When a major piece of private property goes off the tax rolls because a college or a hospital buys it, it’s only natural for local governments to squawk. The Globe’s Sacha Pfeiffer reported last week on the controversy over the purchase of Perkins Park, a 230-unit apartment complex, by the tax-exempt University of Massachusetts Lowell. Unfortunately for the City of Lowell, the $61.5 million transaction will reduce property tax collections by $321,000 a year — more than four times the salary of the average teacher in the public school system there.
When these situations arise, the nonprofit community needs a better response than, “Sorry, that’s not our problem.”
Elected officials representing Lowell came up with a modest piece of legislation that would phase in tax exemptions over four years rather than taking properties off the rolls immediately. The measure stalled as the legislative session sped to a conclusion at the end of July. But the issue isn’t going away.
As a general principle, local governments in Massachusetts should be wary of squeezing nonprofits too hard. Small organizations provide vital services, often on a shoestring. Major universities and hospitals are the cornerstone of the regional economy. They’re easy targets: As tax collections plunged during the most recent recession, public employee unions around the country pushed local governments to stick up nonprofits for higher payments rather than shrink payrolls or seek relief from unsustainable pension commitments.
The nonprofit sector isn’t merely a money pot to be tapped just because local governments ran out of money. Still, the interests of communities and large nonprofits sometimes do conflict. Boston’s system of PILOTs — payments in lieu of taxation — asks nonprofits for voluntary contributions tied to the level of services they consume. But some institutions, such as Boston College, pay nothing. (BC does, however, make separate payments for fire services.) Legislation that at least provides for property tax collection in tightly constrained situations could point the way forward in a future legislative session.
Nonprofits fear a slippery slope. Once cities can collect something, the argument goes, they’ll never stop asking for more. But this logic ignores the political strength that nonprofits enjoy. Universities and hospitals are major employers, and their muscle guarantees that the slope toward taxing nonprofits in Massachusetts will never be too slippery.
Clarification: This editorial has been updated to reflect payments that Boston College makes to Newton and Boston for municipal fire services.