A policy designed to gain revenue from tax-exempt property owners was presented to a City Council subcommittee Tuesday.
Known as a PILOT — Payment in Lieu of Taxes — the purpose of the policy is to bring in a portion of the money a tax-exempt property (for example, properties owned by non-profit organizations and quasi-public institutions) would pay were it not tax-exempt to help pay for critical municipal services that benefit everyone.
Mayor Garcia and City Solicitor Lisa Ball have been approaching tax-exempt organizations about paying PILOTs and have learned that the city needed a better systematic approach to these conversations so that it’s fair and equitable and less of a ‘shake-down’ situation. The Mayor’s Government Restructuring Advisory Council, one of several advisory panels Garcia created on taking office in 2021, took up the issue of non-profits acquiring properties in Holyoke and taking them off the tax rolls. Mayor Garcia empowered the Advisory Council to research consultants the city can contract with to help further explore the issue and help draft a policy. A contact with the Collins Center was initiated in early 2024 which later led to a $13,000 contract, supported by the City Council.
The draft PILOT policy and analysis presented (click to review draft policy and report) Tuesday was developed by the Collins Center for Public Management. To review the PowerPoint presentation, click here.
Stephen E. Cirillo, a Collins Center associate who specializes in PILOT strategies, financial forecasting, capital improvement planning, and financial policies, presented the policy designed for Holyoke. He described the data-gathering involved in the first phase of the project: Assessor’s records, classification forms, existing PILOT agreements, interviews with Garcia and other City officials, and an inventory of Holyoke’s tax-exempt parcels — 940 of them total which is about 16% of the total assessed value. In FY2025, the primary property class in Holyoke is residential, accounting for nearly 66% of the total assessed value. The commercial, industrial, and personal property classes (CIP) make up 18%, while the exempt class constitutes 16%.
Cirillo recommended establishing 25% of the assessed valuation as the PILOT target. He said the City might consider setting a lower percentage target for low-value, tax-exempt properties.
The 25% figure, Cirillo said, represents the approximate share of the City budget that goes to provide police, fire, and Department of Public Works services: emergency and security services plus road maintenance. These three, he said, are services all property owners receive, whether taxpaying or tax-exempt.
Garcia said the City has, over the years, arrived at PILOT payments from a handful of tax-exempt property owners. But that those agreements lack formality and are, in several cases, “handshake” arrangements. The policy presented Tuesday calls for written contracts that include established percentage amounts.
“We are committed to creating a sustainable financial future for Holyoke while ensuring that all community stakeholders contribute to the essential services that we all rely on,” added Mayor Garcia.
Garcia said, “Beginning July 1, the policy will be adopted and the City will seek voluntary PILOT Agreements with all tax-exempt institutions within the community that own real property.” Garcia further explained that these written PILOT Agreements will be based upon fair market value and a tax levy. PILOT Agreements will be established based upon a percentage of the amount that the tax-exempt property would pay if not exempt. The percentage is determined based on the tax levy amount that supports the critical services of the City’s Police, Fire and Public Works operations. The City has determined that this share is equal to at least 25% of the full levy. Garcia said “For smaller, community-based tax-exempt organizations with controlling interests in properties assessed at less than $2 million in FY 2025, that the share will be equal to at least 15% of the full levy.”