Colleges<br />targeted by cash-strapped cities
Pittsburgh threatened to tax college tuition. Providence sought to tax out-of-state students. And Philadelphia is pressing its colleges and universities to resume voluntary payments in lieu of taxes.
As Boston seeks new revenue, cities around the country are grappling with how to squeeze more money from the colleges and other tax-exempt institutions, as recession and lower property tax revenues prompt municipalities to seek alternate ways to pay their bills.
Efforts to impose greater obligations on nonprofits have increased tension and strained town-gown relations in some college-rich cities.
City officials argue that colleges rely on municipal services and should pay their fair share, especially in difficult financial times.
Colleges defend their tax-exempt status by citing the social and economic benefits they bring to their communities.
“Economic constraints have required cities and towns to look more aggressively for additional funds,” said Daniel Egan, president of the Association of Independent Colleges and Universities of Rhode Island.
“But quite frankly, when you put a figure on something, then the tax exemption is gone. If it looks like a tax and sounds like a tax, it’s a tax.”
With its large number of tax-exempt universities and hospitals, Boston appears to be ahead of most cities in seeking to toughen its voluntary payment program for nonprofits. A city panel is finalizing a plan to ask nonprofits to gradually increase their voluntary annual payments to 25 percent of what they would owe in taxes.
The proposal, which many colleges and universities oppose, would raise the total amount of payments to Boston to $20.9 million a year.
Currently, 13 Boston colleges and universities pay the city $8.4 million a year, ranging from $4.9 million from Boston University to $13,125 from the New England School of Law.
In addition, several of the schools pay $5.7 million in taxes on property that would otherwise be considered tax-exempt. At least nine colleges pay nothing in lieu of taxes.
In Philadelphia, meanwhile, hardly any colleges make payments in lieu of taxes, although that could change.
University presidents there met with city officials last week to begin discussing how to quantify their current contributions to the city. Philadelphia is assembling a task force similar to the one in Boston to assess how a new system might work, whether through in-kind services or voluntary payments.
In 1995, the city received $6.78 million in voluntary payments from nonprofits, with the University of Pennsylvania contributing nearly $2 million.
But the payments slowed to a trickle after a 1997 state law calmed fears that the city might try to strip them of their tax-exempt status if they did not pay up.
Now, the city receives less than $1 million a year from nonprofits, mostly from outside higher education, said Lori Shorr, Philadelphia’s chief education officer.