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Elite Institutions Hoard Wealth While Cities Die Around Them

November 13, 2019

A movement to tax non-profits in a city mired in poverty has hit an obstacle: The richest institutions claim they already pay enough.

A movement to tax non-profits in a city mired in poverty has hit an obstacle: The richest institutions claim they already pay enough.


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Story Transcript

TAYA GRAHAM: Hello. My name is Taya Graham. And welcome to the Inequality Watch.

Remember, this show is about the most existential threat to our humanity, our country’s ever expansive income inequality. It’s an imbalance at the root of many social ills, climate change, poverty, over-policing, and inadequate health care to name a few. Which is why our job here is to hold the political system owned and operated by the 1% accountable. To do so we can take real examples of greed and avarice and drill down to unearth the corruption and cronyism that make it possible. And then we do what good journalists should do: hold the people responsible, accountable.

Today we’re going to scrutinize an issue that could not be more illustrative of the show’s topic. Imagine for a moment you were rich beyond imagination that you had access to almost incalculable wealth, but there was a catch. The community where you constructed your shiny mansion on the Hill was distressed. All around you the ravages of poverty had caused crime, shorter lifespans, crumbling infrastructure, and an educational system that you wouldn’t even send your own kids to. Now, imagine that you were part of the problem because of a quirk in the tax law. You didn’t have to pay a single dime in property taxes.

So even though you were getting richer by the minute, the world around you was falling apart. In fact, things were so bad you had to hire your own police force. The first step toward the dystopian nightmare that we only read about in science fiction novels. At some point, if you were paying attention, you might think to come to the conclusion that would help to pitch in. That even though the law did not require you to do so, all your astounding wealth won’t matter much if the city where you lived was slowly dying. Well, the scenario I just described actually exists right here in our hometown of Baltimore.

In fact, all you have to do is drive about two miles from our studio to see the type of conditions I described firsthand. When you do, you’ll drive right onto the campus of Johns Hopkins hospital, an institution that is consistently ranked one of the best in the world. But surrounding this oasis of wealth is an abject picture of poverty. If you look at the images I’m showing on the screen now, you can see that the neighborhoods surrounding Hopkins have not benefited from their proximity. In fact, even though a plan called the East Baltimore Development Initiative has poured tens of millions of dollars into developing the area, rows of homes still sit vacant.

But what’s really amazing about this story is the fact that it rarely makes headlines. That’s because Hopkins is a nonprofit. So the sprawling campus you see on the screen does not pay property taxes, meaning that the institution that generates billions of dollars a year contributes very little to services like police and fire. It is the poor neighborhoods that surrounded it that must foot the bill. But there is a movement now to change that equation, a push by city officials to get Hopkins and 19 other wealthy institutions to contribute more, to fund the services they use. But it’s the response by the institutions themselves and the mayor, which we will be focusing on today.

Today I’m joined by TRNN reporters Stephen Janis and Jaisal Noor. So Steven, can you give us an overview? These institutions pay very little. Can you give some of the details?

STEPHEN JANIS: Because they’re nonprofits, they’re exempt from property taxes. But in 2016 they cut a deal with the city, which was renewal of a deal, a memorandum of understanding where they agreed to contribute total $6 million between about 19 institutions, which was divided between hospitals and universities. The idea was… It was called pilot, which is a payment in lieu of taxes, which is the idea that, “Well, we don’t have to pay taxes, but we’ll voluntarily give you money so that we can offset some of the services that we need as well as everyone else: fire, police, whatever.”

This was an extension of agreement that was codified under the previous mayor, mayor Stephanie Rawlings-Blake. It stated about $6 billion a year, I think since then. So they pay very, very little when you consider how much property that they own. But they had been doing this and it’s really not going to be adequate because of some of the upcoming funding obligations that the city has that I think Jaisal can talk about.

TAYA GRAHAM: Well, Jaisal, Baltimore has all these institutions that are nonprofits, and they’re incredibly wealthy. What do these institutions say when they’re asked to pay their fair share?

JAISAL NOOR: So I reached out to Johns Hopkins because they’re are one of the largest between the hospital and the university. They’re one of the largest nonprofit tax exempt landowners. They’re sitting on billions of dollars worth of property. And as Stephen said, they’re paying a little more than half of the $6 million that the nonprofits per year that nonprofits are giving voluntarily instead of property taxes. So I reached out to them and so Hopkins emphasize that, they are deeply committed to the city, about 16,000 of their employees, which is less than half live in the city.

