A plan by Worcester Polytechnic Institute to convert two hotels near its campus into student housing has outraged city leaders and fueled complaints about a state law that exempts nonprofit universities from paying property taxes.
In a recent letter to WPI President Grace Wang, Worcester officials said they were stunned to hear about the university’s plan. They noted that the Marriott and Hampton Inn & Suites were built years ago as part of a state- and federally funded project to revitalize an area near WPI’s campus. The move to buy the hotels, the officials said, amounted to the school using resources created with public money solely for its own personal needs.
The letter — signed by City Manager Eric Batista, Mayor Joseph Petty and leaders from the business community — also was clear about the long-term financial ramifications of the school’s plan. It explained that if WPI buys both hotels, the city will lose nearly $1.6 million in tax revenue every year because the school won’t have to pay taxes on the properties.
“The hotel industry is an essential part of the city’s economy,” Batista said in a separate statement, adding that tax revenue is “key to investing in public works, safety, and facilities, including the Worcester Public Schools, among other municipal services.”
A spokesperson for WPI declined to comment.
State law exempts charitable organizations — including nonprofit colleges, hospitals, churches and museums — from paying property taxes. Cities around Massachusetts have long been particularly frustrated with the exemption for universities because they’re some of the wealthiest institutions in the state. Tax revenue from the schools could be a boon for local coffers and help reduce residential and commercial tax rates.
An argument in favor of the exemption has been that colleges indirectly boost local tax revenue in other ways by attracting new people and businesses to communities. Localities including Boston, Cambridge and Worcester have also tried to navigate the protection by asking universities to make voluntary payments to support city services. But although schools like Harvard and Boston University have agreed to those programs, critics have said they’re insufficient.
Tim Murray, president and CEO of the Worcester Regional Chamber of Commerce, noted that some schools are continuously expanding, taking more property off local tax rolls. The state exemption, he added, was created at a time when nonprofit institutions and colleges “were not the behemoths that they are today.”
“If the law was reversed and the law gave municipalities the unilateral right on an annual basis to reduce the number of students that any college or university could enroll, do you think a college president and their board of trustees would idly sit by and allow that loss of revenue?” Murray asked. “No, they wouldn’t.”
Murray, who also signed on to the letter to WPI, said the school’s plan to purchase the hotels will likely force Worcester to raise commercial and residential taxes to fill the void. He argued high commercial taxes in the city already disincentivize some businesses from operating in Worcester.
“We have the seventh highest commercial industrial tax rate in the state,” he said.
As a way of making up for lost tax revenue from large nonprofits, some state lawmakers have proposed taxing college endowments if they’re over $1 billion. Murray said any levy on universities shouldn’t be overly burdensome. But as long as the status quo continues, he said the schools should at least be fair and respectful to their communities.
“WPI chose not to be a good partner, and engage with the city in a collaborative way,” he said. “When large institutional nonprofits act unilaterally in a way that’s counter to the economic and budgetary interest of their community in which they are embedded, that is a travesty.”
