|Office of the Chancellor / Public Affairs||
Tuesday, March 16, 2004
Cities challenging university tax status
PITTSBURGH, Pennsylvania (AP) -- As part of a multiyear plan to boost enrollment, Duquesne University bought a $22 million apartment building this year and converted it into housing for 750 students.
The purchase means more space for the Roman Catholic university -- and the loss of another taxable property for Pittsburgh, something city officials say the financially struggling city can't afford. So Pittsburgh is challenging the tax-exempt status of the dorm, and considering taking the fight to other universities.
As state and federal aid to cities is being cut, cities are becoming increasingly aggressive about seeking tax dollars from university and college property that generates revenue for the institutions. A growing amount of tax-exempt property is eroding the tax base in many cities, officials say.
"This is an issue that has been percolating for many, many years. As things get tighter with state and local budgets, they're looking with greater interest at all means of raising revenue," said Sheldon Steinbach, general counsel for the Washington-based American Council on Education, which represents 1,800 colleges and universities. Nonprofits -- universities in particular -- are becoming a bigger target for tax fights, he said.
Some cities and colleges have negotiated arrangements in which schools pay something in lieu of taxes and other fees. Harvard University, for example, has made voluntary payments to Cambridge, Massachusetts, since 1928; its president has said that whenever Harvard purchases property that is being taken off the tax rolls it "will make a voluntary payment for a period and at a level commensurate with the impact of the acquisition."
Northwestern University and Evanston, Illinois, settled a federal lawsuit in February 2004 after years of acrimony over taxes. The university is exempt from property taxes but pays taxes and fees on parking, athletic events, utilities and other services.
In the suit, the university accused the city of including dozens of its buildings in a historic district in retaliation for Northwestern's refusal to make voluntary payments in lieu of property taxes. The designation prevented the school from making changes to the buildings without city approval.
The university and city agreed that 14 of the university's properties would be excluded from the historic district, while 42 others would keep the designation.
In Connecticut, New London City Manager Richard Brown has asked the city's assessor to start taxing the hockey rink at Connecticut College and two buildings at Mitchell College. Forty-six percent of the tax base in New London is tax-exempt, he said.
The state is supposed to reimburse cities for 75 percent of the taxes they would be getting on tax-exempt property -- a program known as PILOT, or the Payment in Lieu of Taxes -- but local governments are only seeing subsidies of about 60 percent, Brown said.
"We discovered our colleges were engaging in activities that were competing with the private sector," Brown said. The colleges were renting out their spaces for activities that aren't tax-exempt, such as soccer camps, he said.
Connecticut College said it would fight in court to preserve the tax exemption. The colleges can petition the Board of Assessment Appeals for a reprieve on March 26.
'We can no longer shoulder the burden'
Duquesne President Charles Dougherty said he believes targeting the university sets a bad precedent.
"We regret this action by City Council and believe it is a mistake, not only for the future of Duquesne University but for the future of the city," Dougherty said in a statement. "Brottier Hall is a university residence hall and university residence halls are tax-exempt by state law."
Craig Kwiecinski, a spokesman for Mayor Tom Murphy, said the administration had begun the process of challenging the dorm's tax-exempt status.
City Council President Gene Ricciardi said nearly 40 percent of the property in the city is tax-exempt, costing the city about $80 million a year in property taxes. The sale of Citiline Towers to Duquesne will mean a loss of about $350,000 in taxes for the city, school district and county, he said.
"When things are going well and we're able to shoulder the burden for the entire region that's fine," said Ricciardi, who sponsored the council resolution. "The amount of property (that is) tax-exempt has grown and we can no longer shoulder the burden."
These news clips are provided by the Public Affairs Department of The California State University. They are intended for the internal use of The California State University system and should not be redistributed. Questions and submissions may be sent to firstname.lastname@example.org.