Audit finds inconsistent PILOT agreements, recommends assessor billing and formal policy in Springfield

Auditor Young Ngo told the Springfield City Audit Committee that a review of the city’s payment‑in‑lieu‑of‑taxes (PILOT) program found inconsistent agreements, no formal billing process and small but recurring payment errors.

The audit, which covered fiscal year 2024 through May 2025, found 15 active PILOT agreements and estimated annual PILOT revenues at approximately $300,000. Ngo said the city’s exempt property value is large relative to other Massachusetts municipalities and that only a small share of exempt property value participates in PILOTs: “out of the $4,800,000,000 in exempt value, only $19,400,000 or about 1% partake in pilots,” Ngo said.

The audit detailed procedural risks and testing results. Ngo said the assessors’ office relies on entities to remit payments and has not generated formal invoices, creating “a risk for missed payments or delayed payments or potential for under or overpayments.” The audit identified several incorrect payments when testing FY2024 and FY2025: three underpayments totaling about $6,100 and one overpayment of about $3,000 in one year, and similar but smaller errors in the prior year (three underpayments totaling about $3,602 and overpayments totaling about $2,900), the report says.

Why it matters: PILOT agreements are voluntary arrangements in which tax‑exempt entities make payments to the city in lieu of property taxes; inconsistent terms and unclear billing can reduce transparency and leave revenue on the table, committee members said. Ngo noted that Springfield ranks sixth statewide in exempt property value (a Department of Revenue comparison of municipalities), a position driven in part by hospital properties.

The audit listed several findings and recommendations. Principal recommendations conveyed at the meeting were: - The assessors’ office should take over billing and establish a systematic invoicing process so payments can be tracked and reconciled; assessors indicated they plan to begin invoicing in FY26, with a goal to begin third‑quarter billing and to audit historical payments and contact affected entities. - The assessors and the city law department should clarify undefined contractual terms in PILOT agreements (for example, how to calculate “gross rents” and the fiscal period referenced) and address indefinite‑term contracts. - The city should develop a formal PILOT policy that sets eligibility, an application process, a consistent methodology for calculating payments (considering property value, municipal service costs and community benefits), and renewal provisions.

The report also noted pending state legislation. Ngo said a House bill introduced in February 2025 would require larger tax‑exempt organizations (properties above a stated threshold) to make PILOT payments equal to 25% of what they would pay if the property were taxable; the bill includes an exemption for hospitals and remains before the House revenue committee.

Councilors and staff pressed for practical next steps. Councilor Victor Davila said the committee and a standing PILOT subcommittee have discussed the matter for years and urged action: “we have been talking about this for 2 years,” he said, adding that the city should not enter budget season without clearer PILOT policy and revenue capture. Auditor Ngo confirmed the assessors are auditing past payments and will reach out to the entities involved.

Assessor Jessica Guerra confirmed procedural items and described reporting and document sources the office uses: “every year, these tax exempt organizations are required to file what’s called a 3ABC,” she said, adding that the assessor’s office receives a form PC (public charities report) as part of that filing that the board can review.

The audit listed the city’s 15 PILOT agreements: 12 were with a mental health association (MHA), one with Baystate Medical Center, one with the Center for Ecological Technology (noted as sold and expired) and one with Springfield Technical Community College. Committee members flagged indefinite contract durations and wide variation in payment terms (examples ranged from a $500 annual payment to calculations tied to 70% of assessed value or to a percentage of gross rents).

Next steps: Auditor Ngo said the audit is public and will be circulated to council members and the committee. Assessors indicated they will begin a billing process and follow up with entities; committee members asked the mayor’s office to consider a roughly $40,000 study to support drafting a formal PILOT policy and to accelerate the committee’s work.

Ending

The committee did not adopt a formal ordinance at the meeting; the audit produced recommendations for administrative action and policy development that the assessors’ office and the audit committee will pursue. The audit report will be made public and shared with councilors for follow‑up.