Proposed changes to PILOT: Do nonprofits owe more to their communities?

Massachusetts State Representative Erika Uyterhoeven of Somerville has introduced a bill that would make otherwise voluntary payments made by Tufts and other large nonprofits to their host cities mandatory. This initiative highlights a concern held by many: do large nonprofits take more than they give? 

The bill in question, Bill H.3080, attempts to address what Rep. Uyterhoeven and others believe to be inadequacies in Massachusetts’ Payment in Lieu of Taxes, or PILOT, program. Under PILOT, large nonprofit institutions that own property valued at more than $15 million are implored, but not required, to make voluntary financial contributions to the municipality in which they reside. The amount of money requested of them depends on the commercial rate of their tax-exempt property. Institutions participating in PILOT are asked to pay 25 percent of what they would owe on their property if it were taxable. 

All nonprofits that volunteer payments through PILOT are eligible for a Community Benefits Credit of up to 50 percent of the amount requested of them. Institutions can receive this credit by self-reporting ways in which they have monetarily benefited their community. This credit, when received, means that an institution has to pay only half of the PILOT amount requested of them by the state. 

The bill comes as a result of frustration among Massachusetts residents and businesses who argue that they have unfairly shouldered the burden of paying for state and city expenses. Proponents of Bill H.3080 argue that nonprofits like Tufts should pay their fair share in maintaining state and city services from which they benefit, like fire protection, police, and roads. 

Medford and Somerville residents are also looking for more transparency from Tufts’ administration regarding the university’s future plans that have the potential to affect the municipalities. From issues like the school’s plan for future expansion to how the incoming class of 2025 may push more Tufts students into off-campus housing in the coming years, Medford and Somerville would like to have a way to communicate with Tufts more directly. The proposed changes to PILOT, said Medford City Councilor Zac Bears, may not create some sort of radically transformative change, but they would demonstrate an attitude shift from Tufts that would be meaningful to Medford residents. 

Councilor Bears also emphasized that Tufts students, faculty, and staff who reside in Medford and Somerville should consider themselves a part of the community he represents. He hopes that Tufts students feel empowered to express their opinions about the proposed changes to PILOT, as these changes would affect them as well.

Sophomore Mark Lannigan, a volunteer policy researcher with the office of Rep. Uyterhoeven, echoed exactly that idea. “As a Tufts student who is paying Tufts University, and [in that sense] a partial funder of what the budget they’re working with is, I would like to see them paying Medford and Somerville,” said Lannigan. “And I think a lot of students would agree.” 

In 2019, after almost a year of negotiations between Tufts and the cities of Medford and Somerville following the expiration of their previous agreement, Tufts increased its PILOT contributions to its host cities from $275,000 to $450,000 per year. While the 64 percent increase in payment was welcomed by both cities, it came as a surprise as the cities’ negotiating teams had yet to reach a final agreement. To Councilor Bears, Bill H.3080 would be instrumental in ensuring that the conversation between Tufts and its host cities is no longer one-sided. 

While some argue that changes to PILOT would reassure community members of large nonprofits’ dedication to helping their community, others have argued that the proposed changes to PILOT are unfair and potentially detrimental to nonprofit institutions. Those opposed to the bill argue that nonprofits are tax-exempt for a reason. According to an article in the Boston Globe, the Boston Symphony Orchestra, a participant in Boston’s PILOT program, cited COVID-19-related revenue losses as an increased strain on the institution. Mark Volpe, chief executive of the BSO, said this made the timing of Bill H.3080 particularly unfortunate and impractical. 

Despite this difficulty, the BSO met 100 percent of PILOT requests in 2020. The same cannot be said of many larger, wealthier institutions. Tufts fulfilled 87 percent of the money requested of them by Boston’s PILOT system. While not 100 percent, this is notably higher than any other educational institution in the program, with the exception of Boston University, which also paid 87 percent of its PILOT ask. Of the $1,227,438 requested of Tufts by the city in 2020, Tufts paid $450,000. This sum, combined with the $613,719 Tufts received as Community Benefits Credit, made up the 87 percent of the request they contributed. 

According to Tufts’ “Boston PILOT Community Benefits Report,” the Undergraduate Financial Aid program, the Tufts Food Rescue Collaborate Family Meals Program, Tisch Summer Fellows, the Tufts University School of Dental Medicine Dental Clinics, and many other Tufts programs are making meaningful monetary contributions to the school’s surrounding communities. In total, Tufts estimates that it contributed $12,344,681 through its services and community programs to the city of Boston. In its “Medford/Somerville Community Benefits Report” Tufts claimed to have contributed an additional $4,564,298 to the cities of Medford and Somerville. As a result of its self-reported contribution, Tufts received $613,719 (50 percent of the total amount of requested PILOT) in Community Benefits Credit from the City of Boston. 

Despite the recognition they receive from the state, some question the legitimacy of the contributions of large institutions to their surrounding communities. Shrenik Agarwal, an intern in the office of Rep. Uyterhoeven, is interested in “looking at all these nonprofit institutions, examining exactly who they serve [and] who they benefit.” He said, “The reason they have this tax-exempt status is because of this mission to serve the public. But it’s [a question of] who is included in that public? When you look at [it], Tufts has more students from the top 1 percent than the bottom 60 percent. And Tufts gives preferences to legacy students. And you keep going down that rabbit hole: How many kids from Somerville Public Schools or Boston Public Schools or Cambridge Public Schools go to Northeastern or Harvard or Tufts? But from their taxpayer money, the new dining hall is subsidized. It’s absurd.” 

In an email to the Tufts Observer, Rocco DiRico, director of community and government relations at Tufts, stated, “Currently, Boston is the only host city that has a formal PILOT program. The Boston PILOT and Community Benefits program has been incredibly successful. In [fiscal year 2020], 37 nonprofit institutions (including Tufts University) submitted community benefits reports totaling $153 million. In addition to these community benefits, these nonprofit organizations also voluntarily contributed $34 million to the City of Boston. At this time, I don’t think it’s necessary to change a program that’s been so beneficial to the residents of Boston.” 

Bill H.3080 does not address the Community Benefits Credit. Matthew Barad, volunteer policy researcher with the office of Rep. Uyterhoeven, said, “The bill does not do anything other than give municipalities the ability to enforce the currently optional PILOT payments. Currently, some towns use the benefits they offer to schools to try and get leverage for higher ‘voluntary’ PILOT payments. The new bill would make that unnecessary, as municipalities would have full control over whether nonprofits have to meet PILOT.” 

If implemented, Bill H.3080 would mean that Boston would no longer be the only host city with a formal PILOT program. The intention behind the bill is to ensure that cities like Somerville and Medford have more control over discussions regarding PILOT contributions. By ensuring that large nonprofits are required to contribute a minimum payment to their respective host city, Tufts and other PILOT-affiliated institutions would no longer have the option to change how much they contribute without consulting everyone involved.