New York’s municipalities and school districts lost out on at least $1 billion in revenue last year because private, nonprofit educational organizations don’t have to pay property taxes.
That’s according to a USA Today Network analysis of state Department of Taxation and Finance data, which showed that $36.5 billion worth of property owned by private nonprofit educational organizations was exempt from paying property taxes in 2015. Another $10 billion worth of property, also tax-exempt, belongs to the state university system.
Property taxes are the largest single source of revenue for local governments in New York. And across the state, the value of exempt private educational property is increasing. The exemptions can put an added strain on municipalities struggling to balance budgets within the state’s property-tax cap, even while they supply the schools with police, fire and other services.
That drives the tax rate up for those who do pay property taxes.
Meanwhile, a number of the state’s nonprofit private colleges have endowments worth hundreds of millions of dollars, with some in the billions.
With New York’s already high tax burden, the exempt properties can be a “bigger concern” here than in other states, said Kenneth Girardin, a policy analyst for the Empire Center, a fiscally conservative think tank.
“Local government here is typically more expensive than in other places in the country,” he said.
Properties owned by private nonprofit colleges and universities are generally tax exempt because of their educational purposes. The exemptions let the institutions “focus their resources to maximize the societal benefits,” said Sara Miller, a University of Rochester spokeswoman.
“The value these benefits confer on our communities is typically far in excess of the value of the tax exemption,” she said.
The state’s private nonprofit colleges and universities had an economic impact of $74.3 billion in 2013, more than double the exemption value, according to a report from the Commission on Independent Colleges and Universities in New York. Nearly 400,000 people were employed by the schools that year. And many of the universities offer free community programs and events.
Colleges “invest in our city — participating in civic events and contributing to the way of life here,” said Yonkers Mayor Mike Spano. But they can often drain resources “such as police, fire and sanitation,” he noted.
“Municipalities should be reimbursed for some of these costs,” Spano said, “possibly with a nominal usage fee for the services.”
Exempt properties increasing
The value of the exempt nonprofit educational property has grown 51 percent in a decade, from $24.2 billion in 2005 to $36.5 billion in 2015, the USA Today Network analysis of state tax data found. The number of untaxed parcels owned by nonprofits for educational purposes also increased, from 7,026 in 2005 to 7,904 in 2015.
Based on the average 2015 statewide full-value tax rate of $28 per $1,000 of assessed value for residential properties, the nonprofit educational organizations would have paid more than $1.02 billion last year if they were on the tax rolls. That estimate is low, considering that, if the property was taxed like a business, the bill would be higher.
New York is home to more than 140 independent nonprofit colleges and universities at more than 170 locations, according to the state Education Department. That’s more private nonprofit colleges than any other state, data from the National Center for Education Statistics show.
Nearly 50 percent of Dutchess County’s exempt nonprofit educational property — about $950 million — is in the town of Poughkeepsie, home to Marist and Vassar colleges. This year, Vassar’s exempt property value is more than $183 million and Marist’s is about $222.8 million, said town Assessor Kathleen Taber.
The University of Rochester’s exempt property value was $461.8 million this year, including its two hospitals and related facilities, the city of Rochester said. In the nearby town of Henrietta, home to the Rochester Institute of Technology, $432 million in property value was exempt for nonprofit educational purposes in 2015, according to state tax data.
“We have a multi-billion-dollar company in my backyard,” said Tim Duffy, a software engineer and RIT graduate who lives in Henrietta, referring to the institute. And if the properties owned by private nonprofit colleges in Monroe County were taxed, the revenue “would easily cover the needs of the most impoverished and social support programs,” some of which have been cut over the years.
In Yonkers, the exempt property owned by Sarah Lawrence College has a full market value of about $251.5 million, according to City Assessor David Jackson. State tax data shows that Westchester County, overall, has nearly $2.9 billion in exempt nonprofit educational property.
Cornell University and Ithaca College are in Tompkins County, which the state comptroller said has the highest rate of exempt property in New York.
