The Boston Finance Commission has suggested that the University "voluntarily pay taxes" on a piece of property it owns in Boston or sell it to a private developer.

In a letter to President Pusey, the Commission said the University's continued ownership was "not in the best interests of the city." It charged "the structure owned by the University does not seem to have been upgraded to meet its full potential" and suggested that "in the hands of an interested private developer the value of the structure might well be increased and the resurgence of downtown Boston thereby abetted."

The property, located at 254-256a Washington St., is assessed at $125,000 and would ordinarily bring the city of Boston about $12,000 annually in taxes. The five story building with double bay windows presently houses McFarland's Tavern, The Towne Grille, and the offices of R.C. Martin, a private contracting firm.

The Commission told Pusey "Harvard has already taken 152 acres off Boston tax rolls making it the largest educational user of land in the city." Boston University, with 45 acres of Boston real estate, is the second largest.

Pusey has referred the letter to the Corporation and to the University's attorneys, but the University has made no official statement yet.

Charles P. Whitlock, assistant to the President for Civic Affairs, said last night Harvard neither pays taxes nor makes any payments in lieu of taxes on the property since the land's tax exempt status is guaranteed by the constitution of the Commonwealth of Massachusetts.

He noted that the University usually made payments in lieu of taxes on revenue producing property such as apartment buildings, but that the Constitution was quite specific and emphatic about the land's tax-free status. "It is not simply a regular tax-exempt property," he said.

The University was originally granted the land in 1650 under a provision in the Corporate Charter that allowed Harvard to own property in Massachusetts that returns up to 500 pounds sterling a year without paying taxes.