Council hearing underscores limited impact of PILOT revenue

Nearly 200 college students, alumni, teachers, and community activists— many brandishing protest signs— packed into the City Council Chambers at City Hall last Thursday afternoon for a hearing on the current status of the Payment in Lieu of Taxes (PILOT) program. The voluntary program, created in 2011 as a way for property tax-exempt, landowning non-profits in the city such as universities and hospitals to offset their consumption of city services, has come under scrutiny in recent years as institutions have continued to pay less than the annual amount requested by the city.

Over the span of four hours, City Councillors Annissa Essaibi-George and Lydia Edwards, who both co-sponsored the hearing, directed questions towards panelists that included representatives from Boston-based colleges and universities and from the PILOT Action Group. The discussion largely centered on increasing enforcement, accountability, and transparency in the relationship between the city and its nonprofit institutions.

“This is about a good neighbor policy and making sure institutions are part of the community and paying their fair share,” Edwards said.

Under the existing PILOT agreement, non-profits are expected to pay 25 percent of what their property taxes would otherwise be based on their 2010 tax assessment. Half of this payment can come in the form of cash, while the other half can come in the form of community benefit programs.

Since 2012, a dwindling number of institutions have paid their full 25 percent contribution, resulting in more than $77 million in uncollected funds in the last seven years, according to a city estimate. Critics say that unrealized money could be put towards helping the city’s underfunded public schools and addressing Boston’s affordable housing crisis.

The “Big 4” schools —Boston University, Harvard, Northeastern, and Boston College — are the biggest “underpayers” in the program, with the latter two having paid less than a third of their requested cash contribution.

Johnny McInnis, Political Director of the Boston Teacher’s Union, pointed out in his testimony that while the city’s nonprofits expand, Boston’s public schools continue to struggle with chronic underfunding.

“Northeastern University’s unpaid contribution alone could have doubled the mayor’s investment in social and emotional health in our schools,” he reasoned. “We ask respectfully that our wealthiest institutions grow with us, not on us.”

Robert McCarron from the Association of Independent Colleges argued that the unseen community services and intangible economic and social benefits provided by colleges and universities more than make up for the program shortfall, insisting that nonprofits “contribute in innumerable ways.”

But city council members disagreed.

“It’s frustrating to pay institutions to use their facilities,” said Essaibi-George, who acknowledged the sense of “institutional creep” felt by many across the city in recent years.

“Any institutions that are not fulfilling their commitment, and then we’re writing them a check for ice time or graduation…I have a problem with [that].”

Councillor Kim Janey, who also spearheaded the line of questioning at the hearing, expressed doubt about the actual depth and reach of some universities’ community benefit programs, the nature and parameters of which are decided upon by the institutions themselves.

“There’s no question that these institutions are economic engines for Boston, but the question is who’s benefiting from that economic spurt?” asked Janey, adding that there remains “room for improvement in community input and engagement efforts” regarding the direction of these service programs.

Enid Eckstein testified on behalf of the PILOT Action Group, a collection of community organizations advocating for program reform, and proposed the creation of a new PILOT Commission that would analyze several key issues, including community representation in the planning and implementation of benefit programs, increased transparency in reporting contributions, and a reevaluation of property values, which are currently based on outdated Fiscal Year 2010 levels.

“These institutions hold billions in endowments, millions in surplus revenue, and have paid more in hedge fund management fees than they have to the city in PILOTs,” said Eckstein. “It’s not sustainable to ask Boston taxpayers to increasingly share the burden.”

Despite this volley of grievances, representatives from the city stood firm, claiming that from a legal standpoint, not much can be done immediately to change the framework of the program.

Emme Handy, Boston’s Chief Financial Officer, reminded councillors that the program was adopted on the basis of voluntary negotiation in order to foster a spirit of collaboration between nonprofits and the city.

“The program is by definition voluntary,” she repeated more than once. “We cannot compel an institution to gift us something.” Sam Tyler, President of the Boston Municipal Research Bureau, echoed Handy’s remarks.

“There’s area for growth, but you’re not going to see success like this in any other city in the country,” he said, pointing out the relative success of the program in a national context. “To expect full payment is unrealistic.”