They've got a (FREE) ticket to ride!

posted 5/5/2008

They've got a (FREE) ticket to ride!

As the "Hub of the Universe", over the years Boston has absorbed an untold number of tax-exempt properties (free-riders) owned by government, university, hospital, church, cultural and other non-profit institutions. Today roughly 56% of Boston's developed land value is owned by organizations that are exempt from paying property tax. Even though there is a system for these free-riders to contribute to a fund for local services, most refuse or pay only a nominal sum.

As our local museums, hospitals, universities and even government agencies become an ever larger part of our economy, formerly tax generating property is systematically removed from the tax rolls. Boston businesses and residents are left to pick up the tab because if an exempt institution buys a property and stops paying taxes, public safety, public works and administrative services to support the property must still be provided and the taxes to support those services must be paid.

The property tax now represents well over half of the city's revenue. The relentless purchase of property by exempt institutions is a long-term ticket to fiscal insolvency as a smaller and ultimately less diverse tax base is forced to pay the substantial and rapidly growing cost of sustaining municipal services for these free-riders.

By copy of this email and your added comments, please let the mayor and your city councilors know that Boston should make it mandatory that any further purchases of real estate that remove taxable land from the property tax rolls must be required to pay the lost taxes as a condition of the purchase and redevelopment.

Examples:

  1. Harvard University, one of the wealthiest institutions in the world, has purchased hundreds of millions of dollars worth of commercial property in Allston which going forward will generate no revenue for the city unless Harvard "volunteers" to provide "Payments in Lieu of Taxes" (PILOT). One of the reasons that Harvard has begun acquiring property on this side of the river is that Cambridge now has an agreement in place with MIT and Harvard to do exactly what we are asking - if a tax exempt institution buys a taxable property they must continue to pay property taxes.
  2. Berklee College of Music purchased two buildings on Massachusetts Avenue for $25 million which if fully assessed at market value and paying commercial property tax rates would generate $625,000 in property tax annually. Going forward they will pay nothing.
  3. The Instutute for Contemporary Art sold their property on Boylston Street to another tax exempt institution and purchased some of the most valuable property in the city on the waterfront. This will generate no additional property tax revenue for the city.
  4. The federal government opened the Joseph Moakley courthouse on one of the most desirable parcels of land on Boston's emerging waterfront. The property generates no taxes because it is unconstitutional for one level of government to tax another. This facility could have been located almost anywhere in the city such as transit rich, development poor Dudley Square or closer to the I-93 corridor, preserving the more valuable property for a tax generating entity.
  5. Boston University opened a high rise dormitory on the Charles with spectacular views of the river and the city. Students pay thousands of dollars a month to rent these units. Dormitories are substantial cash cows for the universities, in part because they can charge market level rents for property but remain exempt from taxes.
  6. And in perhaps the most egregious example, Boston University is constructing a Level 4 Biolab in Boston's South End which will not be subject to property tax. This will require the Boston Fire Department to substantially expand facilities and training to deal with the potential hazards posed by the possibility of a disaster in such a facility. Most of the jobs, especially the better paying jobs, will be filled by suburbanites who pay no taxes to the city, even though they place a significant added burden on our public works and public safety departments.