Crazy Idea #4: PILOTs

Note: This is the fourth installment of Eight Crazy Ideas for ’08, a multi-part posting that is looking at ideas, big and small, that could improve our community in Belmont.
Belmont needs PILOTs. And, with all due respect to the Splendid Splinter, no…I don’t mean those kind of Pilots. I’m talking about Payment in Lieu of Taxes (PILOT) agreements. Here’s the deal: some of the town’s largest landholders are non profit organizations, which are exempted from paying taxes. While that’s totally understandable and, in fact, laudable for bare bones NPOs that are struggling to make ends meet, PILOT agreements are a way of recognizing that not all tax exempt organizations are financially strapped and that towns like Belmont sacrifice considerable tax revenue to host them. When feasible, PILOT agreements allow towns to capture a portion of the revenue they’d get if the land and buildings occupied by tax exempt organizations were instead residential or commercial property.
Take our neighbors in Watertown as an example: when Harvard University purchased the Arsenal on the Charles office development from O’Neil Properties for $168m in 2001, Watertown risked losing $3.8 million in annual taxes from the property — HU, after all, is a tax exempt organization. Fortunately, the town was able to negotiate a PILOT agreement with Harvard that started from that $3.8 million base rate and increased 3% per year through 2054, in addition to one time payments of $600,000 for community development and educational enrichment activities in Watertown.
Now the Arsenal development was a fully developed office park that Watertown had counted on for commercial tax revenue before Harvard purchased it. And Harvard University, with a $30 billion endowment, is a lot bigger and a lot richer than, say, BHS, with a $47 million endowment. That said, it’s not unrealistic for Belmont to plead its case to its tax exempt organizations to do their fair share to support the town they call home, especially in cases where expansion (for example, the purchase of abutting residential properties) has taken homes off the town’s tax rolls.
This isn’t a new concept for Belmont, obviously. Belmont Municipal Light Department (BMLD) and McLean Hospital currently make in lieu of payments to the town. Others do not, however. We love it that thriving schools, religious organizations and nonprofit hospitals like BHS, the LDS and McLean call Belmont home. But with stagnant financial support from the state, and fast rising costs ahead in 2008 and beyond, the time has come for Belmont to sit down at the negotiating table for a frank discussion about ability to pay and PILOTs. The town needs the help of all the businesses, residents and other organizations that call it home.