Harvard has reached an agreement to pay $480 million over 52 years to neighboring Watertown, Massachusetts, where in May 2001 the University purchased a 30-acre commercial property known as the Arsenal for $162 million. Watertown officials and residents, concerned about the potential loss of future tax revenue under a nonprofit owner, initially protested the acquisition and sought through legislation to eliminate the tax exemption for large land-owning nonprofit organizations statewide. But a guaranteed revenue stream from Harvard ($3.8 million in 2002, and rising 3 percent each subsequent year until 2054), which represents a combination of taxes from commercial tenants and a payment in lieu of taxes (PILOT) for tax-exempt uses, persuaded Watertown to welcome the University instead. Harvard will also contribute $500,000 over the next three years to support education initiatives in Watertown that focus on technology, and a further $100,000 annually to support "community enrichment" programs.

President Lawrence H. Summers hailed the agreement as the first application of a new principle for future acquisitions: "...when Harvard purchases and withdraws property from municipal tax rolls, it will make a voluntary payment for a period and at a level commensurate with the impact of the acquisition." As part of the agreement, Harvard will not be required to seek special zoning permission to convert any of the property's 750,000 square feet of space to tax-exempt academic and research use.

The Arsenal property is strategically important for the expanding University. "The acquisition was made so that the University could have some flexibility for space needs that can't be met on the existing campus, but can't wait for the redevelopment process in Allston," explains associate vice president for planning and real estate Kathy Spiegelman. Unlike Allston, "Watertown is ready now," she says. "There are buildings ready to be fit out, [there is] open space, parking, and shuttle transportation back and forth to Harvard Square." Several University groups, she adds, "are in the process of analyzing whether the space there could work for them."        

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