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Dispute over proposed payments by Passages flares again

Dispute over proposed payments by Passages flares again

Pre-release center has yet to make $40K yearly payment

More than three years after the City Council approved the Passages program on South 27th Street, an uneasy standoff has developed between the city, Passages and the South Side Task Force.

The dispute, over a $40,000 annual payment for South Side programs, resurfaced this week, when Ward 1 Councilman Jim Ronquillo asked the city to look into the matter again.

In May 2006, the City Council approved a special review for Passages, which is a prerelease center for women located in the former Howard Johnson hotel at 1001 S. 27th St. The council's approval came after hours of testimony for and against the program, and included a last-minute condition that Passages pay $40,000 a year in lieu of taxes to be used for projects on the South Side.

The condition was suggested by Mayor Ron Tussing as a way to calm opposition from South Side residents who were worried about a proliferation of corrections facilities in their neighborhood. That worry still exists and is often the topic of discussion at task force and other meetings on the South Side.

Alternatives Inc. is the nonprofit that owns Passages. Director Dave Armstrong said Alternatives Inc. objects to the payment in lieu of taxes, or PILT requirement, and has filed a notice of intent to sue the city over the matter, though it has yet to file a lawsuit. Armstrong said that when he agreed to the PILT requirement before the City Council, he wasn't speaking for the Alternatives Inc. board, which at that time included City Attorney Brent Brooks. Brooks recused himself from the matter in 2006 and has since resigned from the board.

But the minutes of the public hearing on May 22, 2006, don't specify that Armstrong was speaking for himself. Instead, when the council asked for an opinion from Alternatives Inc., Armstrong gave it.

"Mayor Tussing asked if Alternatives had any objection to the motion. Mr. Armstrong said they welcomed having a member of the South Side Task Force to their board," the minutes state. "'Taxing nonprofits could be argued all night … You will raise costs by taxing the nonprofit, but if that is what it takes to get it done, I guess that's what it takes to get it done,'" Armstrong is quoted as saying.

Alternatives Inc. has never made a PILT payment.

When the facility was a hotel, it was paying about $60,000 a year in property taxes, about half of which went to the city or the tax increment finance district created in the area. Because Alternatives is a nonprofit, it is not subject to property taxes. Armstrong said the PILT clause is unprecedented and worrisome for a nonprofit. Still, Armstrong said Alternatives would like to make some sort of contribution for bettering the South Side.

"I'm not sure there's another case like it," Armstrong said. "A nonprofit is obviously given that status because it's either a charity or a nonprofit doing work otherwise done by the government. We are a perfect description of the latter. Paying a PILT is kind of like taxing tax dollars."

The South Side Task Force led much of the opposition to Passages in 2006, and members are still worried about more correctional facilities targeting the South Side. The task force chairman then and now, mayoral candidate Mike Yakawich, said the task force would like to see any PILT money spent on the South Side. Armstrong also wants to see the money spent in the neighborhood, and he has approached the task force to try to work out a compromise that could be presented to the city.

But City Administrator Tina Volek said Monday night that any decision on how to spend the money is up to the City Council, and not Alternatives Inc. Some on the South Side worry that the City Council will direct any money it receives into the general fund.

Ronquillo said he has brought up the matter several times, but he said that the city staff has asked the task force to stay out of the matter until the legal questions are resolved.

"I said to Mike Yakawich that this is a legal problem, not a South Side Task Force problem," Ronquillo said. "I said, 'You can listen to (Armstrong), but you guys have no input on making him pay.' "

Brooks, the city attorney, said he thinks that tax statements sent to Passages have included the $40,000 PILT, but the nonprofit has never made a payment. Armstrong said that Passages received one such bill but was then told that the city sent it in error. Even though it doesn't pay property taxes, Alternatives Inc. is still subject to special assessments, such as garbage fees and street maintenance districts, and it receives bills for those amounts.

The issue has mostly lain dormant, Brooks said. One reason is that the attorney representing the city on the matter, Harlan Krogh, now works at the same law firm as Alternatives Inc.'s lawyer, and the possible conflict remains unresolved.

"I don't think there's any reason why they couldn't make some voluntary payment," Brooks said. "We need to try to gather everybody and try to come to some sort of a solution."

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Letter of approval with conditions from the city for the Passages center on South 27th Street.

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