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By Michael P. Mann

Despite a recent report indicating that Harvard employs more than 12,000 people in the Boston area and contributes more than $10 million annually to the coffers of local governments, Boston and Cambridge officials said this week that Harvard should do more for their communities.

Although Harvard is the largest individual landowner in both Cambridge and Boston, it enjoys tax-exempt status on much of its real estate. To partially compensate the community for the loss of revenue, the University makes annual payments in lieu of taxes.

But such contributions are far below what the University would be required to pay if the land were taxed directly. Last year, Harvard paid approximately $1 million each to Cambridge and Boston.

"None of these [tax-exempt] places pay enough," said Cambridge Mayor Alice K. Wolf in an interview. "Whatever they pay is miniscule."

"We're very appreciative of the contribution that Harvard does make, but we do feel the level of contribution could be higher," said Ted Jankowski, commissioner of assessing for the City of Boston.

With the state fiscal crisis prompting Massachusetts officials to cut ever-farther back on local aid, the lack of tax revenue from University land is a particularly sore point for many city officials. The budget submitted by Gov. Michael S. Dukakis last month proposes a reduction of $86 million in local aid statewide.

In the midst of this crunch, Harvard and Cambridge are renegotiating their current in-lieu-of-tax agreement, which which expired last year. Discussions on a 10-year agreement are expected to be concluded soon, according to Marilyn Lyng O'Connell, director of community relations and a co-author of the report.

Although details of the negotiations have not been released, Wolf said that the city will be asking Harvard to increase its contribution.

But Boston does not plan changes in its in-lieu-of-tax program in the near future. "Our hope would be that institutions would recognize the constraints that communities are under," said Jankowski.

Several Cambridge city councillors have speculated that the report was issued during the state budget crisis in order to fend off requests for additional aid. But city officials said yesterday that the timing of the report was irrelevant.

"It's normal for them to come out with a report periodically, and it's only natural for them to do so," said Kevin T. McDevitt, a Cambridge assessor.

"It's a good way of doing public relations," said Wolf.

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