LOWELL — The University of Massachusetts at Lowell has expanded from its two campuses on opposite sides of the Merrimack River into the heart of its host city, acquiring and revitalizing a struggling arena, hotel, and hospital — and boosting the local economy when it needed it most.
But as the university grows beyond its traditional footprint, taking property off tax rolls while straining roads, police, and other municipal services, Lowell officials are asking it to consider making voluntary payments in lieu of taxes to offset the cost of providing it with services. UMass Lowell has resisted making cash contributions to the city, arguing that the economic activity it generates provides far greater benefits.
The negotiation here is one that also plays out in many other communities across the country as they try to balance the economic impact of tax-exempt operations, such as universities, hospitals, and museums, against the need to fund critical services financed by property taxes. In today’s knowledge-based economy, few would contest that such institutions have become engines of growth. But as local officials try to balance budgets, many ask: Is that enough?
“Everybody recognizes the presence of the university has a positive economic effect,” said Tom Moses, Lowell’s chief financial officer, “but there are costs that they don’t nearly cover.”
UMass Lowell responds that making payments to the city would interfere with its key mission: providing access to higher education by keeping tuition low for Massachusetts residents.
“There’s a very good reason why public universities are exempt from taxes,” said UMass Lowell chancellor Martin Meehan. “The idea of increasing tuition on students to give money to the city doesn’t square well with me.”
Payments in lieu of taxes are familiar to Boston, Cambridge, and other communities that are home to universities, hospitals, and other nonprofits. More than 200 local governments across the country, including 92 in Massachusetts, have negotiated such payments with tax-exempt institutions, according to the Lincoln Institute of Land Policy, a Cambridge think tank.
Boston, where 52 percent of property is tax-exempt, collected $23.2 million in voluntary payments last fiscal year from its largest institutions, including Boston University, Simmons College, and the Massachusetts College of Pharmacy and Health Sciences, according to assessors.
UMass’s flagship campus in Amherst, where its students account for most of the town’s population, pays for the costs of municipal services it uses, based on an annual invoice sent by local officials. In 2012, UMass paid about $360,000 for ambulance services alone.
In Worcester, after buying five properties that will take $1.7 million off the tax rolls, University of Massachusetts Medical School earlier this year agreed to make nearly $1.6 million in grants over the next five years to the city’s library and public schools.
UMass Lowell holds about 4 percent of all property in Lowell, according to Moses. If the university paid taxes on its land and buildings, valued at more than $270 million, the city would collect about $7 million a year.
Lowell officials could not estimate the cost of services provided to the university, but demand for them has almost certainly increased. Student enrollment has jumped more than 45 percent since 2007.
“In any city where you have 10,000 to 15,000 residents come in and leave within the course of one year, and those residents are very active, that’s not easy to accommodate without significant cost,” Moses said.
UMass Lowell, however, argues the university more than compensates for such costs, providing an economic spark to an old mill city that has spent decades trying to reinvent itself.
The university is Lowell’s second largest employer, with nearly 600 workers earning $24 million this year, according an economic study recently released by UMass Lowell.
Since Meehan became chancellor in 2007, the study noted, the university has launched some $600 million in construction projects, including dormitories, parking garages, and academic buildings. Perhaps the most visible impact has come in and around downtown, where UMass Lowell has spent more then $100 million to acquire, renovate, and revive three failing properties.
They are the former Tsongas Arena, a sports and entertainment venue; a former DoubleTree Hotel, which UMass Lowell operates as an inn, conference center, and dormitory; and the former St. Joseph’s Hospital, which will open later this year as a student center including restaurants, shops, and meeting places.
These projects have supported the revitalization of downtown, attracting students, parents, and visitors to restaurants, shops, and nightlife there. On a recent rainy afternoon, downtown’s Merrimack Street was buzzing with backpack-toting students. Brew’d Awakening Coffeehaus, a cafe on nearby Market Street, was packed with people of all ages.
Owner Andrew Jacobson, who graduated from UMass Lowell in 2004, said his business has grown 8 to 10 percent annually since opening four years ago. He attributed half that growth to the university’s increased presence downtown.
“The impact of the university’s growth and development on the economy of the city is unquestionable,” said Adam Baacke, Lowell’s assistant city manager.
Ultimately, old industrial cities such as Lowell, grappling with poverty and low educational achievement, should consider the range of universities’ contributions when they consider policies such as payments in lieu of taxes, said Benjamin Forman, executive director of Gateway Cities Innovation Institute.
The institute, run by the Boston think tank MassInc, is a project to revitalize cities such as Lowell, New Bedford, and Worcester.
Perhaps the most important contribution of universities, Forman said, is helping to strengthen public schools in communties, making them more appealing to middle-class families who would buy homes and rebuild the tax base.
UMass Lowell, for example, allows local high school students to take free college courses to gain a head start on credits toward a degree. The university enrolled 202 high school students this year, up from just 19 in 2010, he said.
“If families can get all sorts of experiences in the public school system because higher education is right there in the community,” said Forman, “then you can really market that opportunity to families and attract them to your residential neighborhoods, increase those property values, and solve your fiscal challenge.”