Fiscal Friends

As Harvard focuses on the possibilities for growth in Boston (see "South by North Harvard," September-October, page 67), the University and the city have reached agreement on contested fiscal issues, enabling the Business School to implement its campus master plan. That plan, approved by the Boston Redevelopment Authority in May 1998, details as much as one million square feet of building renovation and new construction during the next half-decade. By then, possible academic uses for Harvard's 52 acres of commercial land in Allston--University ownership of which was disclosed in 1997--may be defined.

A new PILOT (payment-in-lieu-of-taxes) plan, agreed upon in August, now governs the financial terms for Harvard's current and expanding nonacademic facilities--primarily residence halls on the business school's Allston campus.

Under the PILOT package, scheduled to run through the year 2019, Harvard will make a total of $40 million in voluntary payments to Boston; the current annual payment is $1.3 million. The new, higher annual PILOT reflects reduced payments on the Soldiers Field Park housing units at the eastern edge of the business school campus; the construction of a previously announced but newly expanded 288-unit housing project at the intersection of Soldiers Field Road and Western Avenue; and assumptions about future rental rates.

Thomas M. Menino, mayor of Boston, hailed "Harvard's financial commitment" and the housing as "important new contributions to the economy's well being." For the city, the new rooms may be the most significant part of the deal in the near term. They promise some relief in an extremely tight housing market, where surging rental rates threaten to displace long-term residents. The housing project, originally planned to accommodate 400-plus graduate students, is now expected to provide room for about 550 M.B.A. candidates and participants in Kennedy School of Government executive-education programs.

Beyond the new housing, the business school's updated five-year master plan anticipates substantial change. The plan recognizes the Spangler Student Center, now being built, and reconstruction of the campus central-receiving facilities and chilled-water plant; renovation of Baker Library, for which an architect has been selected; renovation of Mellon Hall, a residence, and possibly other buildings; and a proposed, but as yet unscheduled, new academic building and a second executive-education residence.

Not involved in the PILOT agreement or the business school plan are Harvard's other Allston holdings. For now, the University pays full realty taxes on those properties. Should it wish to put them to tax-exempt educational use, it would have to negotiate agreements with Boston first. But before work on those plans can proceed, Harvard and the city had to resolve their outstanding differences about the financial impact of existing buildings.

Harvard president Neil L. Rudenstine may have had that bigger picture in mind when he cited the "extremely open and positive discussion" that led to the PILOT agreement. "The mayor," he told the Boston Globe, "has been extraordinarily helpful and has shown a willingness to think long range in a time when short-range thinking is easy."

According to Paul Grogan, vice president for government, community, and public affairs, "As long as this was unresolved, it was very difficult to have the necessary continuing conversations with the city." With the way apparently clear for those conversations, Rudenstine described the PILOT agreement as a step toward a "great future, in which Harvard and the city of Boston will both benefit enormously."

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