February 9, 2010

Cornell University Reduces Annual Subsidy to City of Ithaca

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In a year that has tightened fiscal belts everywhere, Ithaca was forced to tighten its belt another notch when Cornell announced that it will decrease its annual voluntary contribution to the city by about $4,500. Ithaca Mayor Carolyn Peterson recently passed a budget of $58.63 million for the year, closing a $2.5 million deficit.

“Every little bit hurts right now. We’re dealing with state cuts and we’re getting lower tax receipts. It’s tough all around. We’re seeing a decline in revenue around and to see a decline from the University is another place it hurts,” said Common Council Alderman Svante Myrick ’09 (D-4th Ward).

The decision to reduce Cornell’s annual contribution to the city did not stem from from an administration decision. Rather, it comes from a Memorandum of Understanding between the city of Ithaca and Cornell University that was written in 1995 and later amended in 2003.

Since the MOU was enacted in 2003, Cornell has given about about $1.2 million to the city every year, according to Myrick. The amount Cornell gives annually to the city depends on the consumer price index (CPI) from the previous year. This index measures the change in how much a bundle of goods and services costs to an average consumer. Since the CPI decreased in 2009, Cornell’s annual contribution also decreased, said Ithaca Controller Steven Thayer. This year, the University used a CPI of -0.04 to calculate how much it would contribute.

According to Myrick, MOUs are common in cities that host large universities such as Cornell, since these institutions use the city’s transportation and other resources but are exempt from property taxes.

John Gutenberger, director of community relations, said last year Cornell paid the city about $1.73 million. If the CPI had gone up this year, Gutenberger said, the University would have had to pay the city more because of the terms outlined in the MOU.

Gutenberger and Thayer believe that this decrease in funding will not generate any negative feelings between the University and the city.

“It shouldn’t affect [our relationship] at all because it’s an agreement that the city and the University signed years ago,” Gutenberger said. “We are making a financial contribution to the city until 2023. It lets both sides have a long term planning document with financial expectations to the University.”

However, Thayer and Myrick believe that the University could afford to contribute more to the city, especially given the size of Cornell’s endowment, which is close to $4 billion.

“[The city] is certainly appreciative of the contribution and economic activity [that Cornell brings], but in the same vein the University does put a strain on city services such as the fire and police infrastructure,” Thayer said.

University dining halls and other campus eateries also compete with local stores. According to Myrick, this results in decreased tax revenues for the city.

Myrick estimates that if the University had to pay property taxes, it would have to pay around $30 million. As an educational institution, the University is exempt from such taxes, but it does pay taxes on land that is not exempt such as East Hill Plaza, according to “Economic Impact on New York State,” a 2007 University report.

Other Ivy League Universities have bolstered their commitments to their host towns. Despite losing 24.9 percent of its endowment last year, Yale said it would boost its contribution to New Haven to $7.5 million annually from $5.1 million in 2011, according to Yale Daily News.

Original Author: Elizabeth Manapsal