Lowell seeks annual payments from nonprofits

Looking for another way to boost revenues, Lowell is seeking to require nonprofits to make annual payments to the city to help pay for the services provided.

Under the plan, tax-exempt groups that own property would be charged an annual “payment in lieu of taxes’’ equal to 25 percent of the equivalent residential property tax bill. The requirement would not apply to religious institutions and government entities.

The City Council on March 13 voted to file a home-rule petition with the Legislature to allow Lowell to institute payments in lieu of taxes. The order passed on a 7-0 vote, with one member absent and one voting present.


City Manager Bernard Lynch, who supports the plan, estimated that Lowell would generate $500,000 to about $1 million in annual revenue.

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Lynch, who is chairman of the Massachusetts Municipal Association’s fiscal policy committee, said cities and towns “are very interested in looking at’’ the idea, noting that there is legislation on Beacon Hill that would mandate local payments in lieu of taxes on a statewide basis.

“As state aid has been reduced and as cutbacks are coming from the federal government, we have to find a way to make ends meet so we can continue to provide the services that citizens and businesses expect from their local government,’’ he said.

“There are nonprofits that take advantage of these services,’’ Lynch added. “They serve an important community service role, without a doubt. At the same time, there are services taxpayers are basically underwriting on their behalf.’’

Lowell annually sends a letter to all its nonprofits asking for voluntary payments in lieu of taxes, based on a formula. But Lynch said the requests, which total about $2 million, typically yield only about $25,000.


Lynch said a number of communities in Massachusetts, such as Salem, have negotiated agreements where nonprofits have committed to making annual payments.

But Amy Pessia, executive director of the Lowell-based Merrimack Valley Food Bank, said her group is opposed to the requirement. From its converted mill building on Broadway Street, her group supplies food and personal care items to about 80 emergency programs in 25 communities.

Pessia noted that the food bank already makes an annual donation to Lowell out of appreciation for the services the city provides. She said it has also invested in an upgrade to its valve and sprinkler systems at the request of the Fire Department, and has paid for permits to run a food establishment and for construction work.

“We wouldn’t want to operate anywhere else but Lowell,’’ she said. “We love the city and we love the government and all the residents and our colleagues in other nonprofits.’’

But she said her group worries that if it had to make the annual payment required under the city’s proposal, which exceeds the amount of its current donation, the food bank might not be able to provide the same amount of food “to the people that rely on us.’’ And she said the burden faced by her group and others would be even greater should the city increase its charges later.


But City Councilor Edward J. Kennedy, who sponsored the council order, said he did not think the proposed payments would pose a burden to local nonprofits.

“It’s a small amount for everybody,’’ Kennedy said, noting that the payments are based on 25 percent of residential taxes, which are assessed at a lower rate than commercial taxes. He also cited a provision in the proposal that would allow the council each year to set the payment rate below 25 percent.

“The legislation is really designed to help the city out in struggling years,’’ he said.

Kennedy said his intent is that the revenue go toward easing the residential tax burden, though that requirement was removed from the bill by city lawyers with his consent because of concerns it could complicate the chance of passage on Beacon Hill.

“When I came on the City Council in January, taxes had gone up on residents the past six or seven years,’’ he said. “What I’ve been doing is looking for ways to prevent any additional tax increases.’’