SOUTH HADLEY — Town officials will draft a policy that potentially raises up to $793,000 annually from tax-exempt property owners to help offset the town’s rising structural deficit.
Town Administrator Lisa Wong estimated the calculations based on Holyoke’s program, which went into effect in July 2025. Under the payment in lieu of taxes (PILOT) program, tax-exempt properties voluntarily contribute either 15% or 25% of the full tax amount owed if they did not have tax-exempt status.
During its meeting Tuesday, the Select Board discussed opening communication with Mount Holyoke College, whose maximum estimated contribution equates to $697,000 under Holyoke’s model.
“If you don’t ask, you won’t get it,” board member Carol Constant said. “This is a good start toward starting the conversation and having a policy in place.”
“I think there’s some thinking out there that that’s the silver bullet to all our problems and I will say it’s not,” Wong said.
A PILOT program was one of the recommended actions in the Budget Task Force’s official report. Last week, the task force, which was created to find solutions to the town’s growing budget deficit, suggested the town implement a PILOT program in the following fiscal year.
South Hadley is facing a $3.5 million deficit in fiscal year 2027. The gap is expected to grow by $2 million to $3 million each following year due to rising health insurance costs, special education needs and net negative school choice funds.
Wong said a PILOT policy creates some transparency between the municipality and local entities and helps the organizations budget any contributions. To abide by federal law, the program is entirely optional.
“We would likely start with conversation where we would send a copy of the policy and the information to these various owners and see who responds,” Wong said.
There are 29 tax-exempt properties in South Hadley, two of which already contribute to the town’s coffers. South Hadley Electric Lighting Department provides a PILOT of $220,000 a year, while Holyoke Gas and Electric gives $55,000 a year. The latter cannot be changed without legislation.
Residents also proposed a PILOT initiative at the task force’s listening sessions and on social media. Joel Prough calculated that a $700,000 yearly contribution is roughly 0.4% of Mount Holyoke’s $180 million operating budget, a percentage he considers “a rounding error” for the college.
“I do wonder what do they [Mount Holyoke] get in terms of value of services that are at the cost of taxpayers, versus what they have actually given the town back in hard dollars over the last 10 years.” he said.
Renée Sweeney, Select Board liaison to Mount Holyoke, noted that only a certain percentage of Mount Holyoke’s $1.1 billion endowment can be spent each year. Faced with similar expense challenges as the town, more of that percentage is going to the college’s operating costs.
“You can see that it chips down pretty quickly, and it’s a large percentage of their overall budget,” Sweeney said.
Select Board member Andrea Miles encouraged the board to think outside of monetary donations as well. In-kind projects with students could also provide fiscal or municipal services to the town, such as economic majors analyzing the town’s budget instead of hiring a financial director. These collaborations “really do benefit everybody,” Miles said.