So they pay property taxes and they also talk about the $24 million at the hospitals, Bayview and Johns Hopkins hospital pay and other and non-exempt property taxes and things like parking fees. But then you have critics and there was like a recent protest at city hall demanding that the city reexamine this deal. So in the words of Lawrence Brown, he said, “You can’t give charity but deny justice.”

TAYA GRAHAM: Now, Jaisal the council actually has put out a resolution that is opposed to ask some of these institutions to pay a little bit more money. Tell me about this resolution and what kind of impact do you think it’s going to have?

JAISAL NOOR: So the timing of the resolution is interesting because it comes a few weeks after the Kirwan Commission released… First of all, the Kirwan Commission is a statewide panel that looked at best practices in public education around the country and the world. And it found that the state of Maryland is underfunding its schools by billions of dollars every year. So to make Maryland schools model schools. It’s one of the best schools in the country. They said the state and local jurisdictions need to increase their contributions.

Now, as viewers of the show probably know, Baltimore City spends way more on things like police than public education. And that’s been a trend that’s been going on for years. So this study found that Baltimore City schools are underfunded both by the state and by the city. So, so according to the commission, they said Baltimore City needs to increase its contributions to its own public schools by $330 million a year by 2030, which is a huge amount of money.

TAYA GRAHAM: That’s a huge increase.

JAISAL NOOR: Some people say it’s way too much. The city can do more, but that’s way too much. But I think now local council people are looking at this issue, where can we get that increased money from? These nonprofits, this pilot agreement is less than 5%. This $6 million is less than 5% they would pay.

STEPHEN JANIS: One thing Jaisal done really a lot of good reporting about one of our local media organizations. This is a point we like to make on the Inequality Watch. They have been saying that Baltimore City schools are way overfunded and Jaisal has done some great reporting about how that’s just not true. This really proves what you’ve been saying. I mean, the fact that the current commission said we’re not just talking about tens of millions, we’re looking at hundreds of millions, right?

JAISAL NOOR: Yeah. Absolutely.

STEPHEN JANIS: I mean really city has spent all its money on policing and it’s just totally neglected. Correct?

JAISAL NOOR: So for years we’ve known that Baltimore schools were underfunded. This was upheld by a judge in 1996 and even recently in the last few years, studies have found that that the Baltimore City schools are underfunded by hundreds of millions of dollars a year. But then you have conservative outlets like Fox 45, you have Libertarians–

STEPHEN JANIS: Part of Sinclair Broadcasting.

JAISAL NOOR: Sinclair Broadcasting. So they’re known for their–

STEPHEN JANIS: Right-wing. Absolutely right-wing. Extremist right-wing.

JAISAL NOOR: Extremist right-wing. Essentially propaganda that some of their own commentators have called out for being blatantly racist.

TAYA GRAHAM: Exactly.

JAISAL NOOR: So you have on one hand their national work. But also on a local level, the rich are obsessed with public schools. And essentially, they’re obsessed with public education as one of the few institutions that remains unionized.

STEPHEN JANIS: It’s a great point.

JAISAL NOOR: So part of their agenda as we’ve reported on is attacking the schools, not as underfunded but with a lack of accountability. So their solution is privatization, is privately run charter schools and to de-unionized schools. But that really hasn’t worked anywhere it’s been tried. Betsy DeVos, who’s a big backer of this billionaire heiress. She tried it in Michigan and now we’ve found in Michigan, which is a ground zero for a lot of these reforms, has some of the worst student gains in the country. So that is essentially their agenda schools are not underfunded.

STEPHEN JANIS: She wants to bring it to Baltimore.

JAISAL NOOR: Yeah. Schools are not underfunded, they privatization, but the track record is really poor.

TAYA GRAHAM: Wow. Stephen, after the recession hit, nonprofits are what moved in to sort of bring money into cities. They really were the only businesses that were able to flourish. So what are we looking at now with the state of nonprofits in Baltimore, Maryland?

STEPHEN JANIS: I mean basically, I think… And Jaisal, you can tell me if this number is correct. I think it’s roughly about 25% of all the property in Baltimore.

