Andover Townsman, Andover, MA

January 2, 2014

Private schools may face tax

Town pursuing payments from nonprofit institutions

By Bill Kirk
bkirk@andovertownsman.com

---- — Andover could stand to gain nearly $1 million more in revenue if it started levying property taxes on the private, nonprofit schools in town.

With that knowledge, the Board of Selectmen recently OK’d a policy for the town manager to start negotiating with five schools that have property worth more than $4 million each — but pay no property taxes.

The schools being targeted are Phillips Academy, Pike School, Melmark New England, Merrimack College and Massachusetts School of Law.

Under the policy, the schools would be assessed 25 percent of what they would pay if they were for-profit institutions rather than tax-exempt educational facilities.

That would mean Phillips would owe the most at more than $700,000, followed by Merrimack College at $104,000, Pike at nearly $39,000, Mass. School of Law at $27,000, and Melmark at $16,000.

Currently, the only school that pays the town anything at all is Phillips, which for the past 15 years has made an annual, voluntary contribution to Andover. This year, the school paid $169,000.

Selectmen voted 5-0 last month to approve the policy, which was set into motion the previous year when they urged Town Manager Buzz Stapczynski to establish a Payment in Lieu of Taxes, or PILOT, program for nonprofits.

Last July, Stapczynski presented a document listing all the nonprofits in town and how much each would pay if charged property taxes. State and federal law allows nonprofits such as churches and schools to avoid the payment of most taxes so they can spend more on their programs.

The policy, while it sounds Draconian, is actually a starting point for negotiations, selectmen have said. In many cases, the 25 percent would be reduced if the school could prove, using quantifiable measures, how much value they bring to the community.

Pike Head of School John “Muddy” Waters said his school, which sits on 35 acres, much of which is unusable wetlands, offers a lot to the town that it doesn’t charge for.

“Obviously, we think we provide a lot of great service to the town, including taking kids out of public schools, even though their parents are paying taxes toward the schools,” he said. “We let the town soccer program use our fields for free and we offer our facilities whenever we can.”

He added that paying the town close to $40,000 a year would be “brutal” and would most likely affect a lot of Andover families who send their children to the school.

Of the 436 students in pre-kindergarten through grade nine who are enrolled at Pike, about 200 are from Andover. Tuition ranges from $22,380 in the lower grades up to $26,280 in eighth grade. The fee for ninth grade is a little higher, although this year, for the first time in at least 20 years, the school didn’t have a ninth-grade class.

In any case, if Pike would start being required to pay property taxes, Waters said tuition for local and non-local families alike certainly would rise.

“The program we run is expensive,” he said. “More money going out the door will make our school even less accessible in terms of people being able to afford it. We know our families are already making sacrifices to send their children here, paying tuition and paying their property taxes.”

Waters said the first he learned of the proposal was through a call from a Townsman reporter last month.

“Nobody from the town has ever come to speak to us,” he said. “It’s a little surprising. They didn’t even check in.”

Rita Gardner, executive director of Melmark New England, a school for children with disabilities, said she was also unfamiliar with the proposal and couldn’t comment on it.

“We’ll be evaluating the proposal,” she said.

Tracy Sweet, director of communications at Phillips, issued a statement saying that school officials have had “preliminary conversations with town officials regarding the academy’s voluntary payment to the town and expect to continue the dialogue in the coming months. Our intention is to honor our long-standing commitment to being a good neighbor in the town of Andover.”

Nobody could be reached from Merrimack College or Mass. School of Law.

Andover is not alone in seeking payments in lieu of taxes from nonprofits, particularly schools.

Many communities are seeking contributions from large nonprofits as municipal budgets are squeezed.

Salem, for example, negotiated payments from Peabody Essex Museum, Salem State University and Northeast Animal Shelter when those nonprofits purchased formerly commercial properties that would have been lost to the tax rolls.

In Danvers, selectmen are considering charging St. John’s Prep a payment in lieu of taxes, noting that the school is a large landholder.

Danvers already has PILOT agreements with the owners of two large medical facilities. Partners Healthcare, which owns the Mass General/North Shore Center for Outpatient Care on Endicott Street, paid the town $93,249 last fiscal year. And Northeast Hospital Corp. paid Danvers $37,324 for its Lahey Outpatient Center on Maple Street.

Communities like Boston, Cambridge and Brookline have PILOT policies with formulas to figure out what a nonprofit entity should contribute based on its demand for services. In most cases, it works out to be 25 cents on the dollar, although such agreements are strictly voluntary.

In fact, Boston brings in about $66 million in payments from nonprofits, including private universities. Cambridge brings in $5.3 million.

Taxing proposal

Under a new policy approved recently by the Board of Selectmen, private, nonprofit schools with property values of more than $4 million would be charged a fee based on 25 percent of what their tax bills would be if they were for-profit entities.

The payment in lieu of taxes, or PILOT, would be negotiated between the town and the individual school, with the amount dropping based on quantifiable services the educational institution provides the community.

PHILLIPS ACADEMY

Assessed value: $193,752,100

Taxes at full value: $2.8 million

Proposed payment: $702,000

MERRIMACK COLLEGE

Assessed value: $28,726,300

Taxes at full value: $416,819

Proposed payment: $104,204

PIKE SCHOOL

Assessed value: $10,695,700

Taxes at full value: $155,195

Proposed payment: $38,798

MASS. SCHOOL OF LAW

Assessed value: $7,559,000

Taxes at full value: $109,681

Proposed payment: $27,420

MELMARK SCHOOL

Assessed value: $4,517,800

Taxes at full value: $65,553

Proposed payment: $16,388