Most University officials would say that Harvard's students, faculty and even presence has a beneficial impact on the city of Cambridge.

City officials, while thanking universities for their tangible and intangible contributions, are asking for more. More money, that is.

As a charitable, non-profit institution, Harvard--which has an annual operating budget of more than $1 billion--doesn't have to pay taxes on educational buildings, including dormitories.

This scenario is all too familiar to the citizens of Cambridge, where about half the land in the city is tax-exempt.

Although Harvard is one of the biggest tax-payers in Cambridge on the basis of its commercial and rent-controlled residential properties, some people feel that certain properties which are exempt should be taxed.

In 1990, then-Harvard President Derek C. Bok and Cambridge City Manager Robert W. Healy signed a 10-year agreement that Harvard would make a voluntary payment to the city in lieu of taxes for certain properties.

This agreement covers mainly off-campus student housing, such as Peabody Terrace, Haskins Hall and apartments on Kirkland and Mt. Auburn Streets, which many people believe should be taxed.

These payments in lieu of taxes added up to about 1.296 million for fiscal year 1993, which spans from July 1, 1992 to June 30, 1993, according to Kevin T. McDevitt, principal assessor for the city.

In addition, when Harvard expands and removes property from the city's tax rolls, it continues to pay full taxes on it for several years.

But some feel this is not enough. Councillor William H. Walsh says the agreement is "very unfair" to Cantabrigians because, "If Harvard had to pay taxes on all its property, it would have to give $45 million [a year] to the city."

City officials say the city appreciates Harvard's contribution, which is generous compared to other universities' contributions to their host cities.

"Harvard's in lieu of tax payment to the city exceeds in dollar amounts the payments by any other university to the city it's in," says James P. Maloney, the city's finance director.

McDevitt says that tax assessors in Cambridge are in a good position because the city is closely knit and in good communication with its non-profit institutions. He says, however, that the city has to be careful how much it pressures these institutions because ultimately they are tax-exempt and not obliged to make a contribution at all.

"It's really hard for a city or a town to play hardball with some organization because they are exempt," McDevitt says. "There's a moral obligation, there's a persuasion, but the reality is that they are exempt."

At the root of the problem is the question of what exactly should be tax-exempt. Some feel that Harvard's tax-exempt status has allowed it to expand, thereby reducing the city's tax base and increasing its financial difficulties.

Councillor Alice K. Wolf, a progressive, agrees with Walsh, who is usually more of a Harvard-basher, that buildings used for research at Harvard should be taxed if the fruits of this research are used by for-profit firms. "One of the things that we always wonder about is how much of this research is really for profit-making institutions," Wolf says.

Harvard's expansion is also a problem for Cambridge's fiscal health, some say. "The city is not large enough to see repeated attempts to take property off the tax rolls," Maloney says.

Walsh says Harvard should be taxed for all the services it receives from the city and for the property outside a small radius of the main campus that it has acquired over the years.

And other councillors are looking to the state for help in recouping some of the lost property tax revenue. Wolf says she and Councillor Timothy J. Toomey are working on a proposal "that the [state] local aid formula include a factor for the amount of institutional land in the city."

This arrangement asks the state to grant more aid to cities that have a lot of tax-exempt land. Wolf says that although this bill will likely not pass, it is "a correct thing to do."

Currently, there is a bill in the legislature, sponsored by State Sen. Robert E. Travaglini (D-Cambridge) and State Rep. John McDonough (D-Boston), to tax one half of one percent of the value of tax-exempt land owned by certain non-profits. Cities and towns could choose individually whether they wanted to levy this tax.

This bill is still being discussed in the committee on taxation, and according to some, it doesn't stand much of a chance. "Similar versions have come up in the past and they haven't passed yet," McDevitt says.

But Harvard's Director of Community Relations Happy H. Green says Harvard, which in 1929 became the first non-profit institution to volunteer payments to its host city, makes tremendous contributions to Cambridge. Harvard offers the community intellectual and cultural events and its students often volunteer in the community, Green says.

In addition, Harvard is a strong financial force in the city, generating money and spending, she says. "It's the largest employer in the city and it's the largest employer of Cambridge residents in the city," Green says.

Councillor Alice K. Wolf says that the city is looking to get more money from Harvard, however, because while Harvard benefits many people in many places, Cambridge is stuck with the whole bill. "Institutions like Harvard really cost the city, but their impact is well beyond the bounds of the city," she says.

Students need not worry that the bill will get sent to them, though. Wolf says that taxing students would require a home rule petition to determine whether it's constitutional in the state. She also says that taxing students, or tuition, is neither feasible nor morally the best alternative.