JAISAL NOOR: It’s actually 30%.

STEPHEN JANIS: It’s 30%.

TAYA GRAHAM: 30%.

JAISAL NOOR: We have one of the highest burdens in the country. We have a disproportionate amount of places that don’t pay property tax.

STEPHEN JANIS: Right. So just for example, if a church buys a piece of property to rent out, as an apartment, that doesn’t get taxed. So that’s 30% there. Then we have some of the… As you and I have done investigations on tax breaks, including things like pilots, almost all new apartment buildings built in Baltimore have a 10 year pilot, which means that they don’t have to pay property taxes for about 10 years.

So the concentration of nonprofits on top of the city’s real generosity with tax breaks has made… We talked to the tax privileged and the tax punished population, and the tax privileged are the wealthiest. I mean, the thriving institutions here are mostly nonprofits, right? I mean, there aren’t many commercial businesses that can stand up to a Hopkins, either the university or the hospital. So it’s created this strange world where you have this occluded group of very wealthy institutions that just don’t contribute anything significant to the overall general services, population, education, whatever. So it’s become a bifurcated city in some ways.

TAYA GRAHAM: Jaisal, some will say nonprofits that provide social services like helping the homeless or the elderly should be tax exempt. But others say if you’re using city services, you should pay some form of taxes. What type of nonprofits do you think should be tax exempt or which ones should be targeted as a new source of revenue for our city council?

JAISAL NOOR: So that’s the question that the city is going to have to confront in the next few years. So you’ve seen the national nurses put out a report that found that… So Baltimore’s tax base is $51 billion. Nonprofits make up 15.9 billion of that, 30% one of the highest rates in the country. So what this means is that homeowners and renters are paying a disproportionate amount of money. They’re making a disproportionate amount of the tax base up and we know 30% of renters pay more than a third of their income on rent. It makes it really hard for people to live here. This city is hemorrhaging population; expecting to lose tens of thousands of people in the next few years, which is another reason why schools are underfunded.

TAYA GRAHAM: Exactly.

JAISAL NOOR: You see people leaving the city. And it’s a cycle because the schools are underfunded, so people want to move away from the schools. So this is a national issue; this isn’t just happening in Baltimore. One of the models for how to tackle this is Boston. What’s interesting about Boston is they have a similar amount of tax exempt properties. But in their pilot, they asked any nonprofit that has more than $15 million worth of property to pay 25% of the commercial rate. So whereas Baltimore is getting $6 million a year in these contributions, Boston is getting $33.6 million a year.

They have another deal in community benefits where they get $50 million more a year from the same nonprofits. So they’re getting $80 million a year, where Baltimore City’s getting $6 million a year. A lot of cities are doing it in Virginia. They have a state law–only one in the nation–where any local government can say nonprofits have to pay taxes. Maryland is often considered a rival to Northern Virginia; but in many places in Northern Virginia, all nonprofits have to pay property taxes.

TAYA GRAHAM: Stephen, in Maryland we have over 30,000 nonprofits which are generating revenue over $55 billion a year. There’s actually one person, excuse me, one nonprofit for every 180 people. So this is an incredible ratio. So why don’t you tell us a little bit about a nonprofit program called EBDI?

STEPHEN JANIS: Well, East Baltimore development initiative is something that Johns Hopkins took along with local partners, including the city to try to fix at least the housing infrastructure to the east or really went to the north of the campus. Because it was just… Basically, the images we’re showing you now we’re showing you what it used to look and it still does in many areas. But all of the areas surrounding Hopkins used to look completely abandoned, neglected. So EDBI was formed to sort of funnel money into this idea that we’re going to rebuild some of the neighborhoods around Hopkins.

But it was very interesting because a lot of it got stalled because they wanted to put money and they wanted to build sort of upscale homes that would cost two or $300,000. It started about the time of the great recession. So it’s been very slow. And then of course, they got a TIFF from the city; a $90 million TIFF, which is a tax break on top of that. So instead of putting their own money into it, they went to the city and said, give us more tax dollars, give us tax free property and we’ll build it. So again, they dipped into that same well that all the other wealthy developers have done.

