Whether the city’s wealthiest nonprofits with tax-exempt status are paying their “fair share” to support the communities they do business in has members of the City Council divided.
Assessing Department Commissioner Nicholas Ariniello said Friday that the 47 nonprofits participating in the city’s payment in lieu of taxes, or PILOT, program are not meeting the full payment requested by the city.
In fiscal year 2022, collective payments from these private institutions — which mainly consist of colleges, hospitals and cultural centers with tax-exempt property in excess of $15 million — were 75%, or roughly $92.4 million of the requested $123.5 million, Ariniello said.
Under the program, these nonprofits make voluntary payments, which amount to roughly 25% of what they would have paid in real estate taxes and are meant to “help to offset the burden placed on Boston taxpayers to fund city services for all property owners,” according to the city website.
Property taxes represent 74% of the city’s revenue, but more than 50% of real estate in Boston is tax-exempt, according to City Councilor Liz Breadon, who is leading a contingent of councilors pushing for an update to the PILOT program — which has operated under the same guidelines since 2012, and bases payment requests on tax-exempt property values from 2010.
“In a wealthy and prosperous city like Boston, we have to ensure that expanding economic success is felt by all of our residents, and the prosperity that we have as a city is one that everyone can share,” said City Councilor Ruthzee Louijeune. “Our wealthy and renowned nonprofits can afford to pay their fair share.”
She spoke particularly about her alma mater, Harvard, which owns a “disproportionate amount of property” and has a “disproportionate amount of wealth and endowments that would just be able to do so much for our families.”
“And I think about why we allow institutions that already yes, they give so much to the city, but they also owe so much to the city,” Louijeune said. “Why (would we) allow something like a scholarship, which is something that these institutions should be doing anyway, to be part of a community benefit agreement?”
The purpose of Friday’s hearing, according to Breadon, was to discuss “targeted coordination of community benefits provided” through the city’s PILOT program.
A nonprofit’s 25% contribution is split between a cash payment, which typically goes toward the city’s operating budget, and community benefits credits, which are services institutions provide to residents that they can apply toward their overall contribution.
In FY22, cash contributions totaled $35.4 million and community benefit credits were $56.9 million. A bulk of the $193.8 million in submitted community credits, which are subject to city approval, weren’t considered eligible last year, according to Ariniello.
According to Casey Brock-Wilson, director of strategic partnerships, submissions that weren’t considered eligible were those that didn’t provide direct benefit to residents. For example, she said, one institution spoke about the benefit of their employees spending money at stores in Boston.
“That is part of their normal course of business as an institution,” Brock-Wilson said. “We obviously did not accept that.”
Outgoing Councilor Kenzie Bok also spoke in favor of updating the program, saying that because of the city’s “heavy reliance on real estate tax, the reality is that the more that our institutions grow,” their tax-exemption becomes more of a financial challenge for the city.
“So structurally we have to have good solutions for that,” Bok said. “So that the city and the growth and flourishing of our large nonprofits are aligned and not at odds with one another.”
City Council President Ed Flynn disagreed, saying that he didn’t believe it was the right time to increase payments, given the state of the economy.
“We also need to recognize the value that these institutions bring to our city and the financial difficulties that they may be facing in the current post-pandemic environment,” Flynn said. “They also need our support. It is important to maintain a positive working relationship and work together.”
Councilor Erin Murphy also spoke favorably about nonprofit contributions, stating that tax-exempt status was granted to these properties for a reason.
“It’s brought people into the city and so there’s a balance here,” Murphy said.
Rob McCarron, president of the Association of Independent Colleges and Universities in Massachusetts, said the 18 colleges and universities represented pay tens of millions of dollars in real estate taxes and provide considerable benefit to the community.
“This work is most impactful when colleges and universities and their community partners are empowered to work together to deliver essential mission-based services to those who need it most,” he said.
“To do otherwise would risk offending long-standing partnerships and makes it harder for these services to reach the very Boston residents who have grown to rely on these programs, particularly when we continue to recover from the upheaval of the COVID pandemic.”