Facing budget constraints, Boston is trying to update its payment program, which has been shortchanged by tax-exempt nonprofits

Faced with budget challenges likely to arise from the city’s shrinking business tax base, city councilors are considering modernizing a tax replacement program that has arguably been shortchanged by Boston’s wealthy nonprofit sector.

The Boston City Council will hold a policy briefing on the city’s PILOT program on Thursday, where the discussion could be based on numbers released in October showing that private institutions with tax-exempt status overall contributed just 76% of their requested payment in fiscal year 2023 have.

Of the $128.58 million requested, the city collected $97.85 million, of which only $35.72 million was in cash – a difficult financial scenario for a program that makes a “significant contribution” to the The city’s annual budget should be provided, as one city councilor called it.

Under the program, private entities, which are primarily colleges, hospitals and cultural centers with tax-exempt property worth more than $15 million, make voluntary payments of about 25% of what they would have paid in property taxes .

“It’s voluntary and we’re just trying to come up with a model that’s workable and that we can adhere to and that’s acceptable to the nonprofits in the city,” Councilwoman Liz Breadon, who is chairing the policy briefing, told the Herald . “It is a significant contribution to the operating budget.”

The goal is to create predictability for both the nonprofits and the city in their respective financial planning, she said. The most important thing for the city would be to have a better sense of the amount of revenue, which according to today’s PILOT formula is only known at the end of the year.

Under the program, payments will be split into cash and so-called community benefit credits and are intended to “help offset the burden placed on Boston taxpayers in funding city services for all property owners,” according to the city’s website.

Property taxes make up about 75% of city budget revenue, but more than 50% of Boston’s properties are tax-exempt, Breadon said before a council hearing last year to update the program that operates under that tax rate has operated policies since 2012 and bases payment applications on property values ​​from 2012.

The program was negotiated between former Mayor Thomas Menino and nonprofit sector leaders as a first “gentleman’s agreement” of its kind, Breadon said, and has not undergone any significant changes since this administration.

“We’ve had three mayors in two years and all the institutions have changed leadership as well,” Breadon said. “So it’s the right time, so to speak, to just hit the reset button and re-evaluate and tweak the program to see if it’s more viable and better suited to the city’s needs.”

She said discussions were ongoing but declined to provide details about the possible changes. Mayor Michelle Wu has advocated for an update to the program in the past, but her office declined to comment Friday, saying, “We will be in touch when we have more to share.”

This week’s policy briefing will include a discussion between city councilors and advocates from the PILOT Action Group, which will focus on ways to make more strategic investments and accountability related to community benefit – or service – credits, according to Enid Eckstein, co-chair of the group The facilities provide residents with the opportunity to apply for their total contribution.

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