One of the things that was very interesting that has come up over and over again. This sort of EBDI is a closed organization. They’ve been giving out contracts using money contributed by the city and other nonprofit organizations to contractors without any sort of public vetting and it became very controversial. There were actually press conferences by city officials because the people from EBDI would not say how they picked such and such a developer. One of the arguments was that all the developers came from outside the city. This is something we’ve seen in other tax breaks we’ve done. So again, it’s something that purports to be some sort of civic benefit.

TAYA GRAHAM: Now, we spoke with Mayor Young. And we asked him about asking nonprofits to contribute, in particular Johns Hopkins University. Why don’t you tell us about the response of–

STEPHEN JANIS: Because really as Jaisal pointed out, the mayor is the ultimate arbiter on this. I mean the mayor is going to be the one that makes the decision. Baltimore has a very powerful mayoralty, so he’s going to be the… So we wanted to ask him specifically about Johns Hopkins. Number one, it’s just one that they’re the biggest, but also because Jack Young, our mayor worked for Hopkins for 30 years. So let’s listen to what he had to say.

JACK YOUNG: I respect the council for looking at other revenue sources that could help us.

STEPHEN JANIS: Do you think Hopkins paid their fair share?

JACK YOUNG: Like I said before, I appreciate the council, so looking at other revenue streams to help us with all of the looming budget issues that we’ll be facing. I’ll leave it at that.

STEPHEN JANIS: So as you can see, he was a little uncomfortable answering whether or not Johns Hopkins would pay this. But I think that’s illustrative of many of these situations because of the interconnectivity, right? It creates corruption. I mean, Jack is mayor, he has benefited from working at Hopkins on the one hand and being on getting paid by the taxpayers and the council for at least 20 years, let’s say. Because he was in the council since 1996.

And yet, when he knows that they’re not paying their fair share… I think in part because of that conflicted relationship, he refuses to answer the question. So you can see how wealth inequality kind of reinforces itself, right? They hire our politicians who are supposed to represent us, give them jobs that they can keep while they are working on the council. And then when it comes time to make sure that they’re paying their fair share, they evade because they’re conflicted. How do you expect the system to arbitrate fairly when you have that type of conditions and that kind of setup? So I think his answer is very illustrative of the problem.

JAISAL NOOR: Another way to illustrate the power of Hopkins is to look at this multiyear campaign they fought to get a private police force. The first year it fell through because there was widespread community opposition. The second year we spent half a million dollars on lobbying state officials and despite the protest and opposition of several community groups, and we covered this, there were student marches.

STEPHEN JANIS: Real protests. I mean lockdown

JAISAL NOOR: So they had students walk out. They’ve locked down one of those Garland Hall–

TAYA GRAHAM: Garland Hall, the library.

JAISAL NOOR: The administrative buildings. It held an occupation there for weeks. The faculty came out, wrote a letter; the undergrad students voted overwhelming to oppose–

STEPHEN JANIS: There was a student organization just specifically geared towards that.

TAYA GRAHAM: Students Against Private Policing. Yes.

JAISAL NOOR: So they held multiple rallies and marches.

STEPHEN JANIS: And what Jaisal pointed out is really good. This is a private police force. What that means is they’re not going to be held accountable to the public. If the Hopkins president says, “Go out and do this and arrest somebody,” then they’ll have arrest powers. Yeah, you make a great point. It is exactly the problem. It’s not a public police department.

TAYA GRAHAM: Now, Johns Hopkins has also been having a battle internally. There’ve been nurses that have been organizing for fair hours and fair wages. How has their push for a union gone so far?

JAISAL NOOR: So it’s interesting because it’s been happening for over a year now. They went public early last year. So they’ve of course been met with fierce opposition. Hopkins has this long history going back to the Civil Rights Movement of fighting unions. Dr. King’s wife came to Baltimore to march on the lines with SEIU workers, Coretta Scott King. In the 60s she came and fought for the workers, SEIU, the janitorial staff.

Nurses have tried to unionize in the past. This has been one of their more vocal campaigns. But what they’ve come up against is what they call a really fierce anti-union campaign. Hopkins hired what’s been described as one of the top union-busting firms in the entire country. And the National Labor Review Board under Trump–and he stacked it with these pro-business figures–even they ruled that Hopkins was carrying out unfair labor practices.

TAYA GRAHAM: Really?

