Aquarium not making in-lieu-of-tax cash payments to Boston

THE NEW ENGLAND AQUARIUM, suggesting nonprofit cultural institutions like itself are already contributing enough, says it won’t be making any in-lieu-of-tax cash payments to the city of Boston this fiscal year.

In a letter to the city’s assessor, Eric Krauss, the aquarium’s executive vice president, said the nonprofit institution is an essential component of the cultural and economic fabric of the city, providing substantial but “difficult to quantify” benefits. Making cash payments to the city, he suggested, would be a heavy burden.

“Please note that no other nonprofit aquarium or zoo in the United States makes any payments to any governmental body related to its nonprofit operations,” Kraus said. “More than 70 percent of our fellow institutions receive some form of local, county, or state government financial support for their day-to-day operations. On average, government support for those institutions represents one-third of their annual operating budget. We receive no such support.”

Boston’s payment-in-lieu-of-taxes, or PILOT, program was launched in 2012. The voluntary initiative is an attempt to recover some of the cost of city services from nonprofits that are tax-exempt. Every year nonprofits with property in Boston valued at more than $15 million are asked to pay 25 percent of what they would have owed had their properties been on the tax roll. Half of the payment can come in the form of in-kind contributions, the other half in cash.

The city’s cultural institutions always lag behind education and medical nonprofits in complying with the city’s request. The 10 institutions classified as cultural entities in the city’s PILOT program paid a total of  59 percent of the total payments for which they were billed in fiscal 2019, compared to 92 percent for Boston’s medical institutions and 71 percent for its educational institutions.  This distribution has remained consistent through the years.

The PILOT program is a touchy subject for many of the city’s cultural institutions.  Like the New England Aquarium, the Museum of Science, the Children’s Museum, and the Institute of Contemporary Art make no cash payments to the city’s PILOT program. The Museum of Fine Arts contributed 6.4 percent of the cash contribution it was billed this year. By contrast, the Boston Symphony Orchestra has been paying the full 100 percent cash and in-kind contribution billed by the city since the program’s inception back in 2012.  That amounted to $118,000 in cash in fiscal year 2019.

“The Boston Symphony Orchestra is committed to making its voluntary PILOT contributions each year and to supporting the many services so important to the BSO,” says Mark Volpe, the president and CEO.

Vikki Spruill, the New England Aquarium’s president, said in letter to the city’s assessor earlier this year that the voluntary payments requested by the city are too much, given the organization’s small endowment and its limited flexibility on revenues and costs. “Meeting the city’s expectation for PILOT payments would be extraordinarily difficult and could impair planned operations and necessary capital improvements,” she said.

The aquarium was credited with making $231,000 worth of in-kind contributions in fiscal 2019, but it has never made any cash payments to the city.

While both cash and in-kind payments are valuable to the city, cash contributions, which are the city’s sixth largest source of revenue, are the most advantageous, according to officials.

Boston Mayor Marty Walsh says he recognizes that the cultural institutions play an invaluable role in the life of the city.  “Of course we always want to see improvements in their voluntary PILOT contributions so that we can continue to provide them with the same high level of city services,” he says.

Daphne Kenyon of the Lincoln Institute on Land Policy in Cambridge isn’t persuaded by such arguments.  “I reject their idea that the cultural institutions do a lot for the community and therefore they shouldn’t have to pay, because schools and hospitals do a lot for the community as well and they pay in,” says Kenyon, who has done considerable research on the operation of PILOT programs.

Sam Tyler, the former president of the Boston Municipal Research Bureau, a business-backed group that monitors city finances, supports the cultural institutions’ position of providing less cash and more in-kind contributions.  “I think the city should be flexible in allowing greater than the standard 50 percent credit for them,” he says.  “In fact, in some instances, no PILOT cash payments may be justified.”