When lightning struck the roof of St. Mary’s Catholic Church in September 1993, sparking a massive fire, Fort Wayne firefighters were on the scene within minutes, battling the blaze with six pumpers, all three of the department’s ladder trucks and assistance from St. Joseph Township firefighters and the Southwest Fire District. There was no suggestion at the time or since that any effort should have been spared to save the church – worthy recognition of the community’s shared responsibility in ensuring public safety.

But if a major firefighting effort arises at a church or hospital in the years ahead, look for a more critical discussion about the costs involved and who should pay. The St. Mary’s fire happened long before the days of tea bag protests, property tax caps and a deteriorating sense of shared responsibility. Blame tax abatements, tax increment financing districts and a smorgasbord of exemptions, credits and deductions that leave some taxpayers convinced they are paying more than their fair share.

The resulting pressure to cut property tax bills is drowning out reasoned debate over the cost of public services, who should pay and how much.

The clamor has grown so great, in fact, that even the suggestion of spreading the tax burden is shouted down. Fort Wayne Mayor Tom Henry got a taste of the response when, on behalf of a group representing the state’s largest cities, he told the Indianapolis Business Journal that the Urban Mayors Caucus was looking at a plan in which cities would negotiate payments with universities and non-profit hospitals to cover the cost of services provided for what amounts to billions of dollars in tax-exempt property.

Henry has quickly backed off the idea, insisting Fort Wayne’s fiscal health makes it unnecessary to pursue. But it was hardly a revolutionary concept.

Payments-in-lieu-of-taxes – PILOTs, as they are known – are increasingly used by local governments hurting from declining tax support.

Here’s a primer on a tax topic likely to have some staying power:

Q. What is a PILOT?

A. It’s a voluntary or negotiated payment made to local government by a non-profit entity to cover or defray the cost of providing services.

Q. Is this a new idea?

A. Cambridge, Mass., started a PILOT program in 1973, collecting $1 million that year alone from local non-profits, including the richly endowed Harvard University. The university and town signed a 50-year agreement in 2005 that will require Harvard to eventually pay the city nearly $10 million a year.

“This is not a gift” from Harvard, said Cambridge Vice Mayor Marjorie C. Decker at the time of the agreement. “Harvard students and employees benefit from the services the city provides.”

Officials in Belmont, Mass., last year sent letters to 37 non-profit organizations, asking for 4 cents for each square foot of land, which amounts to about 20 percent of what a non-exempt property owner would pay in taxes. The Lions Club of Belmont agreed to pay $500 instead of the suggested $174.

“We feel the services offered to us are well worth that,” Lions Club President Steve Rizzuto told the Boston Globe. “We’re trying to make a point by offering more than what we were required.”

McLean Hospital, the town’s largest non-profit, was already making payments to the town. But the Catholic Archdiocese of Boston rejected a request for $10,444, noting in a statement that it does not make PILOT agreements with any city or town.

Q. Are other states considering PILOTs?

A. In Pennsylvania, lawmakers are considering legislation that would allow cities and counties to assess large non-profits based on 25 percent or 50 percent of their buildings’ assessed values. In a hearing last month, government officials generally expressed support, while non-profit leaders said the payments would hurt. College programs and development would suffer, and tuition could go up if the bills pass, Jared L. Cohon, president of Carnegie Mellon University, told lawmakers.

In Cleveland, consultants for the city suggested as much as $5 million could be raised each year by PILOT agreements. A 2004 analysis concluded that Cleveland Clinic and University Hospitals alone would generate $34 million a year on $1.3 billion worth of tax-exempt property in Cuyahoga County.

Q. Hospitals are huge property owners. Why wouldn’t they pay property taxes?

A. This is where it gets complicated, and northeast Indiana’s two health care systems highlight the complexity.

The formerly non-profit Lutheran Hospital was sold to Quorum Health Group Inc. in 1995. Lutheran Health Network is now owned by Community Health Systems, headquartered in Franklin, Tenn. It has grown to include St. Joseph Hospital, Dupont Hospital and other major hospitals and clinics.

In 2008, Lutheran paid almost $3.6 million in taxes in Allen County; the entire network paid $13.8 million in local property and sales taxes and made more than $8.9 million in charitable contributions. Systemwide, Lutheran provided more than $1.3 billion in charity care and uncollected costs for discounted care.

As a for-profit system, Lutheran bears additional costs in bonding, so that any investment in the business requires more capital. In a billion-dollar operation, the difference between for-profit and non-profit amounts to about $100 million a year.

Parkview Health system operates in the traditional model, in which hospitals were granted tax-exempt status in return for the charity care they were expected to offer patients who couldn’t afford to pay. By 1969, when the federal government had taken on much of the cost for low-income people through Medicare and Medicaid, the Internal Revenue Service changed the requirement for non-profit hospitals from providing charity care to “community benefit.”

