Edwards, Essaibi-George Want Hospitals, Schools to Pay Their Fair Share in Pilot Program

August 11, 2018
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The City Council Committee on Ways and Means held a hearing on Aug/ 2 regarding the Payment in Lieu of Tax (PILOT) program. Through this program, which is in its seventh year as of fiscal year 2018, schools, hospitals, and cultural institutions can voluntarily compensate the city through cash payments and community benefit programs instead of paying taxes.

Much of the hearing ended up being about universities like Northeastern, with many from the community testifying that they believe the Fenway-based college isn’t paying its fair share.

The chair of the committee is Mark Ciommo, and the sponsors are Councilors Anissa Essaibi-George and Edwards. At the start of the hearing, Essaibi-George said that she appreciates the services that institutions, such as hospitals and universities, bring to the City of Boston.

Edwards said that this hearing was “about a good neighbor policy,” and that she had several goals for the hearing, including that accurate and up-to-date information be looked at, as well as the discussion of ways that the city can be “bold, creative, and make sure these institutions are paying.”

While Edwards recognized that this program is voluntary, she said that she wants to make sure that these institutions pay their fair share.

Right now, institutions are asked to pay the equivalent of 25 percent of their assessed property taxes and half of that is forgiven in a community benefit, so “in effectual institutions are asked really to pay 12.5 percent of the equivalent property tax payment,” said Enid Eckstein of the PILOT Action Group.

Eckstein said, “We came together to advocate for improvements in the program,” and said that they felt like evaluating the program was an important step.

“These institutions benefit from being part of the vital fabric of Boston, and they receive essential City services, so what is their responsibility to the city?” she asked.

The PILOT Action Group has generated a report that Eckstein said she believes shows how the PILOT program “falls short in several key areas.” She said that there is uneven institutional participation – while more total cash funds are collected each year, increasingly fewer institutions are paying their full requested amount. She said that number has actually decreased each year. In fiscal year 2018, Eckstein said that only 26 percent of institutions met their full requested payment, and there is $77 million in unpaid payments.

“The heath care sector comes closest to meeting its obligations, whereas universities and cultural institutions lag behind,” she said.

She said that she wants to “make very clear” that several of these institutions hold billions of dollars in endowments, have millions in surplus revenue, and paid more money in hedge fund management fees than they paid to the city for the PILOT program this year.

“So we really have a misalignment here in terms of our system and this is all public record,” Eckstein said. “We have an obligation as the city to look at how we oversee a program that we rely on.”

Meanwhile, Boston CFO Emme Handy praised the PILOT program, saying that it is “a very successful voluntary program,” and that other cities have used it as a model. She said that $33.6 million was paid in Fiscal Year 2018 as voluntary money from participating institutions, and that 74 percent of the Fiscal Year 2018 request was met.

“Fiscal health of the City of Boston is one of our highest priorities,” said Sam Tyler of the Boston Municipal Research Bureau. He said that in terms of revenue generation, the program has been “very successful,” and that more diverse revenue sources have been advocated for.

Tyler said that the total PILOT payments have been below the City’s request, partially because “the City’s request was aggressive for the first five years.”

However, he said that educational institutions have increased their payments by $5 million over the seven years, but it is still less than the City has asked for.

Handy said that she agrees that there is progress to be made, but “the nature of the voluntary program would mean that we cannot compel an institution to gift us something.”

Right now, since the PILOT program is voluntary, institutions get to decide what their community benefits are.

Ciommo said that every college/university has to provide a 10-year master plan in which they go through a process with the community and once there is some agreement, the community benefits will come forth.

Councilor Ed Flynn asked what steps could be taken to encourage those not paying to contribute fairly to the city. Handy said that it is a great idea to build on community connections with institutions, and Tyler agreed that maintaining relationships with these institutions is “important.”

Several members of the community testified also. A large portion of them were related to Northeastern University in some way. One student said the institution has paid just $5.5 million of the $18.7 million requested by the City since 2012.

Caitlin Gaffney, an educator at both the Maurice J. Tobin K-8 School in Mission Hill and at Northeastern University, testified about the juxtaposition of Northeastern’s expansion into neighboring areas alongside the loss of resources at the Tobin School. She gave examples like “Northeastern’s footprint in Roxbury has significantly enlarged, the Tobin School lost our library and librarian.”

And “Northeastern expanded their global reach, Tobin School lost our school resource officer.”

After four or five of these juxtapositions, Gaffney said, “Today I call upon the Boston City Council to hold Northeastern and all of the other institutions responsible for giving back their fair share to this great city that they have significantly benefitted from.”

Another issue that came up is the affordable housing crisis, which many of the graduate students who testified attributed in part to the lack of university-provided housing.

Richard Giordano of the Fenway Community Development Corporation (CDC) said that “universities have done tremendous good things for this city, but they’ve also created tremendous problems.”

He suggested that if universities are not going to construct dorms to the capacity that they would need, then they should begin to donate the land that “they’ve been land banking and in some cases pretty much exploiting or holding for other purposes” to non-profits and community development corporations that can build affordable housing.

He said this way, these buildings will come back on the tax roll since affordable housing is taxed.

Councilors Essaibi-George and Edwards closed out the hearing by saying that this is only the beginning of a discussion on this topic.

“This can’t be a one-and-done style of hearing,” Essaibi-George said. She said that she thinks it’s important to recognize the role that these institutions play in the city, as well as the partnership that is important for the city to have, “especially as we as a city more and more rely on property tax revenue from residents and homeowners across the city.”

Said Edwards, “There are no enemies at the table, just better standards that we can hold our institutions to. And I think I look forward to working with them to create those standards, and I know ultimately we will and we ultimately will not only continue to lead the nation, but really, really actually have a true success that all of us can benefit from.”

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