PILOT payments should be standardized statewide
Legislation would set payment level at 25% of commercial rate
A correction has been added to this commentary, correcting the payment amount of Harvard University.
“It’s about fairness. It’s about how do you want to participate in this city that you get city services from: police, fire, public works. I think you should share in those costs.”
House Bill 3080 (Senate Bill 1874) authored by Erika Uyterhoeven of Somerville and cosponsored by 19 fellow state legislators, would finally realize Menino’s vision and empower cities to set common rates. Under the legislation, cities could require payments of up to 25 percent of commercial property tax rates for nonprofits with over $15 million in property and could include provisions for in-kind community benefit contributions in lieu of cash.
But what’s wrong with voluntary payments? Boston provides a useful case study.
As some readers may recall, prior to 2010, universities and hospitals had made, but very inconsistently, voluntary payments in lieu of taxes—often referred to as PILOTs—to Boston (and to other communities throughout the Commonwealth).
The amounts varied wildly. The Cambridge-based Lincoln Institute of Land Policy in 2010 had observed that Boston University paid 8.5 percent of commercial property tax rates, compared to 1 percent from Northeastern. There were no common standards.
But faced with a Great Recession-driven fiscal shortfall, Menino established a task force in early 2009 to bring fairness to the PILOT process. The task force members included the president of Boston University, the president of Wentworth Institute of Technology, a senior vice president at Beth Israel Deaconess hospital, the chief operating officer of Partners Health Care, an executive vice president of John Hancock Financial, the Boston police union head, the executive director of Codman Square Neighborhood Development Corporation, and city councilor Stephen Murphy.
Over two years, the task force held 10 meetings. In December 2010, it recommended that nonprofit institutions that owned over $15 million in property make PILOT payments at 25 percent of the commercial property tax rate, with provisions for half of it (12.5 percent) as community benefits.” The percentage requested of institutions was established in consideration of the share of essential city services (fire, public safety, snow removal, etc.) that all institutions directly benefit from amounted to about 25 percent of the overall budget. Community benefits were supposed to directly benefit city residents in ways that are “quantifiable” and prioritize “shared goals.”
After the report was issued, task force members were enthusiastic. Robert Brown of Boston University explained his support this way to the Boston Globe: “My primary goal in life is to make Boston University a better institution, but it can only be a better institution if the city thrives.”
Even matching the PILOT standard, nonprofit institutions retained, the Globe noted, a very good deal. Paying commercial taxes would cost institutions $404 million—full PILOT was only $48 million. One added note: full payment means 12.5 percent of property tax at Fiscal Year 2010 values. Tax collections in 2020 were 66.5 percent higher than in 2010—and many institutions have expanded their footprints—so a new assessment (now finally underway) would demand more of institutions.
The current lack of state standards also allows institutions to play one city off against the others. For example, Tufts cut its payments in the last year to Boston after Medford and Somerville residents sought like payments for their cities.
Back in 2011, Eric Buhrens, Beth Israel’s president at the time, worried about precisely such unfair play, saying to the Boston Globe, “I’d hate to feel like I was the only guy paying my taxes.’’
There is a solution to this—House Bill 3080—which enables municipalities to ensure that all institutions make PILOT payments at a consistent and equitable rate.Given our communities’ needs—in such critical areas as housing, transportation, public schools, and public health—the legislation’s value is obvious. For institutions too, there is a value to having universal standards evenly applied across the board—offering a chance for them to restore public trust through deeds, and not just words.
Enid Eckstein is a member of the Boston PILOT Action Group and Marianne Walles and Eric Von Berg are co-chairs of the Somerville-Medford PILOT Working Group. All of the authors are members of MAP, Massachusetts Action for PILOTs, which advocates for greater accountability and community investment from large non-profit institutions.