Boston University has agreed to a substantial financial arrangement with the city of Boston, marking a significant development in the relationship between the university and the local government. The deal, which spans five years, involves a substantial payment of over $104 million, making it the largest of its kind for a tax-exempt nonprofit in the city's history. This agreement, known as a 'payment in lieu of taxes' (PILOT), is a pivotal moment for both parties, especially given the city's financial challenges.
The agreement stipulates that Boston University will contribute a total of $104 million over the next five years, with annual payments ranging from $6.7 million to $8.3 million. This represents a substantial increase from the previous fiscal year, where the university paid $18.7 million. Additionally, the university will enhance its 'community benefits' contributions, providing scholarships for Boston Public Schools students and other services, with an initial payment of $12.7 million and a maximum of $14 million annually.
This deal is particularly notable as it marks the first written PILOT agreement between the city and Boston University in over 25 years. The city has been actively seeking increased contributions from tax-exempt institutions, including prominent universities and hospitals, to alleviate its financial strain. However, the city's efforts have faced challenges, as none of the five universities requested in fiscal year 2025 contributed the full amount.
Mayor Michelle Wu expressed gratitude to Boston University and its president, Melissa Gilliam, for their commitment to the city's success. Wu emphasized the importance of strong partnerships between the city and anchor institutions, highlighting the interdependence of thriving institutions and well-resourced cities. Gilliam, in turn, celebrated the agreement, underscoring the university's priority in serving and partnering with Boston.
The PILOT program, introduced in 2011, aims to recoup lost tax dollars by encouraging nonprofit institutions to make voluntary contributions. However, the city has struggled to secure the full amount it requests, with payments remaining flat at $32 million to $36 million annually since fiscal year 2016. The Trump administration's policies have further complicated negotiations, but the city has leverage in these discussions, as evidenced by the recent deal with Northeastern University.
Stephen Chan, the city's chief partnerships officer, clarified that the PILOT agreement with Boston University is not tied to negotiations with other institutions. He emphasized the voluntary nature of the program, which relies on individual relationships with tax-exempt institutions. The city aims to expand the PILOT program and secure formal agreements with more nonprofits, but no immediate structural changes are planned.
Critics have called for updates to the PILOT formula and standardization of community benefits, with public input. Despite these calls, the city's approach remains focused on individual relationships and voluntary contributions. The agreement with Boston University serves as a model for future negotiations, highlighting the potential for increased financial support from tax-exempt institutions to address the city's financial challenges.
