Boston Homes produced an interesting article
The City of Boston value of total real estate in the city is 123bln- of which close to 30% is owned by schools, colleges, health care facilities. These non profits fall under the PILOT program which is a voluntary tax
30% of our tax base is negotiated, these leaves huge room for favoritism, special deals and treatment. Tax rates for the PILOT program need to be standardized at 40% of the market rate.
The city could take the windfall in revenue and cut spending by similar amount to reduce deficits.
Please share widely!
Cut the R.E. rate and you will see more of that land redirected towards use as commercial real estate. We will also have more jobs and opportunities from high-productivity industries like high tech, entertainment, etc than from low-productivity industries like education and healthcare.
That’s the number from the Boston PILOT Task Force available at http://www.cityofboston.gov/assessing/pilot.asp.
And I think that it’s a couple years old and too low because the shift of property to not-for-profits continues apace. Just think about the theater district. Theaters used to be businesses and now they’re part of Emerson. That’s just one example. I write a letter to editor at Globe last week in response to this column by MFA director Malcolm Rogers– http://articles.boston.com/2012-01-02/arts/30579021_1_museums-mfa-tax-exempt-organizations –but since it didn’t get published I’ll run it here.
To the Editors,
Museum of Fine Arts director Malcolm Rogers’ (“MFA’s Malcolm Rogers writes about PILOT plan”) complaint about Mayor Menino’s request for higher payments in lieu of taxes (PILOT) should be put in context. Boston’s residential tax rate went up 7.5% last year and another 2% this year. We pay a higher tax rate than Brookline, Newton or Cambridge. So in the middle of a terrible economic environment Boston residents are shouldering the expansion of wealthy non-profits like the MFA.
Roger’s last reported annual compensation of $766,967 and the MFA’s capital campaign of $504 million give some idea of its wealth. But the MFA is not alone. Emerson College bought a “president’s residence” for $4,925,000 last year. It’s PILOT to Boston? $139,368. Northeastern University, whose 2010 Financial Statement shows assets of $1.8 billion pays $31,500 PILOT to Boston, less than its yearly tuition. And Boston College, which is in the middle of a $1.6 Billion expansion, pays a mere $293,251 to the city. But pays it coaches more million-dollar plus salaries, including severance pay.
These institutions are also exempt from state sales tax, so individuals carry the costs of state services for them, too. Last, millions of dollars of contributions to these institutions are used to reduce federal tax payments, increasing the costs of federal programs to individuals.
It’s time for these moneyed institutions to do the right thing and stop foisting their costs of operations on to individuals.
End of letter.
I didn’t begin to address institutions like Blue Cross Blue Shield or Partners Healthcare which are wealthier than most companies, pay corporate-level salries and make profits each year. Hard to swallow all this here in Boston and only the Mayor seems willing to take it on.
PS – Please don’t assume I am anti-education or hospital because it’s not the case. But, I am pro-fairness and while universities talk a lot about community benefits, I have never seen a real cost-benefit analysis they they didn’t do themselves. And, at some point the benefit has to come in dollars so that residents — homeowner and renters — don’t pay ever-higher amounts for city services.
The pilot program is just a way for the mayor to juice these non-profits for in-kind programs and jobs he can hand out to revolving door employees.
Cut out the arbitrary pilot program and cut the stupid rate! It’s too high. The numbers are the definition of a tax that is so high it is costing us money.
That’s the funniest thing I’ve heard today.
I don’t know anything about Boston tax rates, but I do know that Boston isn’t a closed economic system. Tax cuts to businesses and residents, therefore, won’t all be spent in Boston. They might also be saved or used to pay down debt. There may be some benefit to taxpayers, but there will be no measurable benefit to Boston business and a severe cost to services provided by Boston.
The Laffer Curve simply states that there is a diminishing return to increased tax rates. The real estate numbers in Boston couldn’t be a clearer illustration of this principle.
In fact there couldn’t be a tax system more closed than municipal real estate. It’s not some macro-problem of drawing money out of the system. It’s a problem of drawing land off the taxable rolls. With commercial taxes so high, Boston drives higher-end business to easily accessible neighboring towns such as Dedham, Newton, Brookline and Cambridge with much lower commercial rates, to be replaced by non-profits.
Commercial R.E. taxes collect less than they should, so the result is that Boston residential tax rates are HIGHER than neighboring Brookline and Cambridge last I looked.
The split rate is an artifact of some Curley-era business bashing, which would lead you to believe that the nice bars and restaurants all over Cambridge are exploiting the working people there somehow… for a comparable population, the services and stores in Boston suck. In restaurants for instance, we are living on an inverted bell curve, either ultra-high-end or pizza shops.
If you build a skyscraper, you can wrangle better rates from the mayor through federal blight and other designations. If you are trying to build a small business you are going to get screwed. This depresses the innovation that could easily be happening all over the city, and hits the city residents who don’t have transport to better business climates worse than anybody else.
I agree with you on the variables. Taxes could theoretically cause businesses to move.
As I said, I don’t know much about Boston’s tax rate or real estate, but there are other reasons for businesses to move to the suburbs. In fact, they do that all over the place. Real estate is cheap and taxes are cheap in Holyoke, but businesses aren’t relocating there.