Harvard Reaches PILOT Deal With City

After over a year of negotiations, Harvard and the City of Cambridge announced Monday they have reached a deal that will significantly increase the University’s voluntary payments to the city over the next five decades.

The agreement—which comes on the heels of a deal the city reached with MIT last month—means that Harvard will pay the city about $2.4 million in 2006 to compensate for its tax-exempt property. The accord has provisions for regular increases that could bring the annual payment to nearly $10 million by the end of the 50-year agreement.

Under the previous agreement negotiated in 1990, Harvard made a payment of $1.7 million to the city last year, but residents and city officials have often cited the University’s hefty endowment and called for a larger contribution.

At Monday’s City Council meeting, City Manager Robert W. Healy praised the new agreement for providing the city with predictable revenue.

“We were able to get as much as we could get from the University,” said Healy, who negotiated the agreement. “Any payments they make are voluntary.”

Harvard will make a one-time payment of $1 million this year on top of the regular amount. With an annual increase of about 3 percent and an additional $100,000 every decade, the city has estimated the deal will be worth more than $255 million over the 50-year period.

The University paid $4.5 million in taxes to the city last year for its property that is not tax-exempt. Under the new deal, if the University decides to convert any of its taxable property to educational use, it will continue to pay the city as much as it would have paid in taxes, with a 3 percent annual increase.

At Monday’s meeting, Councillor Brian P. Murphy ’86-’87 praised the agreement as “terrific,” adding that Harvard is not legally required to pay the city any money on its tax-exempt land.

“According to state law, we don’t have much leverage,” he said. “Given [this] restriction, the agreement is very helpful to the city.” But several councillors and one resident at the meeting argued that the city deserved more.

“This is not a gift” from Harvard, said Vice Mayor Marjorie C. Decker. “Harvard students and employees benefit from the services the city provides.”

Decker said that Harvard pays far less proportionally than other residents and businesses do for the same services. She said that five years ago the city had calculated that the University would pay $33.3 million annually if its property were fully taxed.

“They get a huge discount,” she said.

Councillor Anthony D. Galluccio applauded the fact that the deal provides for an annual increase. But rather than the 3 percent amount stipulated in the deal, Galluccio suggested that the annual increase should correspond to the rise in the city budget.

“It’s difficult to be overexcited about the 3 percent escalator,” said Galluccio, who co-chairs the council’s University Relations Committee with Decker. “I would have liked to see the escalator tied to a real number....I don’t think we’ve had a budget increase of 3 percent since I’ve been here.”

Roy Bercaw, a Cambridge resident, also criticized the amount during the public comment session, adding that the University’s endowment has been increasing by over 10 percent annually.

“It doesn’t seem to be in line,” he told the council. “It’s mind-boggling.”

But Harvard’s Senior Director of Community Relations Mary H. Power said the 3 percent increase corresponded to “the amount of escalation that would occur in the private real estate market.”

She added that the payments were only one component of the University’s relationship with the city.

Mayor Michael A. Sullivan told the councillors that the deal was the result of a lot of hard work.

“We can all say it could be better,” he said. “But this is what we got.”

The city also announced that the University has agreed to continue to fund the Cambridge-Harvard Summer Academy, a program for local high school students, for the next five years.

With the signing of the new agreement with Harvard, Cambridge now has long-term commitments from the two major universities that together account for about 10 percent of the city’s real estate.

Under a 40-year deal signed December 3, MIT increased its voluntary payment to $1.5 million with a 2.5 percent annual increase. In another major part of the agreement, MIT pledged to limit the conversion of its commercial property to tax-exempt use.

—Staff writer Joseph M. Tartakoff can be reached at tartakof@fas.harvard.edu.