City to ask more from nonprofits
Study breaks down contribution costs
After two years of study and discussion, a mayoral task force has finalized a formula to calculate how much tax-exempt nonprofits should pay for police, fire, and other basic city services. Now comes the hard part: getting hospitals, universities, and museums to cough up millions more dollars each year starting in July 2011.
Many large nonprofits contribute millions to the city in lieu of property taxes, but others pay nothing. The task force sought to create a fair, transparent system to determine how much each institution would be asked to contribute.
The result is a 128-page report to be released today that ties payments to property values and quantifies scholarships, volunteer work, and other intrinsic value nonprofits bring to Boston. The bottom line is that city officials hope to gradually ramp up cash contributions over the next five years.
The ultimate goal would be for institutions to pay 25 percent of what they would owe in property taxes if they were not exempt, with at least half coming in cash and the balance in good deeds, such as scholarships targeted for Boston students.
The increased revenue from medical and educational facilities alone could bring in $5 million the first year, with more expected from museums and other cultural institutions. But some of the city’s largest landholders are not on board.
“We’re opposed to the principle,’’ said Jack Dunn, spokesman for Boston College, which will be asked to ultimately pay almost six times more than its current annual contribution of roughly $300,000 for municipal services. “We do not want to forfeit the tax exempt status we have had since our founding and most importantly we feel we can make more meaningful contributions to the city in other ways.’’
Wheelock College does not make any cash payments to the city — and does not plan to start. The task force suggests that the small Riverway school pitch in $40,000 at first, working toward annual payments of $204,000.
“Contributing to the [payment] program would present a burden to a college of our size and would have a direct impact on the services we provide to our students, including financial aid and student support services,’’ said Roy Schifilliti, a Wheelock vice president.
Boston faces financial pressure from the recession and an over-reliance on property taxes, which now account for more than 60 percent of its revenue. Shortfalls have forced cuts and layoffs in recent years, prompting calls — especially from labor unions — to extract more money from large nonprofits with substantial budgets.
Nonprofits have long argued they are legally exempt from property taxes for a reason. The institutions maintain they bring greater good to the city that cannot be quantified on a spreadsheet, although many have reached voluntary accords to make some cash contributions. The problem is that the ad hoc agreements created an irregular system, with similar organizations paying different amounts.
Mayor Thomas M. Menino formed the task force to bring fairness and transparency to the system, drawing on the collaborative efforts of government officials, university presidents, hospital executives, and other nonprofit leaders. The group held a series of meetings and included nonprofits in the process.
“It wasn’t a secret. Everybody was in the room,’’ said City Councilor Stephen J. Murphy, who served on the task force. “I don’t see anybody coming in at the end of the process and saying, ‘I object to it.’ The time for objecting would have been during the meetings.’’
Under the formula OK’d unanimously by the task force, the first $15 million of property value will be considered exempt to protect small nonprofits. The task force also insisted all large nonprofits be asked to contribute, including cultural institutions. The group insisted that any payments remain voluntary, and not legally mandated.
“Long term, what’s really going to be important is that everybody thinks they are getting the same fair shake,’’ said Stephen W. Kidder, the task force chairman. “What we heard was that institutions really weren’t aware of what arrangements their compatriot institutions had, so that brought a natural reluctance for anybody to step forward.’’
Boston has the oldest such payment program in the country and generates more revenue from nonprofits than any other city, according to Daphne A. Kenyon of the Lincoln Institute of Land Policy.
“I think part of why it can work is because there were a lot of nonprofits at the table for the task force,’’ Kenyon said. “There is some amount of peer pressure that if one institution like Boston University or Harvard steps up to the plate and increases their payments, there would be some guilt feelings on the part of nonprofits who have the ability to pay yet they are simply not paying.’’
That sentiment seemed to be shared by WGBH, the public broadcasting nonprofit that has not made a payment to the city since it moved into its new building along the Massachusetts Turnpike in 2007. The city is in the process of assessing WGBH’s property value and that of other cultural institutions and hopes to have figures compiled next month to give them a sense of what they may be asked to pay.
“We feel we want to do our part,’’ said Jeanne M. Hopkins, WGBH spokeswoman.
Andrew Ryan can be reached at firstname.lastname@example.org.