Globe Editorial

Nonprofits should use formula for payments in lieu of taxes

January 3, 2011

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THE BUSINESS of running Boston falls disproportionately on residential and commercial taxpayers because more than half the city’s land is exempt from property taxes. Boston’s nonprofit institutions — especially its universities and hospitals — should contribute more to the betterment of the city, and without a lot of fuss.

Nonprofit institutions are exempt from property taxes by virtue of their charitable missions. Many make voluntary payments in lieu of taxes, or PILOT payments. Yet a recent task force found that these payments are minuscule in proportion to real estate values. The city’s major hospitals and universities, for example, sit on almost $13 billion in property. If taxable, that property would have generated $345 million in 2009. But collectively, the institutions contributed just $14.5 million.

The institutions aren’t, by and large, freeloaders. Many provide summer jobs to Boston youths, and substantial neighborhood improvements. They are also big employers and generators of spin-off companies. They are a net plus for Boston. But their level of commitment to the city varies from institution to institution. And good works in the community aren’t always a substitute for cash on the bottom line.The report of the mayoral task force strikes the right balance. Led by respected tax attorney Stephen Kidder, it came up with a reasonable recommendation: nonprofit institutions should contribute 25 percent of the amount they would normally pay if their property were fully taxable. The 25 percent represents the percentage of the city budget devoted to police, fire, snow plowing, street repairs, and other essential services enjoyed by the institutions.

Some major nonprofit groups, like Brigham and Women’s Hospital, Mass. General Hospital, and Boston University, are relatively generous in their PILOT payments. Others, including Boston College and Beth Israel Hospital, are stingy. But none achieves the 25 percent mark.

That shortfall exposes a lack of civic commitment on the part of some nonprofit leaders, especially among the lowest-contributing institutions. They are quick to promote Boston’s attractions to their prospective students and employees. Yet they back away when it’s time to keep the city safe and livable.

The task force recommends exemptions for small nonprofits. And it would count community benefits, such as scholarships and support for public health programs, toward the 25 percent goal. The report is generous to a fault, which is a lot more than can be said for some of the city’s nonprofit institutions.