Don't pick pockets of nonprofits

The Obici Healthcare Foundation's request for a property tax exemption has given Suffolk officials a reason to reconsider the city's policy toward nonprofits.

Especially in a recession driven by falling home values, every city is looking for every dollar it can find. But the pockets of charities - even wealthy ones - are not the place to look.

"However, unlike many of the other organizations that have received tax exemptions in the past based on their financial challenges and unique circumstances, the Obici Foundation is supported by an investment portfolio that exceeds over $93 million," City Manager Selena Cuffee-Glenn wrote in a Jan. 4 letter to the City Council.

Implicit in her letter is this: The Obici Foundation should pay $16,251 in annual property taxes because it can afford to.

The foundation's financial health is hardly at issue. After the sale of Obici Hospital to Sentara, the nonprofit has somewhere south of $100 million in the bank, and in good years its investments return millions more.

It's not as if that money is spent on lavish salaries or baubles for board members. This year, the Obici Healthcare Foundation approved $57,313 to expand the SISTAS AIDS prevention program; more than $130,000 to Catholic Charities; $95,478 to the Gates County Medical Center; $43,200 to make insurance available to kids in the Smart Beginnings program; $50,000 to the Salvation Army; more than $130,000 for YMCA health programs; and grants to more than a dozen other organizations. Oh, and $37,290 to the Suffolk Department of Social Services.

Despite the letter from Cuffee-Glenn, the nonprofit foundation doesn't return a "net profit," and certainly not one of $23.2 million a year.

The foundation is required to spend 5 percent of its endowment every year on its mission: Ensuring the poor in Western Tidewater have better access to medical care. Since money is fungible, every dollar paid in property taxes is a dollar less spent on that goal.

Worse, it's self-defeating. The Obici Foundation could've leased quarters and avoided any direct liability for property taxes. Instead, it built a big, beautiful headquarters at the entrance to downtown Suffolk. Rejecting its tax exemption would, in essence, penalize the foundation for doing so.

What is most troubling in this reassessment, however, is the notion that the city's evaluation of a charity's finances should matter. While the administration is at it, will the city now be in the business of combing the books of local religious charities? What about nonprofits with trouble making ends meet? Who gets to decide whether they pay? And what about charities neighbors dislike - a drug treatment center or a facility for troubled youth?

Property tax exemptions are often automatic for charities that meet criteria set out in state and federal code. The city administration has proposed adding a few criteria of its own, including the effect the exemption would have on the city's books, on other taxpayers, on precedent, on future consistency and on a charity's financial condition.

That goes too far. Charities serve the community. They deserve a break not only from federal and state taxes, but from local property taxes as well. That's the rule in most Virginia communities, as it should be.