But there is no standard requirement for community benefit, and hospitals interpret their obligation in different ways. For Parkview, the interpretation is an expansive one. Michael Packnett, president and CEO of Parkview Health, said the health care system’s commitment to tithing – giving a tenth of its net income back to its communities – was one of the job’s attractions for him. For 2008, Parkview Health paid $118 million in community benefits.

The system’s five boards of directors decide how the money will be distributed in each of their respective communities, with an emphasis on improving health.

The Parkview Huntington Hospital board, for example, identified childhood obesity as a problem. So it decided to give $514,591 for construction of a new YMCA. The Parkview Hospital board provided $945,148 for nursing services in Fort Wayne Community Schools and East Allen County Schools; $204,000 for Matthew 25 Clinic; and $166,771 for Neighborhood Health Clinic.

“In Allen County, we help 150 to 200 organizations a year,” Packnett said. “It’s part of how, in my mind, we earn our tax-exempt status.”

Parkview Health pays some property taxes. The total was about $1.8 million for 2008, on business properties that don’t meet the tax-exempt requirements. About $1.3 million of that amount was paid to Allen County. The health care system also has made payments directly for public improvements – $4 million for work on Diebold Road to accommodate construction of the new $536 million hospital. Packnett said it will also share in the cost of a proposed $25 million interchange north of the new hospital at Hursh Road.

Figures from the Allen County assessor’s office show total assessed value of exempt Parkview property is $159,489,852. Assuming a 2 percent tax rate, the value of the exemptions in Allen County is about $3.2 million.

Packnett acknowledged that if the hospital were required to pay full property taxes, the amount would decrease what Parkview could pay in community benefits.

Q. Are there any existing PILOT agreements in Indiana?

A. The University of Notre Dame announced last year that it will make voluntary payments totaling $5.5 million over the next decade to South Bend, Mishawaka, St. Joseph County and Roseland. That’s in addition to the property taxes Notre Dame pays on most of its off-campus buildings and portions of campus buildings considered profit-making. The university paid about $290,000 in property taxes in 2008. St. Joseph County officials sent tax bills for some additional properties for the first time in 2009, including the Notre Dame bookstore and an on-campus hotel, restaurant and nine-hole golf course.

“We’re asking some tough questions to a lot of our exemption applicants,” St. Joseph County Assessor David Wesolowski told the South Bend Tribune.

In Allen County, the assessed value of tax-exempt property totals $743.5 million. That means no property taxes are collected on close to 4 percent of all property. In Wayne Township, almost 8 percent of all property is tax-exempt.

Q. Is there support for PILOTs from Indiana lawmakers?

A. Yes – from at least one legislator out of 150. Rep. Tom Saunders, R-Lewisville, is a former county and township assessor who said he believes it’s a fairness issue. He has filed numerous PILOT bills, only to see them die in the House Ways and Means Committee.

“There’s not the political will to do it,” Saunders said. “People say, ‘You want to tax churches.’ Well, no – but we have churches that own apartments and nursing homes, and now some are even building subdivisions. … We’ve got these megachurches that have bookstores and McDonald’s and coffee shops in them.”

He points to a church-affiliated apartment building marketed to seniors in Henry County (New Castle) as an example of the cost of public services. The church voluntarily pays $25 per occupied apartment for emergency medical services, amounting to about $4,000 a year. But when Saunders checked with the fire rescue department, he found that the cost of providing ambulance runs to the building exceeded $50,000 in just six months.

A handful of other lawmakers have over the years supported PILOT bills that would require payments from the state for property controlled by the Department of Natural Resources. For example, Brown County, home to the popular state park and portions of three state and national forests, has more than 40,000 acres of tax-exempt land. PILOT payments from state coffers to county coffers, of course, would amount to taking money from one pocket and moving it directly to another.

Saunders said he would be pleased if the General Assembly would just assign a committee to study the issue.

“When I ran for the legislature, I thought it was unfair how some properties were treated,” he said. “I’ve been there 12 years, and it’s still unfair.”

Q. Is Mayor Henry pursuing the PILOT idea?

A. No. The reaction was swift – County Council member Paula Hughes, a candidate for the GOP nomination for mayor next year, accused Henry of “lobbying to tax non-profit and church-affiliated organizations to make up for the cities’ revenue deficiencies.”

Henry said the issue is not a priority.

“I am committed to doing everything to create and keep good jobs,” he said. “I am fighting equally hard to strengthen our colleges and universities and to sustain our social service network to better help those in need. There will be no additional burdens on their good works.”

Q. Won’t this discussion end when the economy improves?

A. Don’t count on it. In November, Indiana voters are likely to chisel property tax caps into the state constitution, so schools and local government will have a continual struggle to raise revenue for services most of us have come to expect.

Increasing the scrutiny of tax-exempt properties most likely isn’t what legislators intended when they pushed the tax cap scheme, but it’s probably not a bad idea.

The churches, hospitals and social service organizations that have long held tax-exempt status have evolved along with everything else. Some have strayed from their missions to look more like businesses than charities. Public officials like Tom Henry and Tom Saunders are right to open debate about the cost of services and who should pay.