PILOT report becomes campaign target

October 9, 2009
By

John Ruch

A city report on payments in lieu of taxes (PILOT) made by non-profit schools and hospitals, whose details were first reported by the Gazette last month, has become an issue in the mayoral campaign.

The report confirmed longtime criticisms that PILOTs are often shockingly low and far below the city’s supposed PILOT benchmark of 25 percent of the assessed property value.

Mayoral candidate Michael Flaherty, in a press release issued shortly after the Gazette article was published, blasted the report’s quiet release and said it shows how incumbent Thomas Menino “has continued to shirk responsibility for determining a better [PILOT] solution and has hid[den] behind calls for more task forces.”

“I think this is another example, with all due respect, of Flaherty using an issue the mayor is looking at reforming for [Flaherty’s] political expedience,” Menino spokesperson Nick Martin told the Gazette, noting that a Menino-organized task force is working on PILOT reform.

At-large City Council candidate Andrew Kenneally also responded to the PILOT report. “Boston’s universities are a jewel of the city,” Kenneally said in a letter to the Gazette. “But with our own public schools at the point of laying off teachers, the city can ill-afford to let some universities skate on their obligations, while tax-paying families suffer.”

PILOT agreements with non-profit institutions are voluntary. They have been controversial not only for low values—such as Northeastern University’s $30,500 a year—but also for a process where they are negotiated in private meetings with the Assessing Department 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. Amounts and rates vary widely among various institutions. The report also does not explain the PILOT calculations.

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. And the Assessing Department was ignoring a city ordinance requiring biannual reports to the City Council about PILOT agreements.

Flaherty was among the city councilors who have fought for PILOT reform for years. That effort had little traction with Menino until early this year, when the mayor formed a PILOT task force to work on standardizing the agreements. The PILOT report, which includes assessed values for schools and hospitals, came out of the task force work.

The undated Assessing Department report, “Exempt Property Analysis: Educational and Medical Institutions,” was released in April, according to Martin. Apparently, it was only posted on the Assessing Department web site (CityOfBoston.gov/Assessing) and not circulated. The report’s release was mentioned in a City Hall press release about the PILOT task force at that time.

Flaherty suggested that City Hall officials have “certainly not been very vocal on the report” because it “only reiterates the PILOT program’s serious shortcomings, which I have repeatedly raised as concerns during the last few years.”

Flaherty called the PILOT system an example of Menino’s “inability to manage” and criticized the way the agreements “materialize out of thin air.”

“For years, residents have expressed frustration to me over the lack of transparency, standardization and accountability of the city’s PILOT program,” Flaherty said. “The economic downturn has households across the city tightening their belts so that they can pay their property taxes, yet the city can’t seem to figure out a way to make these institutions pay their fair share—or pay at all,” he added, noting that Jamaica Plain’s Faulkner Hospital has no PILOT agreement.

Martin referred to the report as old news, and pointed out that Boston residential property taxes have decreased two years in a row.

While noting that schools and hospitals make up a tiny portion of Boston’s non-taxable land—which is currently more than half of the city’s real estate—Martin acknowledged the PILOT system is imbalanced. But, he added, that is why Menino’s task force is working on reform.

“It’s definitely moving forward,” he said.