WE MUST REQUIRE PRIVATE UNIVERSITIES, COLLEGES, & HOSPITALS TO PAY THEIR FAIR SHARE IN TAXES

 

The Problem

New York City is home to dozens of elite, wealthy private colleges and universities. For decades, these private colleges and universities have enjoyed the full benefit of New York City’s public services, booming economy, and rising property values. But during that same span, they have paid little to no property taxes. Pursuant to New York State law, private universities and colleges are exempt from paying New York City property taxes on their real property.[1] As a result of this tax exemption, property tax rates on New York City residents are significantly higher, according to a study by the Lincoln Institute.[2] In 2016 alone, these property tax exemptions resulted in $483 million in lost tax revenue for New York City.[3]

Specifically, NYU and Columbia University are among the world’s most elite, expensive, and wealthy universities in the world. NYU boasts a $ 4.7 billion endowment (August 2020)[4], and Columbia University has an $11.26 billion endowment (June 2020).[5] Columbia University and NYU are also the seventh and tenth largest property owners in New York City, respectively.[6] But NYU pays zero dollars in New York City property taxes[7], and Columbia University paid just around $7 million in property taxes on certain (non-tax exempt) commercial properties in 2019.[8]

Over the past two decades, both NYU and Columbia have greatly expanded their property footprint in New York City.[9] When NYU and Columbia acquire new property, that property is removed from the pool of taxable property, thereby leaving NYC residents to make up the property tax difference. This rapid property expansion by NYU and Columbia has come as a direct result of their property tax-exempt status because they “can extract more economic value out of property than other actors, thanks to all property it buys automatically becoming tax-exempt.”[10] NYU recently announced more ambitious property expansion plans throughout New York City in the coming decade, including a 2 million square foot expansion in Greenwich Village.[11] These property acquisitions have led many NYC residents to view universities like NYU as “evil empire[s]”[12] that are “focused on growth for growth’s sake.”[13] Like NYU, Columbia University also continues to expand its physical footprint throughout New York City without paying property taxes, while upsetting neighbors and disrupting communities.[14] As these universities continue to expand and exercise their property tax-exempt status, they are directly contributing to a rise in property taxes for low- and middle-income NYC residents.

Along with universities, large hospitals based in NYC enjoy exemptions from property taxes, leading to major increases in property tax rates for NYC residents.[15] In 2016, property tax exemptions for hospitals resulted in $599 million in lost property tax revenue for NYC.[16] Combined, the lost property tax revenue from university and hospital property tax exemptions totals around $1 billion annually.[17] If universities and hospitals were taxed solely on student, faculty, and staff housing, the City could recover $194.6 million (18% of lost total revenue from the tax exemptions).[18] In my Administration, wealthy universities and hospitals, like NYU, Columbia, and Rockefeller, will finally pay their fair share in property taxes.

Implementing Property Tax Reform through a PILOT Program

In other major cities, private universities and hospitals contribute payments in lieu of taxes (PILOTs), even though those same institutions hold property tax-exempt status. Under PILOT programs, tax-exempt institutions make payments to the host City either through voluntary contributions or through legislative mandate.[19] PILOT programs are used in Boston, Philadelphia, New Haven, Hartford, Ithaca, and Cambridge.[20] For example, between university and hospital PILOT payments, the city of Boston generates around $34 million in additional property tax revenue each year.[21] Harvard University contributed $10 million to Boston in 2019 alone, and $45 million to the city overall since 2007.[22] Similarly, Yale contributed around $12 million to the city of New Haven in 2019 alone, and $136 million since 1990.[23] Dartmouth also contributed around $93 million to its community since 2000. Harvard, Yale, Princeton, Cornell, and Dartmouth have also helped their communities by opting into paying property taxes on “non-academic real estate, despite the fact that the properties qualify as tax-exempt.”[24] For example, Dartmouth’s $93 million contribution to its community comes through the payment of property taxes on student dormitories.[25]

On the other hand, Columbia University has only paid “a total of roughly one million dollars in PILOT payments” over the past 24 years, according to the NYC Department of Finance.[26] Over that time span, Columbia’s annual PILOT contribution to New York City averaged just $41,666 per year. In 2019, a lawsuit filed against Columbia for improper land acquisition compelled the University to sign a $150 million Community Benefit Agreement (CBA), in which the University would allocate money for affordable housing and community projects. While this compelled payment of $150 million adds to Columbia’s contributions, it has been reported that the CBA is riddled with restrictions and deadlines that renders it “less effective [as compared] to several other Ivy League schools who have ongoing voluntary payment systems in place.”[27] And compared to the contributions of other Ivy League schools, Columbia’s CBA contribution will be far outpaced by Harvard and Yale’s annual contributions to their communities.[28]

New York City currently employs PILOT programs for certain manufacturing, industrial, and not-for-profit companies—but there is no formal, efficient PILOT program in effect for universities or hospitals.[29] In my Administration, I will work with the New York State Legislature to fully revoke the unfair property tax exemptions enjoyed by wealthy, private universities, colleges, and hospitals.

