As many cities around the country struggle to make ends meet, some communities are looking toward non-profit institutions for greater financial assistance. In keeping pace with this trend, this past June the University outlined the first installment of the $20 million it pledged to donate to Tompkins County for housing, infrastructure and transportation improvements.
Accordingly, the University plans to spend over $1 million each on housing and transportation efforts in 2009 to help attract a new generation of talent and meet the local demand for employee and student housing. Cornell is looking to invest specifically in home buying programs and new housing developments along with road repairs and pedestrian and biker safety.
However, while some may see this is as a generous and necessary gift, especially given the lagging state of the economy, others note that the University is exempt from paying property taxes on most of its land.
According to Thomas Bruce, vice president of university communications, the goal of this investment is to mutually align the University with ongoing initiatives in the neighboring community to meet increasing demands for affordable housing options and improve local infrastructure.
“We realized that if we were able to align ourselves appropriately with strategies underway in the community and if our investments were in line with investments ongoing in the community, we would be able take care of our needs first and foremost and create a positive ripple effect in the community,” he said.
The $20 million investment will be dispensed in $2 million increments each year for the next decade. This donation comes on the heels of the $1 million the University has contributed annually to the City of Ithaca since 2003, said Mayor Carolyn Peterson of Ithaca.
To determine which aspects of the community needed the most improvement, President David Skorton “looked to spend money on projects that serve the University’s needs, but in a way that would have a positive impact on the community,” Bruce said.
Stephen Golding, executive vice president for finance and administration, said University administrators took a three-pronged approach deciding where to allocate the money for new housing efforts. First, they wanted to align their efforts with the local community, faculty and students. Second, the University found where all three of these constituents wanted to live in relation to campus. Third, they wanted to preserve the surrounding environment and avoid an urban sprawl.
“C.U. picked infrastructure and housing because these were areas that benefited from mutual self-interest [between the county and University],” Golding said.
The timing is appropriate as the country flirts with an economic recession. According to the Bureau of Labor Statistics’ July 2008 report, the unemployment rate has rocketed to 5.7 percent compared to 4.9 percent over a year ago. Contrarily, the New York Department of Labor reported that the rate of unemployment in NYS fell below the national average in July 2008.
Housing affects the whole community — not just the University. Up to 500,000 people are expressing a need for more housing options. Golding said the University’s spending on housing for employees and students eases some of the burden local institutions face in Tompkins County.
One issue that has emerged for universities located in small communities is the heavy toll they place on host towns.
This is a tenuous issue as that non-profits are exempt from paying property taxes on the land they use to run and operate most of their facilities.
Peterson estimated that if the University were subject to property taxes, it would have to pay at least $25 - $30 million annually. Golding estimated that the University would roughly owe at least $60 million based on the value of the land the University owns.
Though large non-profits benefit their host communities by providing jobs and increasing the prestige of small towns, some contend that the land could be set aside for profit-driven institutions that are not tax-exempt. Cornell does pay property taxes on land that is used for commercial reasons like East Hill Plaza. According the to the University’s Economic Impact on New York State report issued in 2007, the University paid $12.9 million in property taxes to municipal governments and school districts in 2005.
Others feels that large non-profits such as universities and hospitals do contribute to taxes via the salary and wages they pay to their employees. But Assemblywoman Barbara Lifton (D-125th), who represents the Tompkins and Cortland counties, explained that often times university employees usually lay outside of county lines so the income and sales taxes they pay go elsewhere.
“A lot of jobs at Cornell such as cooks and groundskeepers are where the wage is such that those workers don’t even live in the county because they can’t afford to live there, so the benefit of those jobs goes outside the county and [host communities] see little benefit,” Lifton said.
Golding said that despite being a tax-exempt institution, the University generated $1.6 billion in economic activity by spending on payroll and construction in the state of New York, according to the University’s Economic Impact on New York State report issued in 2007.
“The University does recognize it gets a significant benefit from its tax exemption status with respect to taxes,” Golding said.
The report also indicates that, “Through taxes paid by its employees, vendors and contractors — as well as local taxes and fees that the University pays directly — Cornell in 2005 directly or indirectly generated an estimated $173 million in state and local tax revenues. For every dollar that New York State spent in support of Cornell’s operations, it got back 72 cents in state and local tax revenues.”
Lifton acknowledged that “faculty jobs are more beneficial to the community because [faculty] buy property in the county, have to pay property taxes and contribute to more local sales tax, benefiting the host community.”
However, several communities across the nation are trying to find more innovative ways of handling large non-profit institutions.
City representatives and the Greater Providence Chamber of Commerce in Providence, Rhode Island, home to Brown University, has sought to address this issue by making the state compensate the city for 27 percent of what property taxes would be, according to Providence Business News.
Another solution, introduced as legislation by state Sen. Harold D. Metts (D-Providence), eliminates the tax-exempt status of hospitals and institutes of higher education, according to the PBN.
Currently, Lifton is overseeing a bill that would ask “NYS to partially compensate communities where a tax-exempt state university campus is located for lost property tax revenues.” The bill applies to communities where 15 percent or more of the land is occupied by a state university. Because the statutory schools at Cornell are SUNY schools, Ithaca would benefit from such a bill. However, Lifton said there has been no action on this bill since she became the sponsor six years ago.
“The bill is dead on arrival ... People say be thankful you have the college there and you have the students spending money as well as their parents. It’s a clean industry that creates good jobs and [you should] be grateful,” Lifton said. “[This bill] is going to sit as much as I’d like to see something happen but given where we are and as state and as country it’s not likely. It’s seen as luxury to spend money in this way.”
The impact report states that Cornell and Ithaca students spent $74 million off campus in 2005, while their parents spent an additional $40 million.
With the flagging economy, Peterson said, “Any city in New York State is facing real economic pressure and could use economic assistance.”