If the private college-owned properties were not exempt, “the city of Ithaca tax rate would drop from the 2016 rate of $12.89 to $5.73,” said Jay Franklin, director of the Tompkins County Department of Assessment, via email. The two colleges “would pay a combined” $12 million in taxes to the city.
Meanwhile, Ithaca College’s exempt property is valued at $440 million, said Ithaca town Supervisor Bill Goodman. The college, he said, makes up about 80 percent “of our exempt property.”
Elmira College “has been very active in buying up homes surrounding the campus and demolishing them, resulting in a loss of tax base,” said city of Elmira Assessor Bruce Stanko. “Assessed value is going up” and the college’s exempt property values are nearly $38.6 million.
Private nonprofit colleges such as the University of Rochester, RIT, Roberts Wesleyan College and others in that region employ 19,700 people and contribute $5.6 billion to the state economy annually, according to the Commission on Independent Colleges.
Campuses in the Hudson Valley — such as Marist, Vassar, Sarah Lawrence, Pace University and others — employ about 12,500 and contribute $4.5 billion to the economy yearly.
In the Southern Tier, nonprofit private universities Ithaca, Cornell and Elmira employ approximately 16,400 and contribute $5 billion annually to the economy.
“Employment is probably the biggest benefit” local colleges bring to an area, said Jon Jay Baisley, Poughkeepsie’s acting town supervisor. And “the revenue you generate from the students and employees … it may not be an IBM but it is an economic engine.”
State Department of Labor data show that many private colleges are among the largest employers in their regions.
The University of Rochester, for instance, is one of the state’s largest private-sector employers and “paid more than $1.6 billion in wages” in 2015, spokeswoman Miller said. RIT is also among the largest employers in its region, according to state data. Marist is among the largest employers in the seven-county Hudson Valley region. Cornell and Ithaca College are both among the largest employers in the Southern Tier.
The city of Ithaca has “low unemployment, increasing population (and) high wages compared to neighboring counties,” said Franklin, the Tompkins County assessor.
There are other economic benefits to college towns: student spending, tourism and more. For instance, after graduating from Marist, Long Island native Chris Panettieri landed a job at Hudson Valley-based Health Quest. He liked the area — plenty of “green space” for hiking and a low cost of living compared to places like Manhattan. So he bought a condo in the city of Poughkeepsie.
The University of Rochester “purchased $217 million in goods and services” in the metropolitan area in 2015, Miller said. Meanwhile, the university’s medical center “provided approximately $107 million in uncompensated care.”
Some schools make voluntary payments — through “payments in lieu of taxes” or other arrangements — to municipalities or special districts. The money is supposed to help substitute for property taxes, but there’s no consistent method for how much a college donates.
Cornell, for instance, makes “voluntary contributions to local governments, the school district and more than 40 local non-profit agencies,” said John Carberry, a university spokesman. This year, total contributions and “support for the local public transit service is $5.8 million,” including $1.3 million for the city.
Marist has a “letter of understanding” with the local Fairview Fire District which “commits the college to making contributions totaling $2.5 million ($250,000/year) from 2015 through 2024,” said Greg Cannon, a college spokesman.
Meanwhile, colleges do pay taxes on some properties, depending on their use.
Sarah Lawrence College “pays approximately $170,000 per year in local taxes and tax-related payments on its properties,” said spokeswoman Judith Schwartzstein. Vassar College has “a number of properties on the tax rolls” and paid about $43,000 in fire taxes this year, said Julia Fishman, a spokeswoman for the school. Elmira College pays about $95,000 in taxes on its $1.7 million in taxable property, said Stanko, the city assessor.
And “Cornell is one of the largest property-tax generators in Tompkins County,” Carberry said.
“The town/gown issues here are no different from in many places,” said Dan Cogan, chief of staff for the city of Ithaca. “We have a young population that comes to town and doesn’t always realize that not everyone who lives here is 19 years old.”
