Boston City Council led a packed hearing on Thursday, August 3, discussing the successes and shortcomings of the city’s Payment in Lieu of Taxes (PILOT) program. The program — in which Boston asks nonprofits with tax-exempt property to make voluntary contributions equal to about 25 percent of their property values — has been criticized by activists and city officials alike due to wealthier participants’ tendency to give less than desired.
According to a recent city report on the PILOT program, less than half of the institutions who contributed gave 75 percent or more of their requested funds, and only 11 organizations gave their full requested amounts. For the 2018 fiscal year, Boston received a total of $34 million from the PILOT program which, while more than in previous years, is still only 75 percent of what was requested. Those arguing for reform say that this is unacceptable, given that some of these nonprofits hold billions of dollars in property in a city that is currently amidst an affordable housing shortage and relies on real estate taxes to fund 70 percent of the budget.
“Our homes increase in value … we are paying increasingly more and more [while] 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,” Enid Eckstein said, who spoke at the hearing on behalf of the PILOT Action Group. “It is not sustainable to ask Boston taxpayers to increasingly share the burden. Fewer institutions pay their full requested amount [each year].”
Still, as supporters of the program made clear at the hearing, the contributions are purely voluntary and thus at the discretion of the institutions.
This fact did not shield the PILOT program and its participants from scrutiny in City Hall, however. Councilors Annissa Essaibi-George and Lydia Edwards — who co-sponsored the hearing — voiced their concerns on nonprofits’ unwillingness to pay their fair share.
“When… these institutions act like developers, why aren’t we treating them like that? They have a lot more money than a lot of these developers do,” Councilor Edwards said. “This is about a good neighbor policy and making sure institutions are part of the community and paying their fair share.”
Councilor Essaibi-George expressed frustration at the fact that nonprofits decline to pay their contributions while the city pays them for services.
“One of the things that’s frustrating to me is when we’re paying institutions to use their facilities… [they’re] not fulfilling their commitment, and then we’re writing them a check for ice time or graduation,” she said.
Specific aspects of the PILOT programs came under an especially critical eye during the four hour hearing. The institutions‘ estimated property values that are factored into the requested contributions, for instance, are going by 2011 numbers. It’s no secret that property values have climbed steeply in seven years. On top of this, many of the larger institutions — such as Harvard University and Northeastern University — have bought more land since 2011.
“It’s very hard to judge the success for this program and pat ourselves on the back when we’re not talking about 2018 values of property, which have gone up exponentially,” Councilor Edwards said.
Also under fire was the fact that a nonprofit’s contributions do not have to come in the form of cash, but could also be given as “community benefits.” Around half of each institution’s contributions came in the form of these community benefits, but many failed to tell the city what those benefits were.
“Who gets to determine what that benefit looks like and whether or not it is truly a benefit to the community?” asked Councilor Kim Janey at the hearing.
City officials stated that the contributing nonprofits get to decide whether their actions benefit the community or not, and that detailing these benefits to the city is as voluntary as the contributions themselves. Councilor Lydia Edwards sees problems with this lack of transparency, and cited examples of how nonprofits can stretch the definition of community benefits.
“One of the examples in an annual report is that a private high school reported that the money saved to [Boston Public Schools] by students not going to BPS was a community benefit,” Councilor Edwards said.
Because of this, Enid Eckstein and the PILOT Action Group argue that a higher level of accountability and scrutiny, as well as a stricter framework of what can be considered a community benefit, be instituted.
Present to give testimony were several students and graduates of nonprofit schools involved in the PILOT program. Keely, a Northeastern University graduate and a member of the Boston branch of Socialist Alternative, argued against the state law that exempts nonprofits from paying property taxes altogether.
“The Board of Trustees at Northeastern has representatives of Goldman Sachs, GE, National Grid, and ExxonMobil. These don’t sound like nonprofit institutions to me at all,” she said.
Despite these criticisms, officials from Mayor Marty Walsh’s office say that Boston’s PILOT program is a widespread success, and attest that cities across the country look to it as a template.
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