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Harvard, Cambridge City Make Payment in Lieu of Taxes Deal

Agreement Will Amount to More Than $60 Million Over 20 Years

By Colleen Walsh


Harvard University has brokered a new long-term deal with the city of Cambridge for the payments it makes each year in lieu of taxes. The agreement will bring the city more than $60 million over the next 20 years, but some city councilors say they wish it went further.

Nonprofit universities are not required to pay property taxes. But some make annual contributions to help cover the cost of municipal services.

MIT reached a similar agreement with the city last December. Unlike MIT, which previously had no written agreement, Harvard reworked the terms of a contract it has had with the city since 1990.

Under the new deal, Harvard will bump up its annual payments to the city by three percent each year for the next 20 years. The university also agreed to make an additional one-time payment of $1 million this year, raising this year's payment from $1.7 million to just over $3 million.

City officials say Harvard's payments to the city over the next 50 years will be more than 50 percent greater under the deal.

In addition to the three percent figure, Harvard's base payment to the city will increase by $100,000 every 10 years.

The deal ensures that if any tax-paying properties owned by the school are taken off the tax rolls, the city will continue to receive payments, which will escalate.

MIT had earlier agreed to pay the city $1.5 million this year, up from $1.2 million in fiscal year 2004. Its payments will increase by 2.5 percent annually.

Reaction from city councilors was mixed. At a recent meeting, some welcomed the new agreement, but others said it didn't go far enough.

“I would like to applaud the annual escalator [in the contract]. It's something I think should have happened long ago,” said Councilor Anthony Gallucio, co-chairman of the university relations committee. “I wish the escalator was tied to the budgets of those services that we provide.”

Vice Mayor Marjorie Decker, committee co-chairwoman, argued the payment was too small and represented only a fraction of the university's large endowment. “I'm not excited about this,” she said. “It's just a pittance.”

City Manager Robert Healy, who brokered the deal, said it was the result of good, tough negotiating. “I think we were able to get literally as much as we could get,” he told the council.