The Amherst Current

An Appeal for PILOT Parity

By Terrence Masterson

Recently, there have been several letters on the question of what  colleges and nonprofits could contribute to their local communities through payments in lieu of property taxes (PILOTs). This issue has a long history dating back to reports prepared by the City of Boston in 2010 and Northampton in 2015 in which both encouraged nonprofits and colleges to contribute a modest 25% of their full taxable value towards funding their local schools and town halls. 

For Northampton and Amherst the importance of the PILOT issue is sharpened because local schools are dealing with painful budget gaps at a time when municipal tax revenues have been seriously depreciated by long-departed, taxable, industrial properties replaced by non-taxable properties, declining state aid, and a mandated cap on property tax increases of 2.5%. 

Since 2020, there have been six new college PILOT agreements which are noteworthy due to their substantial financial value and recurring annual payments. Note as follows:

  • In 2023, Providence and its four colleges agreed on a $442 million, 20-year PILOT ($22 million per year).
  • In 2021, New Haven and Yale agreed on a $141 million, six-year PILOT ($23 million yearly).
  • In 2024, Princeton University announced a $71 million, five-year PILOT ($14 million annually).   
  • In 2020, University of Pennsylvania agreed to a $100 million, 10-year PILOT ($10 million annually). 
  • Since 2020, Harvard has contributed $100 million to Boston ($10 million annually)
  • In 2023, Ithaca and Cornell agreed on a $60 million, 15-year PILOT ($4 million annually).

The average annual PILOT contribution for the six northeastern college agreements is $14 million. But locally, there are no long term PILOT agreements with Amherst College, UMass Amherst and Smith College. This despite a combined total endowment value of $6.3 billion. Specific incidental contributions are listed below. Note that inquiries seeking accurate contributory data were responded to by UMass but not by Smith College or Amherst College.   

  • In 2024, Amherst College agreed to a one time $1 million donation for the Amherst Library. 
  • Since 2021, Smith College has contributed an average of $224,500 annually to the City of Northampton with one-time contributions of $250,000 to Cooley Dickinson Hospital in 2023 and $150,000 to Smith Vocational in 2024.       
  • In 2023, UMass and the Town of Amherst agreed on a $1 million annual five-year PILOT. 

Where Town Gown Works

A positive example of “Town Gown” relationships is in Princeton, New Jersey where the Town Council and Princeton University have worked for many years on funding municipal, educational, housing and infrastructure projects guided by an annual public meeting with Mayor and Town Councilors. Perhaps this collaboration can be a model for Hampshire County?  

Multi-College PILOT Agreements

The Providence, Rhode Island four-college agreement should raise the hope and certainly the precedent that the three larger colleges in Hampshire County could also agree on a proportionately similar regional PILOT agreement.    

Connecticut PILOT Program

Connecticut currently operates a PILOT program which reimburses municipalities for property tax losses from tax exempt properties. By statute, the reimbursement rates are 77% for private colleges and 43% for public colleges. In 2024, Mansfield, Connecticut received $10.5 million in PILOT reimbursements, New London received $7.7 million and Middletown obtained $14.4 million.

Summary

The value of the most recent northeastern PILOT agreements clearly demonstrates that many colleges are substantially contributing to their local communities. Hopefully, these northeastern agreements will reframe the local conversation about PILOTs and that, on a state level, there can be progress in replicating the Connecticut PILOT reimbursement program.

Terence Masterson is an Amherst resident and a longtime Economic Development Director formerly serving Westchester County, NY, Cayuga County, NY and currently Sturbridge MA.  He also was Deputy Mayor and Trustee, Irvington, NY (1983-93, 2009-2010).

4 comments

  1. The origin of tax exemptions for educational and religious properties due to their perceived social benefits is an interesting one . . . from ChatGPT, it dates to 18th-century practices in Europe, i.e., England, where the Church of England, enjoyed a privileged tax-exempt status as part of the state church, and religious and educational institutions were seen as critical to the moral and social welfare of the colonies.

    The specific legal basis for the tax exemption of religious and educational properties comes from both state constitutions and federal laws. States have the authority to determine property tax exemptions, and most state constitutions or statutes explicitly exempt properties used for religious worship, education, or charitable purposes.

    The federal government formally codified the tax-exempt status of nonprofit religious, educational, and charitable organizations in the Revenue Act of 1913, which laid the foundation for the modern U.S. tax system. Under this law, religious and educational organizations were exempted from federal income taxes.

    Critics argue that large, wealthy institutions can use tax-exempt status to avoid paying their fair share, while proponents maintain that these institutions continue to serve important public functions.

    Legal challenges have occurred, but courts have consistently upheld the exemptions as long as the organizations meet certain criteria related to their religious, educational, or charitable purposes. . . . again, this is gleaned from a ChatGPT search.

    The above recent PILOT program discussed does a great job of illustrating examples where educational institutions recognize equity issues exist within their host municipality.

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  2. I’ve wondered about this issue for a long time. I really appreciate this article. Are there actions that we can take as residents to try to get more PILOT parity?

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  3. Arlie –
    The best and most diplomatic approach would be for the Town to quietly approach the two colleges to see how they feel about contributing. The Town does have a 5 year agreement with U Mass but it is only $1M per year expiring in 2026. This funding level is not comparable to what so many other schools contribute. Approaching state legislators is also a path forward since U Mass is a state school. The important point to convey is that this issue may never change and so this should be factored into town budget actions and plans. The reality is that the Town has more budgetary needs and wants than revenues. But this unfortunate factor does not seem to be stated often enough. In the early 2010’s Smith College President Christ met with Northampton city leaders on a regular basis. And Princeton President Eisgruber meets in public with the Princeton Town Council annually. Princeton contributes $14M annually to the Town and its schools.

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  4. Thank you for your response to my question Terry. Do you think it would be helpful to state the issue to my Town Councilors? Or the Town Council as a whole? And I take you are saying to state it to Jo Comerford and Mindy Domb? And are you saying that the way to state it is that since we can’t count on the higher ed institutions contributing more, the state needs to fund the town differently than other towns without two large (actually three) higher ed schools in them?

    Thanks again, Arlie

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