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.