Nonprofits pay ‘tax,’ show community benefits

July 6, 2012
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The City and local nonprofits alike are praising a new system of tax-like payments that saw Faulkner Hospital make the first such payment ever and revealed a wealth of community benefits provided by Showa Boston Institute for Language and Culture.

Those two nonprofits were the only ones in Jamaica Plain tapped to make the voluntary “payments in lieu of taxes,” or PILOT.

Ronald Rakow, the commissioner of the City’s Assessing Department, told the Gazette that the new PILOT system got 90 percent of the payments it requested in its first fiscal year of operation by the end of June, with PILOT revenues up 28 percent from last year.

“The mayor is pleased,” Rakow said.

The system allows up to half of the PILOT cash payment to be deducted in exchanged for “community benefits” detailed in a report. Rakow said the City is not auditing or questioning the claimed community benefits at this point to keep the system flexible.

Showa Boston, at 420 Pond St., made a cash payment of $119,958. It also had a lengthy community benefits list revealing many under-the-radar efforts, ranging from students volunteering at local nonprofits to maintenance of a Moss Hill Road traffic island, and from involvement in the annual Lantern Festival at Forest Hills Cemetery to donating clothes to Boomerangs. Those efforts were valued as exceeding the cash payment.

“I think that’s one side benefit of the program I wasn’t anticipating, was seeing how much [the institutions] do,” Rakow said.

Showa Boston President Ron Provost said it was revealing for the school to do as well.

“No one person had a handle on everything” before, Provost said. “We were pleased to see how much we’re offering the community.”

Showa Boston is also pleased to know about the community benefits option in the first place. Part of the reason that PILOT system reform began in 2009 was the Gazette’s discovery that payments were negotiated in secret meetings by unknown formulas with few records. Some institutions got community benefits deductions, while others, including Showa Boston, never heard of the option.

Under the new system, all tapped institutions pay the equivalent of 25 percent of what their property tax would be if they were commercial property, and everyone is eligible for community benefits deductions.

PILOT is targeted at large colleges and hospitals and is intended to make up for the City services they consume. PILOT income is crucial because more than half of Boston’s land is taken up by tax-exempt nonprofits and government agencies, and state law tightly restricts the City’s ability to create other revenue streams, resulting in a heavy reliance on residential property tax.

Partners HealthCare, which owns Faulkner Hospital at 1153 Centre St., “has long been committed to working with the City of Boston on this issue,” said spokesperson Rich Copp. The organization’s PILOT payments “reflect the value that we place on the services the City provides,” he said.

Faulkner’s cash PILOT was $114,071. It also claimed a single, equally valued community benefit: a donation to a college prep and tutoring scholarship foundation for high school interns at other Partners hospitals.

Partners and Showa Boston previously expressed confusion to the Gazette about what community benefits would be acceptable under the new system. And their claimed benefits vary widely, with Showa Boston claiming dozens and Faulkner only one.

Rakow said that the City is deliberately keeping things vague, in part so it can eventually request that institutions create new programs or take over existing City programs. He also acknowledged that there is no auditing of the activities and their values self-reported by the institutions.

“We have guidelines, but they are not rigid rules,” Rakow said. The guidelines are that the programs “directly benefit Boston residents” and go “above and beyond” the institution’s normal mission.

Rakow noted that the new PILOT system is still in development and that next year, it likely will involve heads of other City departments reviewing and suggesting community benefits programs.

“The [PILOT] cash is very important…but we also believe community benefits are also important and may ultimately prove to be the most important [element],” he said.

Transparency was a big problem with previous PILOT system, with few or missing records. The new system posts all PILOT amounts request and received, and all community benefits lists, on the City’s website at cityofboston.gov/assessing. While that appears to be taking some time to update, Rakow said that all information will be there going forward.

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