In the immediate short-term—up until full revocation of tax exemptions is achieved—I will create a PILOT program for New York City’s wealthy, private universities, colleges, and hospitals that mandates:

  1. Participation by all wealthy, private universities, colleges and hospitals;
  2. PILOT contributions from all participating universities, colleges, and hospitals totaling 100% of what they would pay in real property taxes if their real property were not tax exempt;
  3. The establishment of PILOT contribution reductions and credits for universities and colleges with qualifying community programs that uniquely benefit New York City residents; and
  4. Public disclosure of all property tax exemptions and the total value of these exemptions for the past 10 years.

In New York City, my proposed PILOT plan would apply to the largest universities and hospitals, including Columbia University, NYU, Cornell University (medical school and other NYC-based buildings), and Rockefeller University. All religious institutions and entities will continue to retain their property-tax exempt status. While New York City tenants and landlord struggled to pay bills in light of COVID-19, universities and hospitals have enjoyed record-high profits. For example, Columbia University saw its endowment grow 5.5% and reach an all-time record high this past year.[30] Given New York State and New York City’s debt levels and projected budget deficits, private universities and hospitals must pay larger and fairer PILOT contributions to the City.

[1] https://ibo.nyc.ny.us/iboreports/eliminating-or-reducing-tax-breaks-options-march-2017.pdf

[2] https://www.lincolninst.edu/sites/default/files/pubfiles/nonprofit-pilots-policy-brief-v2.pdf

[3] https://ibo.nyc.ny.us/iboreports/eliminating-or-reducing-tax-breaks-options-march-2017.pdf

[4] https://www.nyu.edu/content/dam/nyu/investmentOffice/documents/2020-08-31%20NYU%20Endowment%20Fact%20Sheet.pdf

[5] https://www.columbiaspectator.com/news/2020/10/22/columbia-reports-310-million-increase-in-endowment-during-pandemic-while-smaller-schools-flounder/#:~:text=Nevertheless%2C%20the%20value%20of%20the,in%20the%20previous%20fiscal%20year.

[6] https://archinect.com/news/article/150086537/nyc-s-10-largest-property-owners-controlling-the-city-landscape

[7] https://www.washingtonpost.com/news/grade-point/wp/2016/07/08/why-should-rich-universities-get-huge-property-tax-exemptions/

[8] https://www.columbiaspectator.com/news/2019/10/24/stacking-up-where-do-columbias-contributions-to-the-community-rank-among-its-ivy-peers/

[9] https://observer.com/2006/05/nyu-columbia-make-a-mint-on-real-estate/; see http://features.columbiaspectator.com/eye/2015/03/25/ties-that-bind/ ; see https://www.gothamgazette.com/index.php/tags-list/1415-nelson-castro

[10] https://observer.com/2006/05/nyu-columbia-make-a-mint-on-real-estate/; http://blogs.reuters.com/felix-salmon/2013/07/08/universities-shouldnt-be-tax-exempt/

[11] https://www.wsj.com/articles/nyu-expansion-plan-approved-by-state-court-of-appeals-1435681976; https://nyunews.com/news/2019/03/12/nys-dormitory-donation/

[12] https://www.metro.us/more-than-300-people-protest-nyu-expansion-in-greenwich-village/

[13] https://www.brickunderground.com/live/tax-exempt-universities

[14] https://ny.curbed.com/2018/3/8/17095838/manhattanville-columbia-university-expansion-photo-essay

[15] https://ibo.nyc.ny.us/iboreports/eliminating-or-reducing-tax-breaks-options-march-2017.pdf

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] https://www.boston.gov/finance/payment-lieu-tax-pilot-program#:~:text=Many%20of%20Boston’s%20major%20schools,uniquely%20benefit%20the%20City’s%20residents; Another PILOT structure is the “reverse PILOT,” in which higher education institutions forfeit their property tax exempt status and must submit applications for reimbursement from the state. I also plan to review this option further.

[22] https://www.columbiaspectator.com/news/2019/10/24/stacking-up-where-do-columbias-contributions-to-the-community-rank-among-its-ivy-peers/

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] Id.

[29] https://www1.nyc.gov/site/finance/benefits/benefits-payment-in-lieu-of-taxes-agreements-pilot.page; Specifically, New York City’s Department of Finance is tasked with calculating, billing, and collecting PILOT payments.

[30] https://www.columbiaspectator.com/news/2020/10/22/columbia-reports-310-million-increase-in-endowment-during-pandemic-while-smaller-schools-flounder/#:~:text=Nevertheless%2C%20the%20value%20of%20the,in%20the%20previous%20fiscal%20year.

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