City lists values of non-profit land and PILOT payments

September 25, 2009
By

John Ruch

JP schools, hospital worth $244m

The City of Boston has quietly released a long-requested report listing property values for major non-profit colleges and hospitals, along with information on their payments in lieu of taxes (PILOT).

The Assessing Department report, “Exempt Property Analysis: Educational and Medical Institutions,” confirms what critics have long claimed: that PILOT payments are often shockingly low and far below the city’s supposed PILOT benchmark of 25 percent of the assessed property value.

The total citywide evaluation for educational and medical institutions was about $12.7 billion. The total estimated PILOT paid to the city in exchange for city services the institutions consume this fiscal year will be $14.5 million—roughly 4 percent of the taxable value. (Taxable value is the normal property tax rate, which is different from the total assessed value. Somewhat confusingly, the Assessing Department report refers only to taxable value, not the 25 percent of assessed value that is considered a rough PILOT benchmark.)

If the properties were taxed normally, the total payment would be over $354 million. The entire city budget is roughly $2 billion.

In Jamaica Plain, non-profit school and hospital property is valued at $244 million. One of those institutions, Faulkner Hospital, has no PILOT agreement at all. It is valued at $182 million.

It is unclear how much is paid in total by the other two institutions—Showa Boston Institute for Language and Culture and Harvard University’s Arnold Arboretum—but it is no more than $2 million and apparently much less.

Showa’s PILOT—$120,966 on property valued at $55 million—may look small, but it is the third-highest percentage rate paid as PILOT by any educational institution in the city. As the Gazette previously reported, Showa also pays its PILOT entirely in cash, while some other institutions are allowed to trade with goods and services. Showa, whose property also includes the British School of Boston, would pay almost $1.5 million if it were taxed normally.

Harvard’s Arboretum property—most of which doubles as a city park—is reported as various pieces of land with a total value around $6.8 million. Harvard has a general PILOT agreement, but it is unclear whether it specifically includes the Arboretum, and if so, how much the payment is. When the Gazette examined all of the PILOT contracts on file at City Hall last year, Harvard’s file could not be found by city clerks.

Cambridge-based Harvard also has its schools of business, medicine, dentistry and public health in Boston. Its total Boston property valuation in the report is about $1.5 billion. Its total PILOT payment is about $2 million. The normal taxable rate on that kind of property would be about $40 million.

The highest PILOT paid by an educational institution is Boston University’s $5 million. That is also the highest percentage rate paid by a college, amounting to roughly 8.5 percent of the land’s taxable value.

The highest PILOT paid by a medical institution is Massachusetts General Hospital’s $1.8 million. The highest percentage rate paid by a medical institution is the 20.65 percent of taxable value paid by Mass Bio-Medical Research Group, a Charlestown lab and office complex. That amounts to $819,000.

Many other properties in JP are owned by non-profits or government agencies, including community health centers, churches, the Veterans Affairs Medical Center, the Massachusetts Society for the Prevention of Cruelty to Animals/Angell Animal Medical Center, the Lemuel Shattuck Hospital and the State Lab. None of them make any direct PILOT payments to the city, though the state does make some general PILOT payments, as do the large hospitals that own some of the community health centers. None of those other properties were addressed in the Assessing Department report, even though some of them are hospitals.

Some formerly non-profit properties are going onto the property tax rolls, such as the former Blessed Sacrament Church complex, which is becoming housing and commercial space.

It is safe to say that the total value of all non-profit land in JP is well over a half-billion dollars.
Who pilots the PILOT?

PILOT is a big issue in Boston for two reasons. Due to state laws that restrict how the city can raise revenue, the city is unusually reliant on property taxes. But a slight majority of Boston’s land is taken up by non-profit or governmental institutions that do not pay property taxes. That puts the squeeze on residents and businesses.

The city has long negotiated voluntary PILOT agreements with large non-profits. But the process has been criticized by such officials as City Councilor Steve Murphy as back-room deal-making with few rules or records.

A Gazette investigation last year found that PILOT contracts on file at City Hall are incomplete, and that none of them explain how the PILOT amounts are calculated. It also turned out that the city was not assessing the value of non-profits’ property, even though the law requires the institutions to file valuations.

Mayor Thomas Menino told the Gazette last month that PILOT agreements are hashed out in meetings with institutional officials and city Assessing Commissioner Ronald Rakow, who was not available for comment for this article. Menino said he himself does not know how PILOT payments are negotiated.

Last year, Menino formed a task force to study the PILOT system and come up with a solid property assessments and some kind of payment formula. The task force, which includes city and non-profit organization officials, was criticized for holding its first meetings in private.

But, Murphy recently told the Gazette, the task force is working well. It is unclear exactly when the Assessing Department produced the non-profit property evaluation report for the task force. Murphy told the Gazette about it in July, and it is now on the Assessing Department web site, though with no fanfare. It can be viewed at CityOfBoston.gov/Assessing.

In campaign debates, Menino has said he does not want PILOT payments to be so strict that they kill off non-profits. He has noted other benefits they can offer, such as scholarships. The Gazette discovered last year that the Wentworth Institute of Technology made part of its PILOT payment in the form of solar-powered trash cans donated to Mission Hill streets.

“PILOT payments are an important measure of civic engagement, but they represent just one category of benefits that colleges and hospitals provide to the City,” the report says. “Many institutions also provide other services and contributions, such as scholarships for Boston Public School students and low-cost medical care, which can directly benefit Boston residents.”

Other types of institutions, such as museums and Massport, also make PILOT payments that receive less attention and are not addressed by the report. The focus is on large hospitals and colleges because several of those institutions have expanded enormously in recent years onto formerly taxable property.

There is also another category of PILOT payments made by owners of property redeveloped as “blighted” land under Chapter 121A of the zoning code. There is increasing controversy about those PILOT payments, which are often decades old, far lower than normal property tax and often paid to the Boston Redevelopment Authority, which is a quasi-independent agency with an unclear budget. The report also does not address those 121A PILOT agreements.

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