Communities reaching out to nonprofits

Pressure on private schools for payments in lieu of taxes

By Keith Cheveralls
Globe Correspondent / August 13, 2009

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While having a prestigious private school within its boundaries might lift the profile of a suburban community, it often does little to bolster the public purse. Private schools, as nonprofit organizations, do not pay property taxes.

In Southborough, residents and officials have been pushing the town’s exempt institutions, including the Fay School and St. Mark’s School, to contribute what they see as a fair share to the municipal budget.

The schools, like many nonprofit entities across the state, make annual contributions, known as payments in lieu of taxes, to help cover the cost of the public and emergency services they receive.

But the amount of those payments, Southborough residents and town officials say, should reflect an institution’s ability to contribute. The Board of Selectmen is establishing a committee to investigate the matter.

“When people see that you have these institutions that own quite a bit of real estate, and the tuition at these places is in the high range, it boils down to an equity issue,’’ said Selectman Sal Giorlandino, the board’s chairman.

As municipal finances tighten, more communities around the region are beginning to discuss whether the payments in lieu of taxes they receive - if they receive anything at all - from nonprofit organizations are fair.

It’s a delicate issue. While large property holdings and an air of prestige may make private schools an attractive target for cash-strapped communities hunting for revenue, the schools may be as financially strained as their hosts.

Both St. Mark’s and the Fay School have been willing to kick in more after discussing the issues with local officials.

The New England Center for Children, a private school for children with autism, has increased its annual payment by $3,600 this year, for a total of $80,668, to reflect the purchase of property that is no longer on the tax rolls, according to Southborough’s finance director, Brian Ballantine.

St. Mark’s hiked its annual payment from $15,000 to $20,000 in 2006, according to Town Administrator Jean Kitchen, and this year bumped it up another $10,000 annually for the next 10 years to help pay for a Fire Department ladder truck.

“Our business office talks on a regular basis with the selectmen,’’ said St. Mark’s spokeswoman Molly Ingram. “It’s a really good relationship.’’

The additional payments have come even as St. Mark’s has clamped down on spending, she said.

“We have not let any faculty go this year, but we have certainly instituted some very serious budget cuts,’’ said Ingram. “It’s the same belt-tightening that all the schools are going through. Anybody who is looking for more money in this day and age has got to make a pretty compelling case for it.’’

The Fay School has offered to double its $5,000 annual payment to $10,000 for the next 10 years, also to defray the expense of the ladder truck.

“The Fay School feels an obligation to be a good citizen of Southborough. To meet that obligation, the school makes a voluntary contribution of money as a sign of their appreciation for the services, particularly police and fire services, that the town provides the school,’’ said spokeswoman Karen Schwartzman.

She would not discuss the school’s budget situation except to say that any constraints would not reduce the school’s “obligation to be a good community citizen.’’

But Giorlandino says what the Fay School is offering is not enough.

“We’d ask that the Fay School reassess its position and consider giving something more equitable,’’ he said.

The town’s other private schools, including St. Mark’s, “have assessed their financial situation and made a notable contribution,’’ Giorlandino said. “We only ask that the Fay School do the same.’’

Southborough is not alone among area communities looking for higher contributions from its exempt institutions.

In Groton, the private Groton School has more than tripled its annual payment to the host community, going from $31,000 to $100,000, according to the school’s chief financial officer, Hale Smith.

“We did have a number of properties that had come off the tax rolls, so we were replacing some of the lost revenue there,’’ Smith said.

But the Groton School’s decision to increase its payment does not indicate an immunity to financial strain.

“We are spending more from our endowment than is sustainable,’’ Smith noted, partly to fund an increase in student aid requests.

Most communities who count private schools among their landowners have not seen any increased payments recently.

Many take a quieter approach to negotiating agreements, avoiding the visibility of the efforts underway in Southborough.

In Concord, officials have engaged the local private schools in discussions about higher payments over the past few years, according to the town’s finance director, Tony Lagalbo.

“Things have gotten tighter, and we’re looking at the state pulling resources away,’’ said Lagalbo, “so we need to both be more careful with what we’re spending, and look at where it can and or ought to be raised.’’

But, he added, “a nonprofit entity is not going to simply one day wake up and say ‘We’d like to receive a tax bill, please.’ ’’

Concord Academy, for one, is facing the combined financial pressures of a depressed endowment and an increase in student-aid requests, said spokeswoman Tara Bradley.

While the school does not have an agreement for payments in lieu of taxes with the town, it does make annual donations to the Concord Free Public Library and the Fire Department, and shares its athletic facilities with the Recreation Department when possible, Bradley said.

Newton does not receive payments from any of its many private schools, city spokesman Jeremy Solomon said, although Boston College provides an annual contribution of $120,000.

“The mayor’s position is that the nonprofit organizations in the city contribute in many ways, and we are sympathetic to their economic plight,’’ Solomon said. “He doesn’t view voluntary payments from nonprofits as a viable way to make a substantial fiscal impact on our budget.’’

But at least two candidates in Newton’s ongoing mayoral race, Alderman Ken Parker and Setti Warren, have said they would seek to expand the city’s agreements for payments in lieu of taxes.

In Brookline, the official policy is to only broach the subject when a nonprofit institution seeks to expand, said the town’s finance director, Stephen Cirillo. The policy also fixes the desired payment at 25 percent of the property taxes that would otherwise be collected on the institution’s land.

Although several nonprofit organizations have formed PILOT agreements with the town since the policy went into effect in 2007, no private schools have been among them.

“The smaller schools are hard hit in the downturn. They’re hesitant to commit to agreements like this. But they also have visions of expansion, and we hope that before they expand they would willingly engage in conversations,’’ Cirillo said.

The Beaver Country Day School in Brookline does not have an agreement with the town, but is aware of the 2007 policy, said Tim Parson, its chief financial officer.

He noted that the private school contributes the use of its athletic facilities to the town when possible.

“We try to be conscious of being a good citizen,’’ Parson said.

And if the school sought to expand its property holdings in Brookline?

“I don’t want to speculate on what we would do or say,’’ said Parson. “It’s certainly a concept that the administration is aware of, but at the moment, it’s not in our budget.’’