Regents consider policy on university-municipality tax deals

IOWA CITY - A proposed policy under consideration by the Board of Regents would require tax deals between its public universities and municipalities or political subdivisions to first be approved by the board.

The policy, which the Board of Regents will review during its meeting Thursday, refers to 'payments in lieu of taxes” or PILOTs, defined as payments negotiated voluntarily by officials of a tax-exempt entity and officials of the community where it is located as a substitute for property taxes.

The Gazette reported in March on a PILOT agreement for a tax-exempt University of Iowa Health Care medical clinic in Coralville's Iowa River Landing district that prompted questions from Iowa City, which is home to the UI and has most of the campus and the main hospital within its borders.

The UI had $2 billion worth of tax-exempt property in Iowa City in 2012, and the city received $1.76 million from the university in the 2013 budget year for providing fire service to 16.8 million square feet of campus. There are no PILOT agreements in place between UI and Iowa City.

Conversely, UI pays the city of Coralville more than $1 million a year in place of property taxes for its Iowa River Landing clinic as part of a PILOT agreement that experts say is unusually high for the size of property - 150,000 square feet.

And Coralville keeps that full $1 million, even though the payment is calculated using the full tax rate for the taxing district, which includes not only city levies but also Johnson County and the Iowa City Community School District.

The Board of Regents does not currently have a policy regarding PILOT agreements, but the one being considered would require a regent institution to notify the Board of Regents' executive director before beginning negotiations on a potential tax deal.

'Agreements resulting in payments in lieu of taxes (PILOTs) between institutions under the control of the Board of Regents and a political subdivision shall be approved by the board,” according to the proposed policy.

The request for approval should include a detailed explanation of the need for an agreement, the manner in which it was calculated, and agreement as to the assessment calculation for establishing the amount of the deal.

All negotiated PILOTs, according to the proposed policy, would include a sunset date and should ensure that the PILOT is dispersed to the applicable taxing entities.