JAISAL NOOR: But because labor law is so weak, all that meant was for I think 60 or 30 days, they had to put up signs saying we will no longer infringe on your right to unionize and talk to each other in the break rooms. Those are gone now. A lot of nurses that I’ve talked to are burnt out because it’s been going on for so long. They say that they’re facing retaliation and the turnover rate, which is already pretty high there is increasing, and a lot of folks are just–

TAYA GRAHAM: They’re giving up.

JAISAL NOOR: They’re given up. And we’ll see what happens. I know national nurses haven’t given up and they’re optimistic on this, but that remains an uphill battle. Going back to what Marisela Gomez and Lawrence Brown and these community advocates have been saying for so long is that it’s such a contradiction to be a hospital where you’re healing the people, but you’re also hurting the people that work there. And you’re hurting the community with all these deals that are not paying their fair share. So it’s just this contradiction, and people want them to do better. Because they are making medical contributions, but they say they need to stop hurting the city that has also given them so much.

STEPHEN JANIS: And you know too, one thing that’s interesting is how this is not the only institution that’s benefited from this sort of tax system. The Convention Center Hotel, which is backed by the taxpayers and the Marriott Waterfront Hotel, which has a 25 year pilot, which doesn’t pay taxes. Both of those institutions who fought unions, do not pay living wages. And we have covered extensively–

TAYA GRAHAM: Unfair hours.

STEPHEN JANIS: Unfair hours. All sorts of stuff. So even though they’re benefiting to the max as cities literally saying, you don’t have to contribute to any of the services. We’re going to give you police service for free. We’re going to give you fire for free. We’re going to give you parking wrecks for free. They still don’t compensate their workers in a way that makes a living wage. So it really only aggravates the problems in the city.

JAISAL NOOR: Actually, when you don’t pay your workers living wage, that means the taxpayers have to provide them services.

TAYA GRAHAM: Provide them services; social services.

JAISAL NOOR: And fill those burdens. And you see the high murder rate here, which is tied to inequality. We just had a ceasefire this weekend, and that’s what the youth were saying, “Leaders: address inequality, address these unlivable conditions for so many people in this city, because that’s what’s driving the murder rate. You’re not going to solve this by spending more money on policing. Address the root causes.”

TAYA GRAHAM: I think it’s illustrative that being exempt from Baltimore’s regionally high tax rate creates a stark visual cue. The city’s roughly 16,000 vacant homes. A symbol of the city’s decline are subject to tax a rate that is twice the amount of the surrounding jurisdiction, Baltimore County. Meanwhile, the nonprofits that do not pay the tax are thriving. In a sense, it’s a symbol of the ravages of the nation’s extravagant inequality. The rich thrive and live in extravagance while paying lower and lower tax rates. Meanwhile, the wealth of the rest of the countries shrinks as people go bankrupt after getting sick, mortgaged their future to attend college and watch their wages barely budge.

Meanwhile, wage earners are paying a higher percentage of their income to taxes than hedge fund managers. And even more troubling is the unique civic disconnect the special status creates. Institutions like Johns Hopkins don’t have to fund a police department mired in corruption and currently unable to reduce crime. It’s not their problem city schools don’t have heat or adequate supplies. Why do they care if the city’s aging water infrastructure needs billions in repair, so long as they don’t have to pay the bill? In fact, like the country’s uber rich, they can construct an oasis of plenty amid the ravages and neglect; a veritable gated enclave untouched by the despair around them.

I wonder, does the president of Hopkins ever take a walk in the East Baltimore neighborhoods that surround them? Do the institutions that build gleaming new buildings and expand their immaculate campuses ever venture into that world of abject poverty and human misery that threatens to engulf their tax exempt utopias. In a sense, what’s happening in Baltimore could serve as a metaphor for the country’s record setting economic inequity. The rich continue to estrange themselves from the collective needs of the community, pay less in taxes, and dominate the political dialogue. Meanwhile, our infrastructure is crumbling. Teachers are unpaid and our healthcare system becomes less and less about healing and more and more about profit.

I want to thank my guests investigative reporter Jaisal Noor and investigative reporter Stephen Janis for joining me today. I’m your host, Taya Graham, and I want to thank you for joining me for the Inequality Watch. Please like, share, and comment. I really do read your comments. Thank you.