Tax Committee Sends Message to Harvard

A joint committee of the Mass. State Legislature gave its approval last week to a bill that if enacted would remove the absolute exclusion from paying property taxes that Harvard and all other non-profit institutions in the state have enjoyed since 1830.

Under the legislation that was unanimously given a favorable recommendation by the legislature’s Joint Committee on Taxation, cities and towns could force non-profits that purchased large tracts of property—those making up at least 2.5 percent of a community’s tax base—to continuing paying property tax, if the property had been taxable prior to the purchase. The legislation would apply retroactively to new purchases made since the beginning of 2001.

The legislation came as a response to Harvard’s ongoing financial dispute with the city of Watertown over the effect on city revenues of the University’s $162 million purchase in May of the Arsenal complex.

The complex represents one-third of the entire commercial tax base of Watertown. According to Larry Rasky, the head of a Boston public relations firm representing the city of Watertown, a non-profit firm purchasing such a great percentage of a town’s tax base in one transaction is without precedence nationwide.

As the law presently stands, Harvard would be exempted from paying taxes on any portion of the property used as part of the educational mission of the University.

Now that it has cleared the taxation committee, the legislation is in the hands of the House’s Committee on Steering, Policy and Scheduling. According to State Representative Rachel Kaprielian, a Democrat who represents Watertown and originally introduced the bill, under the rules of the House this committee must act on the legislation by the end of the month.

If the committee gives its approval to the bill, it would move to the House floor.

While Kaprielian said that she could not offer a definite prognosis for the bill, given the fickle nature of the legislative process, she said that early signs are quite favorable for its success.

“The bill is moving at a very healthy clip,” Kaprielian said. “I’m pushing for it and it’s been very well received [by fellow legislators].”

Harvard’s Senior Director of Federal and State Relations Kevin Casey said that this piece of legislation is the most important to Harvard currently before the legislature. He agreed that many members of the legislature have indicated that they are favorably disposed to the bill.

However Harvard is making efforts to derail the legislation.

Casey, who is leading the efforts against the bill, said that the University is using two strategies to try to defeat the legislation.

The first is to demonstrate to legislators that the University is making genuine efforts to work with Watertown in solving the dispute over the Arsenal.

As part of this effort, Kathy A. Spiegelman, University associate vice president and director of Harvard Planning and Real Estate, sent a letter on June 12 to Watertown’s City Manager Michael J. Driscoll containing a written proposal for an agreement between the city and University. The University’s original proposals for an agreement had only been communicated orally.

Since the June 12 letter, two additional letters have passed between the parties and representatives of each side met in person once, although Driscoll described this meeting as only an “exploratory session” and said that there have yet to be any negotiations between the parties.

As a second strategy to defeat the bill, Casey said that Harvard is trying to show that the bill may have unintended harmful consequences.

“Many other non-profits are very concerned about this bill,” Casey said. He said that the Association of Independent Colleges and Universities of Massachusetts has been active in lobbying against the legislation.

Yet Steven A. Tolman, a Democrat who represents Watertown in the Mass. Senate and introduced a version of the legislation in the Senate, said that such a bill was needed to protect the financial stability of small towns against wealthy non-profit institutions such as Harvard.

“This is the only solution to protect small towns,” Tolman said. “We want to make sure that we have a level playing field [with large non-profit institutions]. It’s only an issue of fairness; this is not anti-Harvard.”

While the impetus for the legislation was Harvard’s purchase of the Arsenal property, Kaprielian said that this legislation might be enacted even if Harvard and Watertown came to a settlement on the University’s future payment to the city.

“The horse is out of the barn,” Kaprielian said. “It is not an automatic right of a non-profit that an 1830 statute would not be tinkered with. I would solidly count [the 1830 exemption law] as an archaic statute.”

However, Casey said that he does not share this view of the exemption law, but instead sees it as an important precedent that the legislature should be reticent of breaking.

—Staff writer Daniel P. Mosteller can be reached at dmostell@fas.harvard.edu.