{"id":1646,"date":"2023-08-11T11:25:16","date_gmt":"2023-08-11T15:25:16","guid":{"rendered":"https:\/\/sites.bu.edu\/dome\/?p=1646"},"modified":"2023-08-11T11:25:16","modified_gmt":"2023-08-11T15:25:16","slug":"end-the-request-its-time-for-bostons-biggest-landowners-to-pay-their-fair-share","status":"publish","type":"post","link":"https:\/\/sites.bu.edu\/dome\/2023\/08\/11\/end-the-request-its-time-for-bostons-biggest-landowners-to-pay-their-fair-share\/","title":{"rendered":"End the Request: It’s Time for Boston’s Biggest Landowners to Pay Their Fair Share"},"content":{"rendered":"

For the second time, Massachusetts State Representative Erika Uyterhoeven (D-Somerville) filed a bill<\/a> concerning payments in lieu of taxes to cities and towns. This bill would strengthen and codify a Boston program, which requests payment from certain institutions that do not pay property taxes. It is important that this bill passes during the 2023-24 session because, without it, Boston (and other municipalities) will continue to subsidize large, private organizations at the expense of its own residents.<\/p>\n

The City of Boston\u2019s budget<\/strong><\/p>\n

The City of Boston\u2019s operating budget<\/a> consists of revenue from property taxes, state aid, local revenue, and, to a small extent, non-recurring revenue (e.g., funds from the American Rescue Plan Act). This revenue is used to fund<\/a> programs and services, including public education, public safety, city departments, and transportation. Property taxes are consistently the City\u2019s largest source of revenue<\/a>, and its share size continues to increase as state aid decreases. For example, 74% of the City\u2019s revenue is derived from property taxes this year compared to 52% in 2002.<\/p>\n

Boston<\/a> residential taxpayers currently pay $10.74 per $1,000 value in property taxes. This number is higher than its surrounding municipalities: Cambridge<\/a> taxpayers spend $5.86; Somerville<\/a> taxpayers spend $10.34 and Medford<\/a> taxpayers spend $8.65. Boston<\/a> commercial taxpayers, including small businesses pay $24.68 per $1,000 value in property taxes. This number is also higher than its surrounding municipalities: Cambridge<\/a> commercial tax payers spend $11.23, Somerville<\/a> commercial taxpayers spend $17.35, and Medford<\/a> commercial taxpayers spend $16.56.<\/p>\n

Part of the reason why Boston\u2019s property taxes are so high is that Boston\u2019s tax base is constrained<\/a>. Boston\u2019s geographic region is relatively small and is home to many tax-exempt institutions.<\/p>\n

52% of Boston\u2019s area <\/strong>is tax exempt<\/a>.<\/strong><\/p>\n

Tax-exempt areas include public land owned by the city, state, and federal government along with private land owned by universities, hospitals, and cultural institutions. These institutions are not required to pay property taxes as nonprofit charitable organizations under section 501(c)(3)<\/a> of the Internal Revenue Code. In Boston, this includes large, private institutions\u2013\u2013like Mass General Brigham, Harvard, Boston University, and Northeastern\u2013\u2013that together own over $14 billion<\/em><\/a> of Boston\u2019s real estate.<\/p>\n

These large institutions do make some<\/em> financial contributions to the city of Boston via the Payment in Lieu of Tax (\u201cPILOT<\/a>\u201d) program. The PILOT program asks educational, medical, and cultural institutions with more than $15 million worth of tax-exempt property to make voluntary payments<\/a> to the City of Boston<\/span>. These contributions are supposed to be 25% of the would-be property taxes, and up to 50% of this payment can be in the form of \u201ccommunity benefits<\/a>.\u201d The 25% represents a \u201cfair share\u201d because large institutions\u2019 use of essential services, such as fire safety, roads, public transportation, and sewage disposal generally make up 25% of a municipality\u2019s budget.<\/p>\n

The PILOT task force defines Community benefits \u201cas services<\/a> that directly\u00a0 benefit\u00a0 City\u00a0 of\u00a0 Boston\u00a0 residents;\u00a0 support\u00a0 the\u00a0 City\u2019s\u00a0 mission\u00a0 and\u00a0 priorities with\u00a0 the\u00a0 idea\u00a0 in\u00a0 mind\u00a0 that\u00a0 the\u00a0 City\u00a0 would\u00a0 support\u00a0 such\u00a0 an\u00a0 initiative\u00a0 in\u00a0 its\u00a0 budget\u00a0 if\u00a0 the\u00a0 institution did\u00a0 not\u00a0 provide\u00a0 it;\u00a0 emphasize\u00a0 ways\u00a0 in\u00a0 which\u00a0 the\u00a0 City\u00a0 and\u00a0 the\u00a0 institution\u00a0 can\u00a0 collaborate\u00a0 to\u00a0 address shared\u00a0 goals;\u00a0 and,\u00a0 are\u00a0 quantifiable.\u201d For example, these services<\/a> can take the form of individual scholarships and job training initiatives. Other examples<\/a> include summer camp and after school activities, preventative medical care, and maintenance of public spaces.<\/p>\n

PILOT does not go far enough <\/strong><\/p>\n

\u00a0<\/strong>Institutions often do not fulfill<\/a> their PILOT requests from the City of Boston. During the 2022 fiscal year<\/a>, Northeastern met 67% of its PILOT request. Boston University and Harvard did better, meeting 80% and 79% of their PILOT requests, respectively. However, these institutions tend to max out their community benefits. For example, during the 2022 fiscal year<\/a>, the City of Boston requested $66,709,087 from educational institutions and received $30,793,921 in community benefits and only $14,788,450 in cash contributions. Here, it is worth emphasizing that $66,709,087 is only one quarter of what these institutions would pay if their properties were not tax-exempt.<\/p>\n

\"\"<\/a>Ever more, these private institutions look increasingly less like tax-exempt charitable organizations. Many of the institutions have large budgets. For example, Harvard has its own Management Company<\/a> overseeing the investing of its $53 billion endowment. Harvard Management Company is registered as a 501(c)(3) non-profit<\/a> and does not pay property taxes in Boston.<\/p>\n

Boston should be able to increase the amount of money generated from the city\u2019s PILOT program to alleviate the pressure on its residents and small business owners and to ensure that large institutions pay their fair share for essential services. Changing these institutions from 501(c)(3) status to require payment of property taxes is likely a political and bureaucratic nightmare, especially given these institutions\u2019 reliance on the nonprofit status. That said, some Massachusetts legislators are taking steps to ensure that universities, hospitals, and cultural institutions start to pay their fair share.<\/p>\n

Bill H.2963<\/strong><\/p>\n

Representative Erika Uyterhoeven refiled Bill H.2963<\/a>, An Act Relative to Payments In Lieu of Taxation by Organizations Exempt from the Property Tax on January 19 this year. The proposed bill:<\/p>\n