August 17, 2015

Communities such as Worcester lean on tax-exempt nonprofits to help pay for services

Worcester Polytechnic Institute pays the city in lieu of taxes for the development in Institute Park, on Salisbury Street.

(Updated on August 17 at 11:30 a.m.) Central Massachusetts, especially Worcester, is home to a number of nonprofits and other tax-exempt organizations. Last year, more than 30 percent of all land in the city was tax exempt.

While that's the largest of any Central Massachusetts community, it's substantially less than Boston, where more than half of its land – 52 percent – is tax free.

So, while Worcester-based nonprofits don't have to pay property taxes to the city, some — Clark University and the Christopher House assisted-living facility, to name two — make up for it through formal agreements or programs, such as PILOTs, or payments in lieu of taxes.

Advocates of such programs argue that these organizations use community resources such as fire and police protection. In communities with large bases of tax-exempt property, this can prove to be a strain on the city or town, Marlborough Mayor Arthur Vigeant said.

"Police and fire still go down there even though (the organizations) are tax exempt," he said. "For some of the communities, like Worcester and Boston, it is a huge drain on the system and if (nonprofits) don't contribute something, that burden for police and fire goes onto the taxpayers."

The impact of exempt organizations can be even more profound when they remove properties from the tax rolls. In 2013, the University of Massachusetts Medical School purchased property adjacent to its Worcester campus. The property, which was paying $1.5 million in taxes to the city, has largely remained on the tax rolls due to its for-profit tenants, but the shock of potentially losing that tax revenue drew the concern of city officials. The two sides later reached an agreement in which the school agreed to pay $1.58 million to the city over five years in what was called an economic and educational support agreement.

Marlborough receives $80,000 a year from the New Horizons assisted-living center. Vigeant noted that in addition to that PILOT agreement, the Cummings Foundation, which operates New Horizons, has gone "above and beyond" with $100,000 donations to nonprofits in the city each year for the past six years.

The foundation views these payments as part of being a good citizen, said Dennis Clarke, president and CEO of Cummings Properties of Woburn, which helps manage the foundation.

Representatives from the College of the Holy Cross, Worcester Polytechnic Institute, the University of Massachusetts Medical School and Clark University, all of which have financial partnerships with Worcester, expressed similar sentiments.

Clark's PILOT is the latest in a series of initiatives that have enhanced its relationship with the local Main South neighborhood, said Jack Foley, the school's vice president for government and community affairs. When the neighborhood was struggling in the 1980s, the university put resources into local schools, nonprofits and neighborhood improvements, he said. In addition to a 20-year, $150,000 annual PILOT deal for the closing of part of Downing Street to connect the two sides of the school's campus, the university also has agreed to pay real estate taxes on new property it purchases as it expands. Those payments total $112,176 a year.

"The realization is there that the success of Clark is inextricably linked to the success of this neighborhood and the success of the city," Foley said. "It's to our advantage to really work with the city."

It's also vital that nonprofits ensure that their support of the city fits with their missions, said Jamie Hoag, director of government and community relations for Holy Cross. In addition to a five-year arrangement in which the college contributes $80,000 a year to support the city's mobile library, it hosts Worcester Bravehearts baseball games and regularly contributes to other city projects.

"We all benefit from a strong Worcester … it's not just about writing that check and sending it to City Hall," Hoag said.

Meanwhile, WPI has a 25-year, $157,403 PILOT program related to developing nearby Institute Park. These payments dovetailed with the school's expansion in the area and thus made sense for the organization, said Jeff Solomon, WPI's chief financial officer. Such long-term commitments allow the school to make a greater impact, he said.

"It's a snowballing effect when we make this investment and partnerships with the city," Solomon noted. "Any time you do some long-range planning you end up with a better result."

The story previously stated that Holy Cross has a PILOT agreement with the city. Holy Cross College makes voluntary financial payments to the city but does not have a PILOT program.

Some have called for more

Despite the money coming from the nonprofits to Worcester's coffers, not everyone is pleased with the contributions being made. In 2014, several city councilors called for the creation of a working group to push for more money from tax-exempt organizations.

Getting financial contributions from these organizations is a balancing act, said City Manager Edward Augustus. While working for Holy Cross as director of government and community before he moved to City Hall, Augustus helped negotiate the college's arrangement to fund the mobile library. While this and other agreements with nonprofits have benefited Worcester financially, they have to be approached delicately, he said: Take too much from a nonprofit and it will have to cut services that are vital.

"We are always looking to bring additional money in from these institutions or services for residents or businesses, but we always have to look at the big picture," Augustus said. "They're really important to us and our future and the vibrancy (of the city) and the ability to evolve and change with time. They are part of that process."

The contributions tax-exempt organizations make cannot simply be measured in dollars and cents, he said. Many of the city's nonprofits provide essential services that Worcester would otherwise have to offer out of its own budget.

"I think to myself: Would we be a better community without UMass? Or a better community without Clark or Holy Cross or WPI in it? … I think the clear answer is no," Augustus said. "I think you can pretty clearly make the case we are better off because of these organizations."

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