Cities seek more money from tax-exempt colleges

Boston, with one of the biggest concentrations of colleges, universities and research centers in the country, collects significant amounts of money from such institutions. Harvard, Boston University, Massachusetts General Hospital and several other institutions made $34 million in payments in lieu of taxes in 2010 in what the city says is the biggest such program in the nation.

In Lancaster, Pa., the city sends out letters every year asking nonprofit organizations to pay one-third of what would have been their tax bill. Lancaster General Hospital pays more than $1 million voluntarily, more than its taxes would have been, Mayor Rick Gray said.

“They said they feel they should be supportive of the community,” he said. “We’re certainly grateful.”

Brown has enjoyed a tax exemption since colonial days but decided to kick in more money because it sees itself as a partner in Providence’s economy and because it wants good relations with the city, said Brown University President Ruth Simmons.

“The idea that we have an endowment, a budget that will bear these kinds of costs is not correct,” she said. Still, she said, it was obvious that this was “a time that requires we step up.”

The use of payment-in-lieu-of-tax deals is on the rise. Such agreements have been carried out in at least 18 states since 2000, mostly in the Northeast, according to a study by the Lincoln Institute of Land Policy.

City leaders say it is a matter of fairness to taxpayers. As universities and other tax-exempt organizations expand, they consume more city services while taking property off the tax rolls.

Syracuse, N.Y., Councilman Patrick Hogan said hospitals in his city have recently embarked on big expansions, as have Syracuse University and another college.

“They’ve gobbled up property that used to be taxable,” he said. “That just moves the burden of paying for fire protection, police, garbage collection and everything else onto the remaining taxpayers. I’m just saying it’s time for them to kick in a little more to support these services.”

Hogan said the city may have to tax commuters if the nonprofits don’t agree to pay more.

Cities have found other ways of generating money from tax-exempt organizations. Chicago, for instance, recently announced it would begin charging nonprofits a water fee.