Tax exemptions can cost towns
On paper, the valuation and percentage of tax-exempt property in some Greater Boston communities could make taxpayers wonder if everyone is paying their fair share.
In Chelsea, 30 percent of the property is tax-exempt; in Foxborough, 23 percent is not subject to tax; and in Lincoln, the figure is 18 percent.
From bridges to parks to Gillette Stadium in Foxborough, state law allows a patchwork of diverse interests to avoid paying property taxes. Exemptions are given on property owned by the state, federal government, cities and towns, and registered nonprofits, which range from hospitals and universities to soup kitchens and houses of worship.
While some state agencies voluntarily pay host cities annual fees for the tax-exempt land and some nonprofits willingly enter into cash agreements with municipalities — known as payment in lieu of taxes — leaders of cash-strapped communities are increasingly asking tax-exempts for funds.
In Chelsea, the Tobin Bridge is valued at $520 million by the city, amounting to more than half of the city’s $1 billion in tax-exempt property. MassHighway, which owns the bridge, pays Chelsea $600,000 annually as a host fee.
While old-timers complained bitterly when the bridge opened in 1950 — dividing the city’s neighborhoods — most have come to accept it. Chelsea Treasurer Bob Boulrice said that without the bridge, the city’s tax-exempt valuation ranking — sixth in the state — would probably go unnoticed.
“The numbers are skewed because of the bridge,” he said.
Policy decisions by some communities, such as Lincoln, have led to the town’s large cache of tax-exempt places. Lincoln, which ranks 32d in tax-exempt valuations in the state, has made a deliberate effort to purchase conservation land. The town now owns 1,522 acres of open space, complementing the nonprofit Lincoln Land Conservation Trust’s 517 acres and the federally owned Minute Man National Historic Park’s 330 acres.
“This preserves the character of the town and limits development, especially in environmentally sensitive areas,” said Ellen Meadors, a member of the Board of Assessors and the Lincoln Land Conservation Trust. Meadors and other leaders of the town of about 6,300 residents believe that controlling the conservation land — as opposed to allowing new housing to be built — is more cost-effective and boosts property values. In Lincoln, the average single-family home is assessed at $1.01 million.
“If you develop that land, the cost of services — police, fire, and schools — would be very high compared with the cost of services for conservation land, which is very, very low,” Meadors said.
Foxborough ranks 15th in tax-exempt property values in the state, but that number is misleading, said Randy Scollins, the town’s finance director. On the books, tax exempts account for $763.4 million, but $470 million of that is one property: the 24-acre footprint of Gillette Stadium.
The town owns the land under the stadium complex — which also includes the ticket office, the Patriots Hall of Fame, the Pro Shop, and administrative offices associated with the Kraft family’s sports and entertaining holdings.
Under the tax agreement with the Krafts, owners of the Patriots, for every NFL game ticket sold, the town receives $1.47. For other events — such as New England Revolution soccer games and concerts, Foxborough receives $2.55 a ticket. Last year, the town received $2.8 million from the Krafts.
All of the stadium parking lots are owned by private companies and are taxed at commercial rates.
Scollins said the town has had a tax agreement with the Patriots since the team built its first stadium in 1971, and that extra cash has helped boost Foxborough’s economy. The Krafts also built Patriot Place in 2007, a shopping district adjacent to the stadium that brings in $2.5 million in commercial property tax revenue for Foxborough.
“We’re enjoying substantial tax benefits from that,” said Scollins.
Some municipal leaders say the nonprofits benefit from city services, and thus should help pay for police and fire protection and snow plowing. And some mayors and town managers are trying to persuade larger nonprofits — which often are the region’s largest employers — to make annual voluntary payments.
As state aid to cities and towns has dropped by double digits in recent years while executives’ salaries routinely climb over $500,000 at nonprofit hospitals, universities, and museums, some elected leaders have chosen to push for payments in lieu of tax agreements, or PILOTS.
Adam Langley, a research analyst for the Lincoln Institute of Land Policy in Cambridge, believes voluntary PILOT agreements are part of a growing trend in the state.
“The state is reliant on property taxes more than in other parts of the country,” said Langley, who added that 90 percent of all revenues from PILOTS in Massachusetts come from hospitals, colleges, and universities.
Last month, Brockton Mayor Bill Carpenter sent out letters to 21 nonprofits seeking PILOT agreements. If all paid a share, the total would be $4.2 million, which would bolster the city’s public safety and school budgets. Brockton Hospital, which holds an estimated $70 million in nontaxed property, was at the top of the list.
Brockton ranks 42d in the state, with $1.058 million — 16.2 percent — of its properties tax exempt.
To date, Carpenter has not heard back from any of the nonprofits. Brockton Hospital officials could not be reached for comment about the proposal.
“We’re asking them to be good corporate citizens, and what we’re really asking them to do is help keep the city afloat,” said Carpenter.
“If this trend continues, if the nonprofits continue to buy up commercial property and continue to make it all go tax-exempt, in the long run there’s no way that the city can financially survive.”
Some smaller communities, such as Belmont, also have attempted to negotiate PILOT agreements, with scant results. In 2012, the town asked 38 nonprofits for cash. Some volunteered to give annual stipends to the town but none were willing to sign a formal PILOT agreement.
According to the state Department of Revenue, Belmont receives $46,596 annually in PILOT agreements from tax-exempt properties, valued at nearly $703 million.
Geoff Beckwith, executive director of the Massachusetts Municipal Association, believes its time for the state to create a law that mandates tax payments by nonprofits. “Having essentially a free ride at the local level, whereas other entities are paying the full amount, just isn’t fair,” he said.
But Rick Jakious, chief executive officer of the Massachusetts Nonprofit Network representing about 700 nonprofits, said tax agreements can impact the ability to provide quality of life services.
“Municipalities are hurting, but we believe that trying to balance their budgets on the backs of nonprofits is shortsighted,” he said.
Salem Mayor Kim Driscoll doesn’t think the state needs to enact a law requiring nonprofits to pay some form of taxes. Since taking office in 2006, she’s been persistent in trying to persuade the big ones to contribute to the city’s budget. The city’s largest employer, North Shore Medical Center, has agreed to pay $125,000 a year. Salem State University pays $100,000 a year and offers other services to the city. In all, the city receives $1.32 million a year from PILOTS.
“I think it really has to do with the relationships you form with those entities in your community,” Driscoll said.