Boston revises its PILOT program

The city of Boston has implemented a revised payment-in-lieu-of-taxes program for local nonprofit institutions, with the intent of expanding the longstanding program and making it more consistent.

A report released last December by a PILOT task force appointed by Mayor Thomas Menino recommended that the program remain voluntary, but urged the city to take steps to encourage broad and uniform participation by local institutions. The task force was chaired by former state revenue commissioner Stephen Kidder and included business leaders and representatives from the city’s nonprofit community.

A letter from the city’s assessing department notified nonprofit institutions in January that, beginning in fiscal 2012, PILOT payments will be 25 percent of what would be paid if the nonprofit’s property were taxable. Letters were sent to 40 educational, medical and cultural institutions, with property valued at about $14 billion.

Many institutions already make some PILOT payments to the city, although there is wide variation. Boston University, for example, paid almost $5 million in fiscal 2010, while Northeastern University paid only $30,620 and Boston College paid $289,351, according to the city.

The new Boston program provides a $15 million credit in property value to all institutions, a credit for any taxes paid on institutional property, and a credit of up to 50 percent of the PILOT amount for community benefits provided by the institution, according to the PILOT task force.

The new PILOT amounts will be phased in according to a five-year schedule. When fully in effect, PILOT payments are expected to grow from about $15 million now to about $48 million, according to city officials.

Boston is not alone in working to improve its local PILOT program. The city of Worcester has also been successful in negotiating new PILOT agreements with local institutions.

An internal working group in the city of Springfield is preparing a report and recommendations for the City Council later this year regarding the city’s PILOT program. There are five major nonprofits in the city: two hospitals and three colleges.

A report by the Lincoln Institute of Land Policy released last fall concluded that there appears to be a heightened interest in PILOTS based on a “growing scrutiny of the nonprofit sector and increasing pressure on municipalities to find new sources of revenue.” The Lincoln Institute found that PILOTS are in place in 18 states across the nation and in 82 cities and towns in Massachusetts, based on a 2003 report by the Department of Revenue.