Residential taxpayers believe that private colleges, which are legislatively exempt from paying property tax, should contribute to the shrinking tax-base of their communities by paying yearly Payments in Lieu of Taxes (PILOTs). Taxpayers view PILOTs as compensation for the municipal services colleges and their students utilize. Colleges challenge that PILOTs, as large cash layouts, threaten their financial stability. Instead, colleges prefer to invest in the community by offering local employment and bringing partnerships and in-kind services to residents.
This struggle between colleges and cities is occurring not only in Massachusetts, home to 83 non-profit colleges and universities enrolling over 250,000 students, but nationwide, and internationally as well. Using Massachusetts colleges as a baseline, this study demonstrates that the payment of PILOTs limits the amount of institutional financial student assistance that colleges can award. In addition, the study examines financial partnership strategies that provide alternatives to PILOTs that may satisfy the mutual interests of elected officials, taxpayers, and colleges, and a discussion of when university-community partnerships allow for enlightened governance.
A review of the current literature offers the history of PILOTs and arguments advocating either for or against PILOTs. However, a substantial void exists in explaining the politics, economics, and nuances of PILOTs. This study attempts to fill this void by offering the frameworks and constructs of colleges and other stakeholders that explains the economic and societal implications of colleges’ PILOTs.