No one disputes the key roles that universities and teaching hospitals play in the city of Boston’s economic success.
But a big potential dispute looms over the roles they should play in funding the city of Boston’s budget.
The City Council is embarking on an aggressive effort to squeeze more cash and community benefits out of these tax-exempt “eds and meds.” Yes, the PILOT program is a perennial punching bag at the council. But this time feels different. This time, we could see the first major changes to the voluntary program for payments in lieu of taxes since it was first put in place nearly nine years ago.
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Councilor Michael Flaherty called forhearings on the issue, and councilors Lydia Edwards and Annissa Essaibi George filed an ordinance that would put PILOT reforms in motion. And new City Council President Kim Janey all but assured the big institutions that change is coming by promising during her inaugural address this month that she would create a new council committee charged solely with evaluating the PILOT program. That’s supposed to happen at the council’s next meeting on Wednesday, when it adopts committee guidelines for the year.
First, let’s talk about what is going right. Universities, teaching hospitals, and cultural institutions pumped $34 million into the city’s coffers in the last fiscal year, an amount that has been rising steadily since the start of the current PILOT program. The Lincoln Institute of Land Policy has determined that no other city in the United States is more successful in wringing cash out of its nonprofit institutions, based on the total haul.
The current system was hashed out during former Mayor Thomas M. Menino’s administration: City officials request larger nonprofits, those with at least $15 million worth of real estate, to contribute 25 percent of what they would be paying if their properties were on the tax rolls; half of that amount can come in the form of credit for community benefits they provide.
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Sounds good so far. But the PILOT Action Group, a watchdog coalition of activist organizations, reported late last summer that fewer than one-quarter of the nonprofits paid the full amount requested by the city, down from the year before, and well off the peak of 48 percent in 2012.
Critics say that’s just one flaw. Flaherty said most of the valuations used to calculate PILOT requests haven’t changed much since the program’s inception. The same can’t be said of the property evaluations used to calculate the bills of residential taxpayers. Edwards also said she’s worried that city officials are not aggressively adjusting their PILOT requests to reflect new commercial businesses — such as restaurants or stores — that open on tax-exempt properties.
Another sore spot: the community benefits portion. Hospitals already have some industry-specific guidelines, but not colleges and universities. Edwards and Flaherty both said they would like to start a public dialogue to determine whether these big institutional players should do more to address crises that the city faces, such as opioid addiction or inadequate affordable housing.
Then there’s this issue of “institutional creep:” As the big schools expand their land holdings, more properties fall off the tax rolls.
The councilors stress that they want this review of PILOT to be amicable, not confrontational. But some institutions are more likely to go along than others. Boston College, for example, contributed $358,000 in cash last year, or 10 percent of the total request. As a Jesuit Catholic university committed to service, spokesman Jack Dunn said, BC officials believe the best way to help the city is through more than $30 million in community benefits it provides annually instead of PILOT participation.
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Boston chief financial officer Emme Handy said the Walsh administration is looking forward to getting closer to 100 percent participation with the City Council’s input. City officials note that after fiscal 2016, they increased the amount they request of the nonprofits every year by 2.5 percent.
Richard Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, isn’t necessarily spoiling for a fight, either. Doherty was a key player in the discussions a decade ago; he points out that members of the Menino task force at the time agreed participation should be voluntary. The specific benefits that the schools provide go well beyond what they get credited for in the PILOT assessment, not to mention their broader contributions to the city’s innovation ecosystem.
Tish McMullin, head of the Conference of Boston Teaching Hospitals, said her group welcomes the opportunity to continue the conversation. Doherty expressed similar sentiments. He said the city’s nonprofit leaders are happy to have a conversation with councilors about these benefits — but maybe not if that conversation is geared toward undoing their organizations’ tax-exempt status.
Janey, the council president, knows participation is voluntary. But she also knows the numbers: the outdated property assessments, the incomplete participation rates.
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Janey said the city simply leaves too much on the table right now. It’s time, she said, for Boston’s nonprofit partners to pay their fair share. Figuring out exactly what that means might not be so simple.
Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.