Let's tax all the universities and hospitals!

[JohnAKeith]

Hello.

Sorry for the interruption, but I am putting together a blog entry / newspaper article on the Mayor's proposal to "get tough" with the universities and hospitals and start pushing them to make "payments in lieu of taxes" (PILOT) on all their real estate.

If you're not familiar with the whole topic, it basically boils down to this: non-profits are exempt from paying property taxes on their land. It's a law passed by the Commonwealth. To get around this, cities and towns set up "PILOT" programs which "encourage" non-profits to make tax payments based on the assessed value of their properties. In Boston, the city suggests that the "voluntary" payments be 25% of the amount that would be due if the property was fully-taxable.

Some universities and hospitals pay "full" value. BU pays $4 million per year. Harvard pays less. Brigham & Women's pays its full value.

Other organizations take a pass and pay nothing.

Seems inequitable, right?

Now that the city of Boston is facing a $140 million deficit, this year, the mayor is pushing for an overhaul of the program so that everyone pays something. (To be fair, this issue has come up, time and again, over the years ... all the way back to Ray Flynn and beyond.)

So, what do you think? Should non-profits be exempt because of the "contributions they make to our society"? Should all non-profits? What about museums and homeless shelters and community health centers? Should they have to pay something?

Sometimes, the non-profits compromise. They pay a percentage based on the "income-earning" parts of a piece of land. So, if a medical center has a Starbucks on it, they would figure out what percentage was income-producing and make a payment just for that portion.

This week, BC's 10-year master plan was approved. BC is in the process of buying 2000 Commonwealth Ave. This property is ginormous. It brings in an estimated $400,000 in property taxes, each year. If BC buys it and turns it into dorms, then it goes off the city's tax role.

Fair? Not fair? Tough luck?

What are you thoughts on the whole thing?

Thanks a lot!

[BostonObserver]

Let's tax all the housing projects. I bet they take up more land than any university and they require a lot more city services. According to the south end news your area police(D-4)spend most of their effort in lower roxbury. Which section do you think contributes more in taxes the south end or lower roxbury.

[vanshnookenraggen]

I think the law works best from small organizations but not large institutions like Harvard and BU. Harvard is the wealthiest university IN THE WORLD, how is it getting away with not paying it's share? (probably because it can).

[palindrome]

I feel BC should continue to to make the $400,000 payments, and even increase their payments to the city from their Brighton campus.

If i am not mistaken, the property (former cardinal's residences) was was never taxed to begin with as the catholic church owned it.

I do not know if the brighton property ever contribute to the PILOT, or if BC contributes for it now, but i feel they should.

I think it would be fair if city taxed campus residence halls. I have no way of proving this, but i feel like BC is making money off of them.

Disclaimer: I am a BC student who was born and grew up in Boston, and a little drunk at that!

[tobyjug]

If a non-profit has a for profit business as a tenant, the non-profit pays property tax on that profit generating portion of the property. For examples, the commercial street level area in the Little Building (Emerson College), or Suffolk on the Sal's Pizza space (if it gets approved.) The classic battle used to be with hospitals that leased space to their doctors for office space. Hospitals now pay property tax on that space. Though treatment offered by the doctors might be part of the hospital's non-profit/charitable purpose (I'm laughing as I type that part), leasing office space to medical tenants is not. This is so even though the rental proceeds might advance the overall charitable purpose because of the financial benefit to the institution on account of the leases.

PILOTs are supposed to be voluntary, but wise institutions make some effort, or risk unproveable retaliation by city officials (e.g., surprise fire and health inspections, slow building permit approvals, denial of discretionary variances and permits).

Boston has tried sneaky tax disguised as fee schemes in the past. The most famous was attempted in the 70's when the city tried to levy "fees" for fire protection for high rises. The courts gave that one the hook.

[JohnAKeith]

One addendum. Suppose a profit-making venture owns property. If it makes money, it distributes that money to its shareholders. However, suppose a non-profit-making venture owns property. If it makes money, it reinvests it.

I think there's a big difference there.

[czsz]

Universities have suffered endowment drops over the last year and are modeling cuts across the board - and keep in mind that the vast majority (over 80% of endowments) are locked up in investments and almost never used by the university itself. Pulling out of them could have serious adverse effects on the market. Universities will also wind up spending a lot more on financial aid to keep students solvent and opportunities open.

I'm not so sure they'll feel more "encouraged" to start forking money over to cities without some form of legal compulsion. Even then, I'm sure they would start tax-sheltering resources (with their own ancillary benefits for the city and state) like crazy.

[tobyjug]

Originally Posted by JohnAKeith

One addendum. Suppose a profit-making venture owns property. If it makes money, it distributes that money to its shareholders. However, suppose a non-profit-making venture owns property. If it makes money, it reinvests it.

I think there's a big difference there.

Ah yes, but the courts do not agree with you. The property must be used by the charitable/non-profit, not used to generate income for the purpose of supporting the charitable/non-profit. For example, though Little Building private tenants pay rents that help Emerson maintain its program, that does not constitute "use" by Emerson such that the property would be wholly exempt. As another example, the City probably could have taxed that "billboard" that was on the Pine Street Inn tower for years.

