Cambridge To Assess Losses Due To Harvard

After years of complaining that area universities do not pay enough to the city government, the Cambridge City Council took action last night and ordered a report on the amount of money that the city loses due to the tax-exempt status of the schools.

Councillor Timothy J. Toomey called Harvard’s direct financial contribution to the city “woefully inadequate” given the large property tax breaks the university receives.

“Especially with the fiscal situation of the city and state, Harvard should step up to the plate,” said Toomey, who co-sponsored the order for the report with Councillors Marjorie C. Decker and Kenneth E. Reeves ’72.

The order asks city manager Robert W. Healy to report on which properties owned by local universities are tax-exempt, how tax-exempt status is determined, and how much the city would receive if the properties had remained on the tax rolls.

Mary H. Power, Harvard’s senior director of community relations, said the University would provide information for the report.

But City Councillors called on Harvard to offer more in compensation for the 189 acres of Cambridge land for which the University does not have to pay property taxes.

Harvard makes a voluntary payment in lieu of taxes (PILOT) that is currently $1.5 million annually. The University pays an additional $4.3 million in taxes every year for the land it owns that is not tax-exempt. The Massachusetts Institute of Technology (MIT) has a similar PILOT agreement.

Decker told the council that Harvard would have to pay about $33 million, and MIT $17 million, if their property was “taxed like everyone else.”

When Harvard buys property and takes it off the tax rolls, the PILOT compensation is based on the real estate tax from when it is purchased, and does not adjust based on inflation, Decker said.

Decker also called for a closer look at how the tax-exempt buildings are used and whether for-profit activities are taking place—which Mayor Michael A. Sullivan agreed has been an “ongoing issue.”

Power said she did not know of any for-profit enterprises in tax-exempt properties.

“In order to take a property off the tax rolls, it needs to be clear that the property is used for non-profit, tax-exempt use,” Power said. “I’m not aware of any examples when that’s not the case.”

In the case of mixed-use buildings that include both retail and academic space, the commercial activity is taxed, Power said.

The city and the University are currently in the middle of a 20-year PILOT agreement that was negotiated in 1990, but councillors said the often-strained relationship between the University and the city could be improved if Harvard were willing to increase its contribution.

“Harvard contributes a lot to the city, but Cambridge is also valuable to the University,” Toomey said. “It would be a magnanimous gesture on their part to increase their payment in lieu of taxes agreement.”

Power said the University was willing to discuss the PILOT agreement, although she said it is not clear when these negotiations will occur or how long they will take.

“The city has indicated an interest in working with us to renew that agreement and we will work with the City Manager to do that,” Power said.

She emphasized that Harvard makes other contributions to the city besides PILOT, citing a report released last month by eight Boston-area universities which said that educational institutions contribute more than $7.4 billion annually to the local economy.

“The basic point is that instiutions such as Harvard and MIT create significant economic strengths for host communities,” she said.

—Staff writer Jessica R. Rubin-Wills can be reached at rubinwil@fas.harvard.edu.