Committees were formed. A part-time administrator was hired (still didn’t have much financial support). The board surveyed members to see what interests the members had. Membership meetings were based on those interests.

By 2004, the structure was in full swing and a small grant was awarded by United Way to replace not augment the previous funding. Most members felt that the organization’s offerings were not robust enough to impact on building capacity, and to make a difference with regard to advocating on behalf of the sector. During the next two years, membership dues, and corporate sponsorships from the annual conference provided the HSC with a growing fund balance. In 2006, the board decided to make a bold move to hire an executive director who could take the organization to the next level.

Since that time, the membership has seen a more than 100% increase. The organization’s budget has increased from $50,000 to over $300,000. These funds represent a growing awareness in the funding community and the county government of the value to all of the citizens of Prince George’s County of having an entity that can help nonprofits be more effective, and that can advocate on their behalf. These funds have come from a variety of sources and support significant new programs. HSC now operates an historic Nonprofit Incubator program funded through the Community Development Block Grant program. The Incubator provides core training, peer mentoring and professional executive coaching to 11 nonprofits. HSC has applied to the US Department of Health and Human Services for $500,000 to expand this effort to more than 20 additional nonprofits, and be able to re-grant $200,000 to some of those nonprofits.

HSC has a vibrant Public Policy agenda that has three sub-committees (made up of members and chaired by board members) that are seeking to 1) work with county departments to improve the efficiency of payments to nonprofits that contract with those departments, 2) seek to influence the development of the county budget so as to see the allocation of more funds to nonprofits, and 3) pass an ordinance requiring that a Community Benefit Agreement (CBA) be part of every development and re-development plan that goes forward through the Planning Division. This effort is supported by a grant from the Washington Area Women’s Foundation as each of the public policy initiatives will assist single women headed households with children under 18 and incomes under $40,000 to achieve financial security. The Women’s Foundation grant allows HSC’s Public Policy Committee to have the support of a professional public policy consultant.

HSC continues to have wonderful support from the Prince George’s County Executive, and has recently been awarded a grant from the Morris and Gwendolyn Cafritz Foundation for general operating. We enjoy ongoing collaboration with other funders and capacity building organizations. The Partnership for Prince George’s, a philanthropic effort hosted by the Prince George’s Community Foundation, has funded HSC to develop a public policy initiative concerning the county budget. We also collaborated on hosting three excellent forums on advocacy seeking to get more of our members comfortable with joining the advocacy efforts.

The Eugene and Agnes E. Meyer Foundation funded our strategic planning effort that will be our guide for the next five years. They have also asked HSC to submit a proposal for general operating funds as they see that we have reached the limit of our current staff, space and equipment capacity to expand our work to help more nonprofits succeed and thrive. In light of the dire economic times, HSC hosted a dynamic one-day Nonprofit Survival Kit Summit that encouraged member organizations to collaborate, share resources and otherwise help each other survive. A panel of funders also told members what they had to do in this new economy to attract funds ... COLLABORATE! ... our theme for the year.

Developing a Legislative Strategic Plan

The 111th Congress is in a frenzy of activity as the new administration proposes new legislative priorities on many fronts. State legislatures are meeting or will be meeting over the next few months. State Net produces an excellent state legislature calendar. If your organization has not already done so, now is an excellent time to develop a Legislative Strategic Plan.

Most nonprofits diligently work on strategic planning, but most often that planning is limited to the business end of the nonprofit and not the policy end. A Legislative Strategic Plan helps you identify exactly what your legislative goals are in the short and long terms, and determine what it will take to help you reach those goals.

Unless you are a huge organization, like AARP or the National Education Association, it is best to limit your short term legislative goals. Mid to smaller nonprofits typically don’t have the resources and “person-power” to take on dozens of issues and certainly they don’t have the resources and person-power to do them all well. As with regular strategic planning, Legislative Strategic Planning begins with understanding your mission and brainstorming what policy goals will help the organization achieve that mission.

I like to develop a list of primary, secondary and tertiary issues. What are the two or three issues that are primary and critical to our members? What would be secondary or even tertiary? Clearly identifying your primary issues helps you plan how to use the resources you have (money, time, members) and keeps you from getting side-tracked by issues that you may have a stake in but are not critical. After figuring this out then you can better determine how you will spend your political capital.

Most of us are not islands; we work in coalition with other groups and organizations that have similar or sister missions. For instance, what would the cattle association have in common with the sheep herders’ association? Is it grazing or water rights? Legislation that protects open land while allowing structured use? Is it legislation that funds disease research and eradication? Conduct outreach to organizations that you think your nonprofit crosses paths with and find issue areas of agreement. Leveraging the power of your membership and the power of another organization’s membership is critical.

For the secondary and tertiary issues, I always loved finding things I could sign on to, whether it was another organization’s legislative strategy, letter to Congress or amicus briefs. Signing on not only put you in the game, it also increases your cache and visibility. It tells your members that you are doing “something” to be part of a public policy effort, but you are not spending your resources on issues that don’t rank at the top.

In your Legislative Strategic Plan it’s okay to dream. In a perfect world, what do we want? Is it an amendment of an existing law? Is it a completely new regulatory scheme or a completely new law? Are we going for a Constitutional Amendment? I did say dream. What would it take for us to realize that dream? More money, more members, more clout? The dream legislation can become part of your longer range goals.

How are we positioned to mobilize once we have our plan? In the olden days, we used to create phone banks, I still have an old chapter training manual that taught our chapters how to phone bank. Now it is so easy to pop off a message, provide links, even sample letters, etc. My favorite tool for mobilization is CapWiz by Capitol Advantage, but there are many of these tools out there that work equally well. Mobilization requires planning and judiciousness, you run the risk of wearing people out if you are constantly issuing a call to action. Think about how you are positioned. I had a conversation recently in which I was told the organization did not have the email addresses of its members. So now, they have to go collect those addresses of over 1,000 members before they can begin to send out instant alerts.

What will it take to familiarize the decision makers with our cause? Have we done a good job of educating legislators or do we need to make an effort? Have we identified and matched our members with legislators? What do we need to do to achieve that?

On a later post I will talk about visiting your legislators and decision makers. But for now, these are a few hints on developing a Legislative Strategic Plan, a very important process if you are in an organization that needs to advocate for itself or for a worthy cause.