NCPA - National Center for Policy Analysis


April 9, 2010

Boston officials are asking not-for-profit hospitals to pay about 25 percent of their properties' tax assessment to shore up municipal services squeezed by the recession, the Boston Globe reports. 

The move comes as Boston overhauls its Payment-in-Lieu-of-Taxes program, under which the city's not-for-profit institutions provide individually negotiated fees or services to the community in lieu of property taxes.  However, critics say the model has created an "uneven system" in which some institutions contribute millions, while others pay "significantly less" or even nothing. 

To address the discrepancy, the mayoral PILOT Program Task Force -- made up of government representatives, not-for-profit executives, university presidents and organized labor -- formally will recommend that hospitals, universities and other tax-exempt institutions adopt standard fees on their properties: 

  • If not-for-profit institutions cooperate with the payments, officials anticipate the PILOT program will generate an additional $17.8 million in 2011 and eventually more than $38 million annually, up from $13.3 million now, the Boston Herald reports.
  • Noting that this new formula would more than triple some institutions' PILOT payments, officials have suggested "softening the blow" by allowing credits up to 50 percent to not-for-profits that offer community programs, such as free health screenings, according to the Globe.
  • Although the payments would be voluntary, the formula would allow officials to compare institutions' contributions and place pressure on those facilities paying proportionally less, according to the Globe. 

Hospitals have balked at the proposal and contend that the measure would strain facility resources, prompting layoffs and cost shifting; some hospitals have stated that they will charge patients an additional $2 per physician visit to cover the cost of complying with the program, the Herald reports.  

In addition, hospitals have said that they are already facing budget cuts in the form of lower Medicaid reimbursements and that many hospitals also face economic difficulties. 

Source: Andrew Ryan, "City asks exempt sector for help," Boston Globe, April 6, 2010; and Thomas Grillo, "Pay up, nonprofits," Boston Herald, April 6, 2010. 


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