A new task force dedicated to examining Boston’s tax system for nonprofit institutions, including Boston University, met for the first time Monday in a new effort toward reforming the way nonprofits pay the city.
Mayor Thomas Menino appointed the task force to examine a system that allows nonprofits to apply for tax-exempt status and negotiate their own tax payments in ‘payment in lieu of taxes’ agreements.
The current PILOT program ‘allows the city to tax up to 25 percent of the institution’s liability were it considered taxable,’ according to a Jan. 28 press release from the mayor’s office.
The city of Boston relies primarily on property taxes to generate revenue, but 53 percent of land in Boston is tax-exempt. In the face of economic trouble, the current system needs to be restructured, the press release said.
‘This task force is not just about generating new revenue,’ Menino said in the press release. ‘This task force is about creating equity in our PILOT agreements, from in-kind services to scholarships and other community opportunities. A new formula to ensure fairness is necessary.’
BU President Robert Brown was appointed to the task force. Other members include representatives from the business and healthcare communities, labor organizations and area universities.
‘One of the issues is that the payments, how they are currently structured, dates back to the 1970s, and there wasn’t the sense that there was some sort of standard to enforce across the board between institutions,’ Menino spokesman Nick Martin said.
Councilor-At-Large Stephen Murphy’s spokesman, Seth McCoy, said that because so much of Boston’s land is tax-exempt, residents carry an unfair amount of the city’s financial burdens.
‘The goal would be to have tax fairness, and if that means collecting more money from non-profits, then yes, that would be the case,’ McCoy said when asked if universities should specifically be expected to pay more in taxes.
McCoy said property taxes are a burden for residents in the poor economy. A deal needs to be reached in which nonprofits contribute to the city’s budget in an equitable way, McCoy said. The more property universities purchase, the more the city must rely on the property taxes of residents.’ ‘ ‘ ‘ ‘
‘We think it’s great that non-profits contribute the way that they do to the city, but we can’t continue to let homeowners be priced out of their homes that they’ve lived in for 20, 30, 40 years because non-profits are buying up taxable property,’ McCoy said.’ ‘ ‘ ‘ ‘ ‘
In fiscal year 2008, PILOT collected $31.4 million dollars, according to the press release from the mayor’s office.
Some university officials worry that a drastic change in the system would leave universities responsible for paying millions more to the city and consequently passing those costs on to students.
BU spokesman Colin Riley said the university pays more than $4.6 million a year to the city in lieu of taxes. In contrast, Northeastern University pays $30,751, according to a Dec. 10 Boston Globe article.
Riley said that BU has a good relationship with the city, but he is weary of the effect that a new taxation system might have on students.
‘Whenever there are additional costs to the university, the students will bear at least some of those costs,’ Riley said.