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City Seeks New Taxes On Local Universities

By Frank Dabek

STAFF REPORTER

The Cambridge city council passed two measures last night that call for MIT and Harvard to pay additional taxes to the city. The measures come in the wake of widespread discontent over large property tax increases for Cambridge home owners.

The two measures were passed at last night’s city council meeting; they will not have any immediate effect on the Institute but signal a continuing effort on the part of the city to expand the tax revenue MIT and Harvard generate at a time when citizens are voicing concerns over sharp rises in property taxes.

One order requests that universities increase the payments that they make in lieu of taxes retroactive to 10 years ago; the second asks the city’s legal team to investigate the possibility of eliminating the property tax exemption for large, non-profit organizations such as MIT.

Councillor Anthony Galluccio, who introduced both measures, said that more than 10 years have passed since Harvard and MIT have made major adjustments to the PILOT agreements that spell out how much they pay to the city in lieu of property taxes, while property owners have seen large increases in their tax bills during that time.

Galluccio proposed an “automatic mechanism for increases” at a rate commensurate with the increase in property values and the cost of the services Cambridge provides to MIT. The payments currently increase at a fixed rate of 2.5 percent; MIT payed approximately $1.2 million last year.

Sarah E. Gallop, co-director of the office of government relations for MIT, said that MIT is not likely to renegotiate past PILOT payments and that a pending renegotiated agreement is not likely to be affected by recent property tax increases.

Galluccio positioned the motions as a way to improve the relationship between the city and the universities. MIT can increase its payments as a “show of respect to taxpayers.” Automatic increases would “bring even more dignity to the relationship” between the city and universities if the city is not forced to “make pleas” for payments each year.

Other councillors voiced support for the measure at the meeting. Councillor Denise Simmons said that the city provides services to the universities that they do not help fund: students are “not buying the parking; they are buying the parking permit.”

Councillor Kenneth Reeves said the the current relationship was “inequitable... [universities] are not sharing in the burden of taxation.”

Gallop said that MIT, despite its non-profit status, is the largest taxpayer in the city due primarily to its large commercial holdings including the recently purchased Technology Square.

Written agreement ‘very close’

MIT and the city have been involved in negotiations to come to a written agreement governing how the Institute makes PILOT payments since early 2003. The current agreement is informal. The new agreement has been stalled in negotiations since April of 2003 but the agreement is “very close” to being signed, Gallop said.

A written agreement between the city and the universities would eliminate the quid pro quo nature of current PILOT negotiations, Galluccio said. “It is inarguable that there are enormous benefits” from the universities, he said, but it would be easier to advocate on behalf of universities interests if a written agreement existed. MIT’s small payments, relative to the city’s budget, “make it tough to face taxpayers.”

Motion would tax universities

Gallucctio’s second motion calls on the city solicitor to “examine all possible legal and legislative mechanisms by which ... [the] elimination of property tax exemptions for large institutions could be accomplished.”

The order would apply to large nonprofit institutions that reach a specified percentage of land-ownership in the city.

Speaking in support of his order, Galluccio said that MIT and Harvard were “no longer the fledgling educational institutes” that the non-profit status was designed to protect.

Reeves said that MIT and Harvard behave “much more like businesses than not.”

Mayor Michael Sullivan pointed out that 51 percent of the land in Cambridge is not taxable, much of it owned by MIT and Harvard.

The council has attempted to levy taxes against universities in the past. In 2003, the council proposed a payroll tax that would apply to university workers.

Public voices support for city

The members of the public who spoke at the meeting were in favor of the measure. Kathy Podgers said that home-owners should not face large increases in their property taxes while universities see only slight increases. The current system is “robbin’ the hood” she said: it takes from poor and gives to the rich.

Bill Cavallini recalled a 1979 march on MIT to protest low in lieu of taxes payments. The universities do not pay their fair share today, and “it’s time that they do.” he said.