Boston’s voluntary ‘payment in lieu of taxes’ (PILOT) program, established in 2011, is facing renewed scrutiny and significant challenges as federal funding cuts from the Trump administration have put pressure on crucial higher education and healthcare institutions.
City spokesperson Emma Pettit expressed concerns that ongoing discussions with institutional partners are being complicated by the federal government’s ‘unprecedented attacks on higher education, research, and healthcare.’
The PILOT program allows the city’s most affluent tax-exempt institutions to make voluntary payments to support city services. Grassroots organizations have long advocated for a revision of this program to increase contributions from nonprofits.
However, top City Hall aides argue that the current political environment severely limits the city’s leverage to enforce significant changes to the PILOT program.
Harvard University, a significant player in Boston’s economy, has already experienced nearly $3 billion in federal funding cuts. The Trump administration has curtailed numerous grants at the university and its medical school, and even threatened to remove its tax-exempt status altogether.
Although Harvard is located in Cambridge, it holds extensive property in Boston, which contributes to the financial dynamics local institutions face. Recently, the Trump administration mandated that federal agencies terminate all business dealings with the university.
As a result, Boston’s hospitals and research institutions are also feeling the strain from cuts by the National Institutes of Health, endangering various research initiatives and health services.
Officials at City Hall emphasize that these institutions are pillars of Boston’s economy; hence, cutbacks adversely affect the city as a whole.
Given these broader issues, current city officials suggest that it is more prudent to request PILOT contributions aligned with previous years’ payments rather than exert pressure on tax-exempt institutions already grappling with financial hardships.
Patricia McMullin, executive director of the Coalition of Boston Teaching Hospitals, echoed this sentiment. She emphasized that hospitals are navigating uncertainties and the threat of severe cuts while striving to maintain community support and healthcare services.
McMullin highlighted the generous involvement of hospitals in the PILOT program, even amidst the ‘unprecedented’ financial challenges following the pandemic.
On the other hand, advocates pressing for reform of the PILOT program insist that the city should not ease the pressure. According to Enid Eckstein, co-chair of the Boston grassroots organization PILOT Action Group, now is ‘not the time to take your foot off the gas.’ She argues that many wealthy nonprofits have failed to adequately contribute their fair share for years.
Eckstein condemned the Trump administration’s actions against universities and healthcare funding but maintained that institutions with substantial endowments must step up, especially given the financial hurdles faced by cities.
In FY 2025, over 70 percent of Boston’s budget will rely on property taxes, with state laws restricting the city’s ability to impose new taxes. Consequently, homeowners and commercial property owners shoulder the majority of the financial burden necessary for essential city services.
A 2018 report by the Boston Municipal Research Bureau revealed that approximately 52 percent of all land in Boston is tax-exempt. Among that, 78 percent is owned by federal, state, or local governments, while 22 percent belongs to private nonprofits. If the properties owned by PILOT-participating nonprofits were taxable, Boston could have generated an estimated additional $500 million in revenue last fiscal year.
Currently, the PILOT formula requires institutions to pay 25 percent of what they would owe if not exempt, with half that amount being requested in cash and the other half fulfilled through ‘community benefits’ such as free healthcare services or cultural programs.
Eckstein and her advocacy group have recommended further adjustments to the PILOT formula, including updating property valuations to reflect current market values. The current calculations, based on property tax rates from fiscal year 2011 and property values from 2009, likely undervalue properties today. Though the city has reassessed tax-exempt real estate recently, it has yet to apply these new valuations to the PILOT formula, according to Boston City Councilor Liz Breadon, who chairs the council’s PILOT committee.
Eckstein also advocated for the standardization of the community benefits program to better align city resources with urgent needs while incorporating community input in those discussions.
However, increasing payments from tax-exempt institutions is often more challenging than it seems. The nature of the PILOT program is voluntary; therefore, there’s no legal enforcement to ensure compliance with the requested contributions.
While some organizations consistently fulfill their PILOT obligations, others pay little or nothing at all. City Councilor Breadon mentioned that this creates a delicate balance between negotiating higher contributions and maintaining positive relationships with these institutions.
Breadon highlighted the risk of institutions opting out of payments altogether, stating, ‘it’s an ongoing conversation right now, and we haven’t landed on the compromise that works for everyone yet.’
Historically, the city has never received the full amount requested from all PILOT-qualifying nonprofits. In the most recent figures from the 2024 fiscal year, the city received 76 percent of nearly $129 million in requested PILOT payments, with only about $35 million coming in cash.
This amount barely makes a dent in Boston’s annual budget of $4.3 billion for FY 2024. Nonetheless, officials assert that they will not relent in their expectations.
‘Our expectations of our residents are that they’ll continue to pay their real estate taxes, and our expectation of our institutions is that they will also continue to meet their commitment to PILOT even though it’s a voluntary agreement,’ stated Breadon. ‘We certainly have a lot of sympathy, but we also realize that we need their contributions, especially in this difficult time.’
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