Tax hunt targets exempt groups

City to study nonprofits

Mayor Thomas M. Menino is planning to tackle an issue that has long bedeviled a city rich with nonprofit universities and hospitals: how to wring more money out of revered institutions, many of them quite wealthy, that are exempt from property taxes.

Menino will announce the formation today of a task force in an attempt to negotiate ways of increasing their payments in lieu of taxes - which the institutions voluntarily pay to varying degrees.

With this response to the economic crisis, Menino is taking aim at the major institutions that are the lifeblood of Boston's education and healthcare economies.

It is a political thicket for the mayor, who is considering a run for reelection next year. Universities and hospitals provide tens of thousands of jobs for Boston and Massachusetts, and many of those institutions have said they also are hurting in the current downturn.

But perceived inequities created by their tax-exempt status have long rankled some critics.

Combined, tax-exempt institutions give the city $32.4 million annually in payments in lieu of taxes, a drop in the bucket when compared with what the city spends on police, fire, and other services. If their properties were taxable, the institutions would be writing checks for 10 times that amount - between $350 and $400 million each year, city officials estimated yesterday.

"We want to ensure that each and every institution is paying their fair share," Assessor Ronald W. Rakow said.

The mayor's task force will examine not only the payments but also services provided by the universities and hospitals to the city and its residents, such as scholarships, internships, jobs, and other benefits.

The mayor's push comes at a difficult time, when the nation is grappling with a severe economic crisis. Its effects have trickled down not only to state and city governments, including Boston's, but to the very institutions Menino is targeting. The endowment of Harvard University, for example, tumbled $8 billion between June and November this year.

The Association of Independent Colleges and Universities in Massachusetts, which represents most of the city's large institutions, is against the city squeezing anything more from its members.

"We cannot afford to take on a payment in lieu of taxes right now," president Richard J. Doherty said. "Making a payment in lieu of tax would have a devastating effect."

The Conference of Boston Teaching Hospitals, which represents about a dozen medical centers in the city, sounded a similar alarm, saying the institutions are reeling from crippling cuts in state and federal funding. But executive director John Erwin also said he supports the mayor's approach to quantifying the hospitals' contributions in terms of services and other benefits, rather than just dollars and cents.

"When people look at PILOT payments, that is just the tip of the iceberg in terms of what the hospitals do in the city," said Erwin, who added that a recent study by his group found the hospitals contributed $175 million worth of community benefits, from public school programs to public housing initiatives.

Even though the payments are voluntary, the city has used its authority over zoning and permitting - both critical for institutional renovation and expansion - as leverage in the past to persuade them to agree to payments. Several institutions are currently renegotiating payment agreements as part of expansion plans, including Boston College and Northeastern University, city officials said.

One of the key goals of the mayor's initiative is to standardize contributions across institutions. Currently, many pay wildly differing amounts.

For example, Boston University contributes $4.6 million each year, the highest of any institution, while Harvard University - which owns twice as much land in Boston - pays $1.9 million. Northeastern University contributes only $30,600.

In the medical sector, Massachusetts General Hospital pays nearly $2 million, while Beth Israel Deaconess Medical Center gives $125,000 and Boston Medical Center pays $140,000. Some haven't paid anything, including Caritas Christi Health Care, which operates Carney Hospital in Dorchester and St. Elizabeth's Hospital in Brighton.

The mayor, who is expected to unveil his plans at a Greater Boston Chamber of Commerce breakfast this morning, said through a spokeswoman yesterday that the task force will include representatives from the institutions to be examined and will begin meeting before the end of January. Spokeswoman Dot Joyce said there is no timetable for when the group will be expected to finish its work or take action to increase contributions.

Nearly 50 percent of land in the city is tax-exempt, leaving owners of the other half picking up the city's total property tax bill, which was $1.4 billion in the current fiscal year. Half of the tax-exempt land is owned by city, state, or federal governments. The other half is owned by private nonprofits, including schools, hospitals, churches and other charities.

City finance officials declined to provide a detailed breakdown of the amount of land owned by each of the 44 tax-exempt institutions. Rakow said his office was still trying to determine property ownership in some cases and assess the value of the land. He said that based on his analysis so far, he roughly estimated total potential property taxes of $350 to $400 million, if it were taxed at the current commercial rate.

Aside from the mayor's initiative, three other measures designed to extract more from tax-exempt institutions are under consideration by the Boston City Council. The council held a hearing yesterday on the measures, one of which would effectively eliminate the tax exemptions. But none is likely to pass because of insufficient support, said one council insider who spoke on condition of anonymity.

The sponsor of the initiatives, Councilor Stephen J. Murphy, said he's not giving up. "This is a multiyear effort in trying to bring some tax fairness to the people of Boston," he said.

The Boston Municipal Research Bureau, a business-funded watchdog group, said yesterday that the city has one of the most aggressive payments-in-lieu-of-taxes programs in the nation and cautioned officials against pushing harder, despite the difficult funding cuts the city is facing. The Research Bureau predicted that Boston could face a budget shortfall of nearly $85 million in the fiscal year that begins July 1.

"The city should be very cautious about how to proceed in terms of trying to generate additional revenue from the exempt property," Bureau president Samuel R. Tyler said. "You don't want to jeopardize the goose that's laid the golden egg in terms of the vitality generated by these institutions in the local economy."

Donovan Slack can be reached at dslack@globe.com.

Correction: Because of incorrect information provided by the city assessing department, a story in Tuesday's Metro section about the city seeking more money from nonprofit universities and hospitals gave an incorrect amount for the payments made in lieu of taxes by Beth Israel Deaconess Medical Center to the City of Boston. The center paid $167,000 in fiscal 2008.