Boston University has agreed to a $105 million, five-year Payment in Lieu of Taxes (PILOT) agreement with the city of Boston, marking a significant financial contribution from a tax-exempt nonprofit in the city's history. This deal, which Mayor Michelle Wu's office announced on Tuesday, is a substantial increase from the previous year's contribution, reflecting a 19% jump from $18.7 million to approximately $22.3 million by fiscal year 2030. The agreement is a pivotal moment for the city, which has been grappling with strained finances and has had to make difficult decisions, such as cutting staff jobs in the school district and pulling $70 million from emergency reserves to plug budget deficits.
The PILOT agreement involves annual cash payments from BU to the city, starting at $6.7 million for fiscal year 2026 and increasing to $8.3 million by fiscal year 2030. Additionally, BU will contribute more community benefits, such as scholarships for Boston Public Schools students, with payments of $12.7 million in the first year and up to $14 million annually. This total yearly contribution from BU is a substantial increase from the previous year's $18.7 million.
The city's reliance on property taxes is significant, but about half of the city's land is tax-exempt, with approximately 22% owned by private nonprofits. The PILOT program, launched in 2011, aims to recoup lost tax dollars by asking nonprofit institutions to make voluntary contributions in cash or services. However, the city rarely receives the full amount requested, and negotiations have been complicated by political and economic factors, including the Trump administration's attacks on universities and the healthcare sector.
The deal with BU is the first written PILOT agreement between the city and the university in over 25 years. It comes at a time when the city is seeking more financial contributions from prominent tax-exempt institutions, including Harvard University, Massachusetts General Hospital, and others. In fiscal year 2025, none of the five universities the city requested the most money from contributed the full amount, according to city data.
Mayor Wu expressed gratitude for BU's contribution, emphasizing the importance of strong partnerships between the city and anchor institutions. BU's president, Melissa Gilliam, also celebrated the deal, highlighting the university's commitment to service and partnership with Boston. The city's chief partnerships officer, Stephen Chan, noted that the PILOT program is voluntary and depends on individual relationships with tax-exempt institutions.
The city is working to expand the PILOT program and secure formal agreements with more nonprofits, but it is not planning immediate structural changes. Some advocates have called for updates to the calculation formula for PILOT payments and standardization of community benefits, with public input. This agreement with BU is a significant step in the city's efforts to secure financial contributions from tax-exempt institutions, but it remains to be seen how other institutions will respond to the city's financial demands.
