Managing Mitigation Money

As we finish our tests this week and run into the logistical nightmare of packing up to leave Cambridge, Harvard planners may know our pain. But their final test will come at the end of the summer—when they are slated to announce their plans for how to move part of Harvard itself out of Cambridge, into the University’s new holdings in Allston.

Chief among the competing concerns surrounding the move across the Charles is the matter of how Harvard will financially support its new neighborhood. As a non-profit entity, Harvard is not compelled to make any tax payments to the municipalities in which it resides. Instead, it has taken it upon itself to make payments in lieu of taxes (PILOT) to those communities. PILOT payments are an admirable consolation prize when Harvard takes up land that would otherwise bring valuable tax revenue. And as the University increases its presence in its Allston campus, it must be willing to increase its PILOT payments as well.

When Harvard’s purchase of a 30-acre tract in Watertown sparked outrage from neighbors, University officials negotiated an deal that guarantees Watertown an annual payment of $3.8 million—no matter how much of the parcel Harvard takes off the tax rolls. In Boston, where Harvard holds more than nine times as much land—and is currently hammering out a deal to buy even more—the University pays only $1.6 million in PILOT. Much of Harvard’s holdings in Boston are still on the tax rolls, and Harvard has not yet negotiated a new deal with Boston city planners, which is why the time is right now to reopen compensation talks.

Boston Mayor Thomas M. Menino is entirely right when he calls for higher PILOT payments in these tough economic times. Similarly, city leaders in Washington D.C.—where Harvard owns the vast, tax-exempt Dumbarton Oaks in extremely affluent Georgetown—are considering the University as a potential source of revenue.

Harvard has every right to purchase tracts of land as it continues to grow—and, as a non-profit educational institution, it should remain exempt from taxes. But it must create payment schemes that adequately reimburse cities for that loss of tax revenue.

This principle is no surprise to the University. In a 2001 internal memorandum sent to University President Lawrence H. Summers and uncovered by The Boston Globe, top university planner Kathy Spiegelman wrote, “We propose to present a generous offer for a [payment] agreement with Watertown, knowing full well that such an offer will lead to more generous provisions for property acquisition in Cambridge and Boston.”

The University must recognize that while its presence does indeed spur economic growth—as was well-documented by the economic development report issued by the eight of Boston’s prominent colleges—this indirect contribution should be buttressed by direct payments to cities.

Times are tough for cities, and voluntary payments by tax-exempt are creative solutions to surging deficits. Such organizations—and Harvard specifically—need to step up to the plate and help municipal governments in their time of need.