Housing concerns exist in a number of localities, such as the town of Ithaca, where there’s a “bit of a housing crisis,” said Goodman, the town supervisor. Students competing for off-campus rentals — “since there isn’t enough on-campus housing for them” — has led to housing cost increases. Meanwhile, some neighborhoods experience disturbances because of “student parties.”
In Rochester, the “potential increase in student housing in residential neighborhoods near the campus has created some concerns about affordability/gentrification,” the city said.
The colleges can also strain a community’s resources. Though some of the larger schools have their own police forces, they typically rely on local fire departments to respond to emergency calls.
In the town of Poughkeepsie, about 55 percent of the Fairview Fire District’s assessed property is untaxable, leading to high tax bills for residents, said Fire Chief Chris Maeder.
On one hand, the colleges bring “a number of businesses to the local community,” which typically pay fire taxes, Maeder said. “On the other hand … the only way fire districts are currently allowed to raise revenue is through property taxes. The county, cities and towns are the ones who benefit from the sales taxes.”
And a college’s tax-exempt status can also affect local businesses, in ways positive and negative.
“I understand the idea of a (tax-exempt) campus store providing textbooks for the students,” said Joe Wetmore, owner of Autumn Leaves Used Books in Ithaca. “But when the student store is selling T-shirts, mugs, banners with the Cornell name — that’s a commercial activity. You’ve moved from your mission of being a nonprofit educational institution and into a for-profit business.”
Other businesses that do pay taxes are “trying to compete in that market” and are at a disadvantage, Wetmore said.
Supporting the community
Many people feel a university can enhance a community’s quality of life. Private nonprofit colleges host free concerts, lectures, exhibits and more.
For instance, Sarah Lawrence’s Child Development Institute “offers free lectures, workshops and free community adventure play experiences for children in a variety of locations, including local parks, throughout the year,” said Schwartzstein, the spokeswoman.
The Elmira College speech and hearing clinic offers an “array of clinical speech-language pathology and audiology services to individuals of all ages from within the region,” said Michael Rogers, the school’s vice president of external relations.
At Vassar, a scholarship program “eliminates student loans from financial-aid packages awarded to Poughkeepsie High School students” accepted to the college, said Fishman, the spokeswoman. The loans are replaced “with Vassar scholarship funding,”
The University of Rochester acts as the Educational Partnership Organization for East High School, “which was on the verge of being closed by the state because of inadequate performance,” spokeswoman Miller said.
Cornell offers hundreds of community programs, “from science outreach to agricultural support and nutrition training” across the state, spokesman Carberry said.
And students typically volunteer in their local communities. At Marist, for instance, “student organizations raise approximately $80,000 annually to benefit various charities,” said Cannon, the college spokesman.
Overall, “most people are probably happy” in Ithaca, said Goodman, the town supervisor. The colleges “add to the cultural life” and bring “a lot of highly educated people to the area. We’re doing OK because of the growth here.”
Vassar College, Poughkeepsie
Budget: $177 million
Endowment: $974 million
Most recent value of tax-exempt property: $183.2 million
Sources: Vassar College, town of Poughkeepsie
Budget: $38 million
Endowment: $37.9 million
Most recent value of tax-exempt property: $38.6 million
Sources: Elmira College, city of Elmira
Sarah Lawrence College, Yonkers
Budget: $67 million
Endowment: $90.8 million
Most recent value of tax-exempt property: $251.5 million
Sources: Sarah Lawrence College, city of Yonkers
Cornell University, Ithaca
Budget: $4.35 billion
Endowment: $6.3 billion
Most recent value of tax-exempt property: $2.1 billion
Sources: Cornell University, city of Ithaca
University of Rochester
Employees: 28,923 total employees
Budget: $3.6 billion
Endowment: $2 billion
Most recent value of tax-exempt property: $461.8 million
Sources: University of Rochester, city of Rochester
© 2016 Gannett
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