Boston nonprofits from Harvard to hospitals escape tax classification wars [+Graphic]

Nonprofits, from Harvard to the giant hospitals, have ducked the city’s tax classification turmoil.

Behind the scenes, the Wu administration is negotiating with these tax-exempt organizations — some of which pay salaries in the high six-figure range — to fork over their fair share. But it’s not happening quickly enough, some say.

“It’s time for institutions to step up and do what is right for the long-term needs of the city,” said Enid Eckstein, co-chair of PILOT Action Group, made up of advocates in Boston pushing for reforms to the program.

“Harvard, and Northeastern, to name a few, are rapidly expanding their footprints and in many ways, we are subsidizing them,” Eckstein told the Herald Monday. “Most are just not paying their fair share.”

The latest numbers published by City Hall show these private institutions collectively contributed just 76% of their requested payment in fiscal year 2023. Of the $128 million that was requested through the PILOT program, the city collected $97.8 million, of which just $35.7 million was cash. The remainder of that sum was calculated as so-called “community benefits.”

The Payment in Lieu of Taxes program is voluntary, with many institutions falling short of the cash payments they’ve agreed to.

Marty Walz, interim president of the Boston Municipal Research Bureau, said PILOT participants should pay what they’ve agreed to in cash and not just in “community benefits.” Those benefits include scholarships; health initiatives; internships; donations; preserving open spaces; transportation; access to healthy foods; cultural programs; summer jobs; and co-ops.

But not taxes paid.

“Boston’s PILOT program is an important component of the city’s financial picture,” Walz said. “These large nonprofits, among the city’s largest employers, provide services residents need via community benefits, and they should also be encouraged to make their cash payments.”

Under the program, private institutions, which mainly consist of colleges, hospitals and cultural centers with tax-exempt property in excess of $15 million, make voluntary payments amounting to roughly 25% of what they would have paid in real estate taxes.

Rob McCarron, CEO of the Association of Independent Colleges and Universities in Massachusetts, said the “community benefits” option is vital for nonprofits.

“Any discussion around the PILOT program needs to acknowledge the full breadth and scope of the community benefits that the colleges and universities provide to the city,” he said, adding the schools bring “value … across every neighborhood.”

This all comes as a revised mayoral home rule petition hikes commercial tax rates over residential ones to help out homeowners.

The plan has drawn criticism for burdening a struggling commercial sector dealing with falling property values and vacant office space, and for the mayor’s rejection of calls to instead look to cut a $4.6 billion city budget that grew by 8% this fiscal year.

The latest version of the tax split includes the lower maximum shift of 181.5% that was recommended by four business groups, rather than the 182% Mayor Michelle Wu had initially included in a draft petition she had been circulating over the weekend.

It’s all up for a vote — while nonprofits stay below the radar, for now.

Originally Published: October 29, 2024 at 5:04 AM EDT