Harvard Drives Local Economy

Undergraduates’ late-night antics might keep local residents awake into the wee hours, but boisterous Harvard students boost greater Boston’s bottom line.

The average undergrad spends $2,880 a year at businesses in the Hub, generating 1,314 full-time jobs in the Boston area, according to a University-commissioned report released Friday.

And the tourists who trek from afar to touch John Harvard’s shiny left toe may not improve their luck—but they certainly improve the local economy. Visitors to the University bring in $82 million for surrounding businesses, according to the report, creating 1,630 jobs.

In total, the University generates more than $3.4 billion annually for the metropolitan area, the study found.

While the report had been in the works for a full year, its release comes amid escalating town-gown tensions. With the Cambridge City Council slated to consider a measure this evening calling on Harvard to increase its tax payments to the municipal government, Friday’s report could help the University underscore its substantial contributions to the local economy.

University President Lawrence H. Summers, in a breakfast speech to business leaders Friday morning, said that Harvard’s success and the Boston metro area’s economy are “fundamentally intertwined.”

“With Harvard and the Boston area you have a relationship that is like a marriage without the possibility of divorce,” Summers said.

But that doesn’t preclude the possibility of nuptial discord.

City Council member Anthony D. Gallucio said Harvard has not adjusted its in-lieu-of-taxes payment to Cambridge in over a decade. He and fellow Council member Timothy J. Toomey, Jr., will present a resolution tonight asking Cambridge’s top city lawyer to consider the legality of measures that would compel Harvard to pay a heftier tax bill.

Harvard and MIT “have very well-healed real estate arms, and they’re operating as corporations with enormous endowments,” Gallucio said in an interview last night. He said the measures would send “a strong message that our taxpayers are getting hit across the city,” and that “it’s just not acceptable” for Harvard and MIT to shirk their tax burden.

Gallucio said that in the past, the University has only periodically increased its payment-in-lieu-of-taxes as a “quid-pro-quo” for city concessions on development issues. But he said the city and the University need to agree on a “more dignified process” in which Harvard’s payments rise in step with homeowners’ tax bills.

Unless the city can secure new funding from its universities, Gallucio said, Cambridge faces “a strong concern that we could be taxing out seniors and middle-income homeowners.”

Friday’s report recognized that economic instability over the last few years has heightened pressures on municipal and Massachusetts budgets. But “despite its tax-exempt status, Harvard helps in several ways to bolster state and local government finances,” the report said.

In sum, the University generates more than $162 million in state and local government revenues, the study found.

SHELTER FROM THE STORM

The local economy fell into a recession three years ago, and unemployment in the Boston area jumped from 2.2 percent in 2000 to 5.0 percent in 2003. But Harvard served as a stabilizing presence—providing jobs for over 16,000 University employees.

In fact, the report argues that the true number of Boston-area residents who can attribute their paychecks to Harvard’s largesse is much higher, since the University purchases nearly $900 million in goods and services from local vendors and construction firms.

In total, the report estimates that the University generates more than 48,000 Boston-area jobs. That figure includes the employment rolls of companies based on Harvard technology or started by faculty and graduates.

For example, faculty-launched Biogen Idec—the third-largest biotech firm in the world—employs 1,400 in the Boston area.

But Mary Power, the University’s senior director of community relations, said that the 48,000-jobs figure did not include all jobs at businesses started by Harvard grads—for example, the hundreds of positions at office supplies giant Staples, which was started by an alum.

The 66-page report comes on the heels of a similar study released by Harvard and seven other Boston-area research institutions last year, showing that the universities generate more than $7 billion for the local economy annually. Higher education is the greater Boston’s second largest employer, after hospitals.

The last time the University commissioned a Harvard-specific study was in 1999, before the economic downturn highlighted the higher education industry’s role as a stabilizing force for Massachusetts.

Power said that city leaders are cognizant of Harvard’s revenue-generating role, and she sees “a growing appreciation for the fact that research is an economic driver.” The new study “allows us to speak more crisply about the specific economic impact that Harvard has,” Power said.

All three reports came from New York-based Appleseed, Inc. Power said the University looked to a private firm to conduct the study—rather than Harvard’s own research centers—because of Appleseed chief Hugh O’Neill’s extensive experience in collecting economic impact data.

The University paid O’Neill’s firm $30,000 to conduct the study, Power said.

—Zachary M. Seward contributed to the reporting of this article.

—Staff writer Daniel J. Hemel can be reached at hemel@fas.harvard.edu.