Council Considers Suing Harvard Over Tex-Exempt Status

The Cambridge City Council considered bringing a lawsuit against Harvard and MIT challenging their tax-exempt status as educational institutions at their regular Monday night meeting.

Currently, universities are exempt from property taxes under Massachusetts law because of their educational and nonprofit status.

Councillor Kathleen L. Born spoke about the profit that some faculty make using university research facilities that are supposed to be used exclusively for education.

"This seems to be not what the Commonwealth had in mind [when they made universities exempt from property taxes]," Born said during the meeting.

A report by City Manager Robert W. Healy indicated that professors at Harvard and MIT use their offices to perform consulting, a profitable venture, and that patents frequently bring millions to scientists who use university facilities to develop their inventions. It found that Harvard collected $16.5 million in royalties and fees from licenses and options in 1997.

The report discussed the possibility of levying property taxes only on those university-owned properties that are used for research and development purposes.

The council seemed divided over whether there was a case to be made against the universities. Councillor Katherine Triantafillou began her remarks by saying, "The universities aren't really paying their fair share to the city."

Triantafillou then voiced concern that pursuing this matter could adversely effect churches and other institutions that are also exempt from property taxes.

"I am concerned about the burden that we place on scientific and academic pursuits," she said.

Vice Mayor Anthony D. Galluccio countered by saying the universities in Cambridge bring benefits to the communities.

"It is of benefit that the research and development occurs here," he said.

He also said he wished that some of the manufacturers of the products that are first developed in Cambridge would base themselves here. That would bring more jobs into Cambridge, Galluccio said.

Healy suggested that MIT and Harvard officials be brought to the table to discuss the issue before pursuing litigation.

Harvard officials said they look forward to meeting with the city councillors about the report. The University does not yet have a position on the matter however.

"This is an issue we feel we need to study further," said Director of Community Relations for Cambridge Mary H. Power. The University received the report only a few days ago, Power said.

The University paid $3.7 million to the city in real estate taxes during the last fiscal year and is pulling its weight, Power said.

In response to comments made by councillors that other university towns and cities are litigating these matters, Power said she had talked to her counterpart at Stanford University and learned that Palo Alto has not sued Stanford for property taxes on this basis.

The report said that the cost of litigating a real estate tax case with either MIT or Harvard might outweigh the benefits of any additional tax revenues should the case be successful. It concluded that the next step in the case would be "a rather massive factual investigation."

Born motioned to send the report to the finance Committee, chaired by Cuncillor Michael A. Sullivan. 7 LITIGATION