‘A Complicated Marriage’: Cambridge Calls on Harvard to Increase Optional PILOT Payments

The city of Cambridge called on Harvard to increase their optional municipal payments at a city council meeting Monday night — after failing to reach a new agreement with the University by the end-of-year deadline.

The current Payment in Lieu of Taxes program, which replaces the property taxes that Harvard is exempt from paying, is set to expire in early June. A failure to reach an agreement with Harvard could result in Cambridge losing $4.7 million in annual voluntary payments.

While the city is still in active negotiations with the University, Cambridge City Manager Yi-An Huang ’05 said that the offer that the University made was “not yet” high enough for the city to agree to the contract.

The PILOT program asks large, tax-exempt nonprofits in the city to voluntarily pay a portion of what they would otherwise pay in property taxes to help supplement the city’s budget.

The city hopes to increase Harvard’s payments in alignment with the University’s financial growth since the initial signing of the agreement.

“When we originally signed our agreement, the University had an operating budget of $2.5 billion and an endowment of 22.6 billion,” Huang said. “20 years later, the University’s budget is now more than twice as big, at $6.4 billion, and the endowment has more than doubled to $53 billion.”

In 2004, Harvard signed a 50-year PILOT agreement that allowed the city to terminate the agreement in 20 years — at the end of 2023. The University and the city agreed to a one-year extension of the original contract and negotiated throughout 2024 but could not come to an agreement, which led to the termination of the PILOT program at the end of the year.

While Harvard has no legal obligation to participate in PILOT payments, their “voluntary agreement is based on the university’s commitment to be part of this community and part of finding funding for the things that are really important,” Huang said.

“We’ve got to get this thing done, and if we don’t get it done, then what is at risk is the existing agreement and the funding level that the University was already committed to in the prior agreement,” Huang said.

At Monday’s meeting, City Councilors also discussed the need for Harvard to increase its graduate student housing to ease the housing burden in areas around Harvard.

“Not only do they have to build more, but they have to make it actually more attractive, both financially and just in terms of the lifestyle, so that people are going to want to choose to live there,” Vice Mayor Marc C. McGovern said.

McGovern added that Harvard has a special responsibility to support the city of Cambridge.

“Cambridge isn’t Cambridge without Harvard, and Harvard isn’t Harvard without Cambridge,” McGovern said. “It’s a complicated marriage at times, but it’s in their best interest to make sure that the city is functioning well and able to support its residents as best we can.”

​​—Staff writer Jack B. Reardon can be reached at jack.reardon@thecrimson.com. Follow him on X @JackBReardon.
— Staff writer Shawn A. Boehmer can be reached at shawn.boehmer@thecrimson.com.