The divide between church and state seems on the one hand to be growing but on the other narrowing, especially when you consider how intrusive established religions have been. Representatives of the Catholic Church sat in Nanci Pelosi's office of late while negotiations for the health care bill were ongoing, overseeing what she would do about abortion.
Now this.
Any way one reads this, it comes out as a threat. The quid pro quo is explicit. "If you don't bend to our will on this, we will stop services your city relies on."
I have in the past believed that the tax exempt status of religions was a necessary work-around to preserve the fiction of separation. In the past, there have been instances of state intrusion directly into religions in, for one example, state funding for programs in parochial schools. There was always a quid pro quo in such offers and practices.
But never has a representative of the state sat in the office of a minister while he drafted a sermon to be sure certain details got left out or included. Never, despite massive abuses by religious institutions in real estate and related financial areas, has the state moved to revoke 501(c)(3) status. It may be that any state official who tried it would be booted out of office summarily, but nevertheless that has been the unspoken law of the land.
Seems the courtesy doesn't go both ways. If that's the case, I think it is time to revisit the whole issue. If the Catholic Church sees itself as providing services as an arm of the civil service sector and allows itself the conceit that it may use that service as a lever to influence political decisions, then they have implicitly given up due consideration as an inviolate institution, free from state requirements of taxation and regulation.
Seems fairly clear cut to me. Obviously, there will be those who disagree. But it's time, I think, to seriously reconsider the state relationship to so-called "nonprofit" "apolitical" tax exempt institutions.