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Municipalities Hit Not-for-profits and Churches with User Fees



Article:
The economic recession has resulted in massive budget deficits for many State and local governments. Illinois and Chicago area has been particularly hard hit. In order to raise cash many communities have been adding numerous user fees. In many cases the government body is trying to impose the fees on local churches, schools and other charitable organizations.

Most not-for-profit organizations are traditionally exempt from property taxes. It can sometimes be a fine line between a user fee and a tax. The American Society of Civil Engineers estimates that cities and towns need to spend more than $250 billion over the next five years fixing deteriorating storm systems. Due to the high resistance to increased property taxes, communities have increasingly imposed user fees as an alternative.

The EPA recently issued strict storm-water rules for new developments. They have also stepped up enforcement for run-off rules for municipalities. According to a December 27, 2010 Wall Street Journal article, municipalities have had to pay about $5.3 billion in 2010 repairs which reflects a four-fold increase from 2009. Several communities have charged "drainage fees" that also hit not for profits to cover the costs. In some cases the not-for-profits have successfully fought off the fees or sought exemptions. The problem becomes when the not-for-profit receives an exclusion, somebody else has to pay.

The recession made charitable grants and fund raising efforts a challenge to the top line of the not-for-profits fund raising goals. We believe that the expense ratios of these same organizations will also be strained due to increasing pressure from local communities in search of anyone capable of helping close their fiscal deficits. This in turn could negatively affect Chicago area church and other not-for-profit property values due to diminished cash flows.