Andover Townsman, Andover, MA

July 18, 2013

Town: PA should pay more money

Officials eye tax-exempt nonprofits to boost revenue

By Bill Kirk
bkirk@andovertownsman.com

---- — Phillips Academy would pay the town more than $700,000 a year — more than a 200 percent increase — under a new “payment in lieu of taxes” policy proposed this week by the town manager.

In a report to the Board of Selectmen Monday night, Reginald “Buzz” Stapczynski said the private, nonprofit school’s property off Main Street is assessed at almost $194 million.

If Phillips was taxed as a for-profit business, the school would pay $2.8 million a year in property taxes to the town.

Under an agreement dating back to 1999, however, the school pays only $169,303 a year in lieu of taxes. The school also pays $122,950 a year on its taxable property, for a total annual payment to the town of $292,252.

Stapczynski recommended that Phillips as well as all other nonprofits with property assessed at more than $4 million be required to pay 25 percent of what their tax bill would be if their weren’t a tax-exempt organization.

Under that formula, Phillips would be accountable for a little more than $700,000 a year.

Town officials are currently negotiating with Phillips on a new so-called payment in lieu of taxes, or PILOT, agreement. The most recent, five-year agreement expired on June 30.

“I had a meeting with them several months ago and a follow-up phone call with Steve Carter to give him a heads up,” said Stapczynski, referring to the school’s chief financial officer. “We are going to meet with them to convey the policy and establish a new agreement and contribution.”

The town manager said he didn’t think the school ultimately would end up paying the $700,000.

“By straight extension of the policy, that’s what it (the payment) would be. That is what the policy would call for as a starting point,” he said, adding he expects there would be “many meetings” before a final agreement is struck.

He said Phillips, during negotiations, would likely “push back on the community benefits they provide.”

In a report filed with selectmen Monday, the town manager included a January 2004 press release from Phillips Academy that touted the school’s many community partnerships, including community service programs as well as cultural offerings such as Addison Gallery, the public’s use of the school’s skating rink, financial aid to students in the region, water and sewer fees, trash disposal payments, preservation of open space and the like.

Selectman Paul Salafia, who is involved in the negotiations with Phillips, said yesterday that the town must also consider the cost of educating the children of Phillips faculty members, who live in tax-free housing on Phillips property.

He said approximately 40 children of faculty members go to Bancroft and Doherty schools. With the average cost of educating a child in Andover at about $12,000, that amounts to a $480,000 annual subsidy the town is offering the school.

“We get no revenue from that land, yet we have to service the children,” Salafia said. “We want to educate the kids, but we want to see how much it’s costing us. These are broad estimates at this point. We don’t know the exact numbers. We are just starting to gather that information.”

The new policy would also apply to Melmark Andover, a school for special needs children on River Road that currently doesn’t pay the town anything in taxes although its property is assessed at $4.5 million.

Other large property owners that currently pay nothing to the town include Pike School, with property assessed at $10.6 million; Massachusetts School of Law, $7.5 million; Merrimack College, $28.7 million; and Boston Archdiocese, $13 million.

There have been no discussions with any other nonprofit schools beyond Phillips, Stapczynski said.

Chairman Alex Vispoli said the board asked Stapczynski earlier this year to come up with a uniform approach for what nonprofit entities should pay the town in lieu of property tax payments.

Vispoli said as more communities come up short in their annual budgets, they are looking for other sources of revenue. Nonprofits, particularly schools, require a lot of services from the town and should be asked to make payments to cover those costs, he said.

“Other towns in the state are doing the same thing,” Vispoli said. “We asked for a baseline proposal, which is what (Stapczynski) submitted last night.”

The city of Boston has been “at the forefront” of the issue, earning $66 million last year in payments in lieu of taxes, primarily from the major universities in the city, Vispoli said.

He also said officials should determine a way to calculate exactly how much it costs annually to send police, fire and other community services to Phillips and the other nonprofit entities in town.