Regardless of who wins the mayor’s race on Tuesday, one thing is all but certain: Boston’s system for collecting payments in lieu of taxes from large nonprofit institutions is bound to change.
The city’s system for PILOTs, as these payments are known, ropes in at least $34 million in cash a year, and even more in community benefits. But city councilors — including the two mayoral candidates, Annissa Essaibi George and Michelle Wu — have long found flaws with it. And critics say the nonprofits, particularly several big universities, should do more to help the city they call home.
Both Essaibi George and Wu are now vowing to revamp the voluntary program, which has not seen any major changes since Mayor Thomas M. Menino’s administration. Acting Mayor Kim Janey in June said she would assemble a new PILOT task force, to revisit standards established a decade ago. With Janey losing out in the preliminary election, it will now be up to a new mayor to get the task force started; both Essaibi George and Wu say they intend to do so. In particular, they want to focus on how universities and other nonprofits tally up community benefits — which count toward their PILOT contributions — and how city leaders and the people they represent might have more input in that process.
Expect extra focus to be placed on the city’s four wealthiest universities: Harvard, Boston University, Boston College, and Northeastern. None of them typically contributes the full amount that the city requests. And at least three saw their endowments soar last year: Harvard’s grew by $11 billion, while BC and BU each added about $1 billion to their coffers.
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“These are some of the richest institutions in the world. Harvard’s endowment just skyrocketed,” said Enid Eckstein, a convener of the PILOT Action Group, a grass-roots advocacy organization pushing for reforms to the system. “These institutions can all afford to pay.”
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Yes, the “eds and meds” sector has buoyed Boston, in good times and in bad. No one wants to jeopardize that. Many cities grapple with this issue, and Boston’s PILOT program is considered among the most successful in the country. On the other hand, Boston’s budget relies heavily on property taxes — and roughly half of the property in the city is tax-exempt, a figure that includes government-owned land. No other city in Massachusetts comes close.
The current PILOT system was started in 2012 to set a consistent framework for how the bigger nonprofits could contribute. Nearly 50 hospitals, schools, and cultural institutions — nonprofits with at least $15 million in tax-exempt real estate — are asked to kick in 25 percent of what their property tax bill would be. They can contribute half of that amount in cash and the rest through community benefits (scholarships, free events, and the like). In recent years, the city’s request has climbed 2.5 percent each year; critics say this has not kept pace with rising property values in the city.
That will likely change after the city’s assessing department completes new property valuations — work that’s long been urged by the City Council — used to calculate PILOT requests. City officials say the numbers should be out in January, to update the decade-old valuations.
The city’s medical facilities collectively met 89 percent of their requested contributions in fiscal 2020, the most recent year for which statistics are available. Hospitals have a particular incentive: Their community contributions are also overseen by the state attorney general’s office and the IRS.
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Meanwhile, universities and other schools only contributed, on average, 73 percent in 2020, with nearly all of the schools falling short on cash contributions. BU, Boston’s biggest school by land value, paid 87 percent of what the city requested, including credit for community benefits. Harvard was at 78 percent, and Northeastern, 68 percent. BC largely declines to participate, paying $365,000 for fire service in 2020; otherwise the college maintains, as a Catholic school, that it does not want to risk its tax-exempt status and prefers to contribute to the city in other ways.
Essaibi George said she would prod these institutions to kick in more money, through a “combination of carrots and sticks.” She declined to specify what those sticks might be, other than “there are levers we can pull at the city level.” She has made it clear that she wants all these large institutions to contribute fairly to what she calls “equitable growth” in the city.
In particular, she wants the nonprofits to report how many people they employ in the city annually, and to seek more input on the kind of community benefits they provide.
“I want to see community benefits that are reflective of the community need,” Essaibi George said. “It starts with an open conversation about the work we need to do together.”
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Like Essaibi George, Wu said she wants to work with the tax-exempt institutions — which are among Boston’s biggest employers — to connect city residents with jobs, and to better tailor the community benefits they offer with community needs.
Wu also said there’s more to be done on persuading these organizations to procure more goods and services with entrepreneurs of color.
“Boston has so much land that is tax-exempt,” Wu said. “This is about having clear expectations and alignment [and] our anchor institutions being good neighbors and partners.”
Wu also said she supports removing cultural institutions — the museums, the Boston Symphony Orchestra, GBH — from the PILOT program. Combined, these organizations contributed less than $500,000 in cash in 2020.
Tim Ritchie, president of the Museum of Science, remains hopeful that museums can be removed from the mix — especially when he can point to other cities that actually contribute money to these institutions.
“Cultural institutions were added at the very last minute to the PILOT program [in Boston],” Ritchie said. “It was very much an afterthought. … The community benefits that we extend far exceed what we should be paying in contributions. I think cultural institutions should not only be excluded, but we should be seen as the public benefit that we are.”
The city’s hospitals and universities, meanwhile, helped design the current system back in the Menino years. Leaders of the Association of Independent Colleges and Universities in Massachusetts and the Conference of Boston Teaching Hospitals said they’re eager to engage with a new administration to hash out any potential changes.
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They have many reasons to do so, not the least of which is maintaining a good relationship with City Hall. There’s no question these nonprofits rely on city services, just like everyone else in Boston. The question a new mayor will need to answer: What’s the best way to pay for that?
Jon Chesto can be reached at [email protected]. Follow him on Twitter @jonchesto.
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