City Unable to Reap Benefits Of Nonprofit Land Holdings

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In their capacities as tax-exempt bodies, nonprofit organizations such as the Berkeley Repertory Theatre, which recently made a $6 million property purchase in West Berkeley, may fiscally hinder the city of Berkeley during rough economic times, though less direct benefits may also be seen.

Nonprofits are exempt from property taxes by an American Internal Revenue Code - exemption 501(c)(3) - according to Dave Fogarty, economic development coordinator for the city. He added that this exemption makes a negative impact on the city's economy.

Property tax exemptions extend beyond nonprofits, according to Fogarty. Tax-exempt real estate within the city also includes university properties, churches and private schools.

"The purchase of property by these private, tax-exempt organizations and by the university poses a problem fiscally for the city of Berkeley," Fogarty said. "The city is reluctant to see more property go off the tax rolls."

Terence Keane, director of public relations for the Berkeley Repertory Theatre, said in an e-mail that the purchase of their new 60,000-square-foot building on Harrison Street in West Berkeley was made as a permanent replacement for the theater's scene shop, which burned down several years ago.

He also said the space is large enough to also house operations for other parts of the theater in the future.

The purchase is a result of the theater's "unusual success" over the past few years, according to Fogarty, who added that nonprofits are enduring the same negative impacts from the economy as other businesses.

"Donations and attendance to nonprofit events are down because people are unemployed," Fogarty said.

But artistic groups and other nonprofits have a positive impact on surrounding businesses as well, according to Fogarty.

"Arts groups attract a large number of people to Berkeley who eat in local restaurants, shop at local shops and those kinds of things," he said. "(They) build Berkeley's reputation as a center for the arts, which then has a positive effect economically."

Located on Alcatraz Avenue for 48 years, the Shawl-Anderson Dance Center - one of the nonprofit organizations located in the city - boosts revenue for surrounding businesses with the audiences it attracts to its nighttime performances, according to Abigail Hosein, office manager for the organization.

"There's a lot of restaurants around our block that people go to after our later shows," she said.

In addition to creating business for local restaurants, the dance center holds 100 classes per week for over 400 students, according to Hosein. The students - in addition to dance companies and artists the center provides free space for - also contribute to foot traffic for surrounding businesses.

But the university occupies much of the city's property with its 1,232-acre campus, according to UC Berkeley's website.

According to Fogarty, nonprofit tax exemptions become a more prominent issue for the city's economy because the large campus is also exempt from taxes. He added that the university is in the process of purchasing a few more vacant properties within the city, including a vacant Burger King property near the intersection of Shattuck and University avenues.

"The university and nonprofits have the rights to make those purchases," Fogarty said. "But it does pose problems for the city's fiscal situation."


Hailey Parish is the lead local business reporter. Contact her at [email protected]

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