HOLYOKE — Some 16% of the city’s properties are exempt from paying property taxes — a potential source of revenue Mayor Joshua Garcia is looking to tap into next fiscal year via a new payment in lieu of taxes policy.

These properties, owned by nonprofits and quasi-public institutions, reach nearly 1,000 in total, include nursing homes, charities, churches, drug recovery agencies, health centers and schools. The goal is for these organizations to voluntarily contribute a quarter of what they would paying if they weren’t tax-exempt, with the added city revenue put toward essential services, including police, fire and public works.

This new policy comes after Garcia and City Solicitor Lisa Ball have been individually meeting with organizations to encourage them to contributing revenue over the past couple years, with some success.

But this process has lacked has lacked formality, resulting in little more than “handshake agreements,” between the city and tax-exempt property owners, Garcia said.

So to lay out a process that is both more formal and equitable, the mayor, in collaboration with the Collins Center for Public Management, is proposing the new PILOT policy.

The city’s Development & Governmental Relations Committee has unanimously recommended adoption of the plan, which the City Council discussed at its meeting on Tuesday.

Council members were generally optimistic about the findings in the 38-page draft of the report compiled by the Collins Center, which lists in detail the various sources of tax-exempt properties and approximations of potential income if they were to contribute taxes.

At-large Councilor Howard Greaney said “its about time they start paying their fair share.”

Michael Sullivan, who in addition to being an at-large councilor is the vice chair of the Government Relations Committee, said that this move is “a fantastic start ... and long overdue,” as he also mentioned the policies have shown to be successful elsewhere.

Boston and Brookline have implemented similar policies, and Springfield and Concord are exploring the idea.

But At-large Councilor Israel Rivera, who supports the policy, urged city officials to tread lightly.

“Everyone should pay their fair portion, I agree with that. ... But at the same time, I caution myself with regards to how this can impact these nonprofits in a way that they may no longer exist,” he said

According to state law, the city cannot legally require tax-exempt organizations to pay property taxes, which is why the mayor’s proposed policy will enact a formal process for organizations to voluntarily contribute.

As laid out in the new policy, which is set to take effect July 1, payments would be a percentage of assessed value — currently with estimations at about 25% of the full levy the owners would pay based on the property’s assessed values.

The number of 25% was determined based on the tax levy amount that supports police, fire and public works operations. According to Stephen E. Carillo, an associate with the Collins Center who has worked with the city to kickstart the PILOT research, said that these are services that go toward “all” in the city, even the tax-exempt.

Smaller nonprofits may contribute a lower amount.

“For smaller, community-based tax-exempt organizations with controlling interests in properties assessed at less than $2 million in FY 2025, that share will be equal to at least 15% of the full levy,” Garcia said.

The city’s assessed value is predominantly from residential properties, which represent nearly 66% of the taxable properties. Commercial, industrial and personal property classes represent 18% — only slightly more than the 16% which are tax-exempt parcels.

Samuel Gelinas can be reached at sgelinas@gazettenet.com.