Baltimore, MD - The Baltimore City Comptroller’s Office has released a comprehensive report on managing tax gaps in the City’s budget through Payments in Lieu of Taxes (PILOTs). The report recommends specific actions the City should take in negotiations with the 14 major medical and educational anchor institutions– also known as the “meds & eds.” 

In 2016, Baltimore City entered into a 10-year-long PILOT with the 14 largest non-profit organizations in the City. It requires contributions based on their size and their community benefit impacts. The collective payment totals $6,000,000/per year on property that would otherwise bring in $108,317,863.00 in property tax revenue – while using $47,659,860.00 in City services. 

PILOTs are voluntary payments made by tax-exempt nonprofits to municipalities, in place of property taxes, to cover the cost of city services they use. For Baltimore City and other local governments, PILOT programs offer a vital avenue to generate revenue from charitable organizations exempt from property taxes. 

"Baltimore is home to 20% of the state’s tax-exempt property," said Baltimore City Comptroller Bill Henry. “Non-profits provide critical resources to our residents. They also are a huge burden on the general fund. We need to change the way we approach this problem.” 

The Baltimore City Comptroller’s Office recommends the following measures:

1. Municipalities should work collaboratively with nonprofits when seeking and negotiating PILOTs. Because PILOTs are voluntary payments, the best PILOT initiatives arise out of partnerships between municipalities and nonprofit organizations.
2. PILOT agreements should standardize a formula that determines an institution's contributions. Using concrete and quantifiable methods reduces the appearance of unfairness, which increases exempt organizations’ willingness to comply with municipal PILOT requests.
3. Cash contributions should be adjusted annually for public benefits provided to residents. City officials and nonprofit leaders should work together to identify which services would be most valuable for residents and most appropriate for each nonprofit to provide. But there must be a standard methodology used to calculate those community benefits.
4. Agreements should provide the opportunity to adjust annual contributions based on acquiring or relinquishing new property by exempt institutions. PILOTs that provide additional Promising PILOTs | Office of Comptroller Bill Henry 21 payments when land becomes tax-exempt under nonprofit ownership could help ensure that local governments can continue to provide the same level of services.
5. Municipalities should listen to each institution’s priorities and earmark PILOTs for services consistent with a non-profit’s mission and/or target a PILOT to fund activity that directly benefits the institution or supports its mission.
6. State governments should provide grants to reimburse overburdened local governments for the loss of revenue due to property tax exemptions, particularly when the entire state derives significant economic benefits from the nonprofit.
7. PILOTs should be multi-year agreements – with 10 years being the minimum. This provides for a predictable revenue stream for local governments and a known budget number for nonprofits.
8. Agreements should specify a payment in the base year but adjust for inflation each year.
9. PILOT agreements and their negotiations should be a public and transparent process.
10. Local governments should track and publish PILOT contributions detailing total amounts – both cash contributions and community benefits credits – made by each nonprofit. Universities and hospitals may be more inclined to pay into PILOT agreements if they see other universities and hospitals doing so and know the public is privy to the information.

Comptroller Henry said “These best practices are designed to establish fair, sustainable, and impactful PILOT programs that benefit our City as well as our anchor institutions. In 2026, the current PILOT will expire. Considering the mounting issues stressing our budget – increased school funding requirements, infrastructure improvements, various consent decrees – it is time for dramatic change.” 

Read the full report here. 

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