Murphy says PILOT deal is on its way

November 6, 2009
By

John Ruch

A new deal that could “double, nearly triple” the payments in lieu of taxes (PILOT) paid by large colleges and hospitals may be finalized within 90 days, according to City Councilor Steve Murphy, a key member of the city’s PILOT Task Force.

Murphy made the PILOT increase prediction at an Oct. 22 candidates forum in Franklin Park. He later elaborated on those comments in a Gazette interview, saying he expects a big boost in the current $15 million total PILOT in time for the April city budget process.

Murphy said he expects the new total PILOT will be in the range of $32 million to $46 million in cash, with such community benefits as scholarships also being maintained or expanded.

He said it is too soon to predict the specific “template” that new PILOT deals will be based on, “but I can see where it’s headed…I do think we’re on course to have something within the next 90 days.”

The new PILOT system “will be the first of its kind in the country, and a model,” Murphy said.

As non-profit institutions, colleges and hospitals do not pay property taxes. But many of them make voluntary PILOT payments to make up for their impact on city services.

But the PILOT agreements have been controversial for years for low values—such as Northeastern University’s $30,500 a year—and 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 institutions, and some do not have any PILOT agreement at all.

Murphy is among a group of city councilors who have fought for PILOT reform for years. That effort was largely ignored by Mayor Thomas Menino until early this year, when Menino formed the PILOT Task Force to work on standardizing the agreements.

Besides Murphy, the task force includes representatives from institutions, large businesses and labor unions.

The first achievement of the task force was getting PILOT data that had never been available before. As the Gazette previously reported, that included a complete evaluation of institutional property by the Assessing Department. Murphy said the task force also has compiled a complete list of each institution’s community benefits, such as scholarships and neighborhood health programs, and is working on a uniform way to put dollar values on them.

The data also includes “mayoral initiatives”—programs the mayor asked institutions to undertake—that city councilors were “not aware of” before, Murphy said.

Now the task force will come up with a “template,” a kind of chart of what institutions will pay as PILOT based on their property values and community benefits. Unlike current PILOT deals, the template will apply equally to all institutions.

The exact PILOT rates in the template are the subject of horse-trading. Murphy said his starting position was a request for total PILOT cash revenues of $97 million.

“We hit them with sticker shock with the $97 million,” Murphy said. “They were ready to jump out of the sixth-story window.”

“They certainly would rather provide services, not cash,” Murphy said of the institutions. He added there have been some rocky moments, such as one institution that wanted credit for paying the normal fees for city building permits. “You want a gold star for that?” Murphy recalled thinking.

But the government and institutions are negotiating well now, Murphy said, describing positive progress. Because the city cannot legally require any PILOT deals, the agreement will rely on goodwill and political pressure.

“The biggest part was getting the mayor to buy in” on PILOT reform, Murphy said, noting Menino is “more difficult to say no to” than a city councilor. Now, Murphy said, the deal is a matter of “getting everybody [else] to buy into it.”

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