Sometimes these things come down to questions of degree of use by the private tenants as a percentage of the whole space, and subjective judgment. That is most often the trigger for parties to enter into a PILOT agreement so that everyone is "happy" with the allocation.

[kennedy]

I would suggest they find ways other than taxes for the universities/hospitals to contribute to city coffers. Perhaps some form of a student-job creation program? Like work-study, but with the money coming the university? X% of sophomore-senior undergrads must work in the city, at university-run developments? I doubt that would work, but I doubt it would go smoothly if we imposed a tax on the universities. They are non-profits, after all, and it wouldn't look too good to tax them (no matter how large their endowments are).

Endowments, there! Is it possible to create a program that would force universities and hospitals and the like to invest their endowments into the city? They invest them all over the place, but what if there was some sort of a law that made them invest in local companies? That would be the best solution, IMO.

[PaulC]

Endowment tax proposal withdrawn
Sydney Lupkin

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Published: Wednesday, April 29, 2009
Updated: Wednesday, April 29, 2009
State Rep. Paul Kujawski (D-Webster) withdrew an amendment proposal Tuesday for an endowment tax on colleges and universities with an excess of $1 billion in endowment funds.

The idea for a 2.5 percent tax on all endowment funds exceeding $1 billion was proposed as an amendment to the House budget for fiscal year 2010.

?The proposal has large, obvious flaws and the potential for severely negative unintended consequences,? Boston University President Robert Brown said in a brief email exchange.

Private universities are considered nonprofit organizations and are therefore exempt from paying property taxes. As such, legislators on Beacon Hill, such as Rep. Angelo Scaccia (D-Boston), are eager to generate revenue by taxing these ?fat cats,? according to a State House News Service summary of Tuesday?s House session. Scaccia repeatedly voiced his objections to Kujawski?s withdrawal, arguing that private universities are taking a free ride.

Although BU?s endowment briefly exceeded the billion dollar mark at the conclusion of fiscal year 2008 on June 30 with $1.1 billion, that total has fallen 28.7 percent in the first three quarters of fiscal year 2009, BU Chief Investment Officer Pam Peedin told The Daily Free Press earlier this month. As such, BU would not be subject to this tax.

Neither Kujawski nor Scaccia were available for comment at press time.

source:http://www.dailyfreepress.com/endowm...rawn-1.1738447

[underground]

Boston and the metro area gain unique benefits from our high concentration of non-profits that put our region at a competitive advantage. Why would we want to discourage that? Sure, we don't like it when BU students have loud parties and MIT students throw who knows what in the river, but lets not forget that those students are also starting companies that create jobs and generate wealth (and tax revenue) down the road.

[statler]

^^ Because, unlike a corporation, universities are very unlikely to pack up and leave and the cities and towns know this. The universities have nothing to hang over the head of local officials.

[kennedy]

Of course they do, it's called their endowment. They can choose to invest it in other cities and businesses. Sure, they won't leave, but they'll stop being so friendly when it comes to things the city/community wants. Not that they're very friendly in the first place, but, it still holds true about investment.

[KentXie]

I wonder why NEU contributes so little to the city. I'm sure they have a lot of money too.

[Lurker]

Unlike most other institutions in the city, instead of making PILOT payments, Northeastern pays real estate taxes on a significant portion of its property . At least that's according to the president in an interview with Emily Rooney.

[Oakley]

Originally Posted by kennedy

Of course they do, it's called their endowment. They can choose to invest it in other cities and businesses. Sure, they won't leave, but they'll stop being so friendly when it comes to things the city/community wants. Not that they're very friendly in the first place, but, it still holds true about investment.

Yeap. If you notice, schools like Boston University and Harvard are opening and expanding foreign and non-Boston facilities.

The problem with endownments is they are pretty restrictive in how a lot of money can be spent.

[Oakley]

Originally Posted by underground

Boston and the metro area gain unique benefits from our high concentration of non-profits that put our region at a competitive advantage. Why would we want to discourage that? Sure, we don't like it when BU students have loud parties and MIT students throw who knows what in the river, but lets not forget that those students are also starting companies that create jobs and generate wealth (and tax revenue) down the road.

How many of those companies are actually kept in Boston (and Massachusetts)? With the state's anti-business climate, it would be interesting to know.

[palindrome]

Originally Posted by statler

^^ Because, unlike a corporation, universities are very unlikely to pack up and leave and the cities and towns know this. The universities have nothing to hang over the head of local officials.

Is there an actual historic example of a university completely relocating to another place? That would be interesting info. Anyone know?

[Ron Newman]

Depends what you mean by "another place". MIT moved from Back Bay to Cambridge. BC moved from the South End to Chestnut Hill. BU moved from Back Bay to where it is now. Emerson College has wandered around the city, finally settling in the Theatre District -- but only after very nearly moving to Lawrence.

Pepperdine University moved from south-central Los Angeles to Malibu in the early 1970s.

[kennedy]

I wish they were all still in the Back Bay, that would be so much better...well, actually I just wish Harvard was in Boston proper. MIT looks good on it's side of the river.