Toomas Breen Photo
Flyer left on doors across town this past weekend.
Just in the past week, this news site revealed that the mayor is engaged in clandestine discussions with Yale University concerning its financial contributions to the city.
In addition, just this past weekend I received a door hanger reminding me of the value of Yale’s tax exemption as part of a campaign organized by New Haven Rising, an extension of the Yale unions.
The demand for more financial support from Yale has repeatedly come to the fore in New Haven for decades, particularly during tight budget times, without any clear resolution. I propose that we change how we frame the issue — and try some new strategies for getting Yale to pay its fair share.
Changing the Narrative
Yale has created a false narrative around its voluntary contribution to the city.
Yale magnanimously pronounces that it not only contributes more money to its host city than any other university in the country, but indeed the whole world. In absolute dollars this is a factually correct statement. However, if we were to look at other universities and measure their contributions as a percentage of the town’s budget, we see that this idea that Yale contributes more than any other university to their host city is well-crafted spin.
Looking at one of Yale’s closest rivals, another story emerges.
After a group of residents of Princeton, N.J., sued Princeton University, the university settled and agreed to make a contribution to the town of Princeton. In 2020, that was about $3.4 million. The total budget for the town of Princeton is $64.8 million. As a percentage of the budget, Princeton contributes 5.25 percent of the town’s revenue. Its endowment is $26 billion.
On the other hand, Yale’s $13 million in voluntary annual contributions to New Haven represents only 2.4 percent of the city budget. Its endowment is $31 billion.
So in terms of percentage of the town/city budget, Yale is not the largest contributor to its host city. Indeed, it falls far short by over half. If Yale were to match this percentage, its contribution would more than double to $28 million.
This spin is even starker when we contrast this with Dartmouth and the town of Hanover, N.H.
Dartmouth is unique, as it actually pays taxes to the town of Hanover, as a result of a lawsuit in the 1930s that St. Paul’s School lost when it sought a property tax exemption for its campus dormitories.
Dartmouth, whose endowment is $6 billion, contributes in taxes about $8 million annually to the town of Hanover, a whopping 26.67 percent of Hanover’s $30 million annual budget.
At this rate, Yale would owe the City of New Haven about $140 million a year.
These are only two examples of how Yale has carefully crafted its message so that we as New Haven residents must surely be grateful for their generous contributions. The very name we refer to its payment — “voluntary contribution” — carries with it a smug reminder of Yale’s seeming generosity.
This is why it is so important that we change this narrative. We can do this by taking a lesson from Princeton.
The town of Princeton refers to the university contribution as a “fair share payment” in it official budget document. In the coming weeks I intend to submit a formal communication to the Board of Alders proposing that it require all city departments, and any reference to Yale’s payment to the city be referred to as Yale’s “fair share payment.” Not only would this serve as a reminder of what Yale ought to pay, but if the board grants it a hearing, we can then have a discussion about Yale’s “fair share” that is outside of any budget proceedings.
There is another noticeable trend. The host communities of these wealthy universities can roughly be divided into two groups: wealthy small-town suburbs or rural areas and larger cities. This is an important distinction because New Haven is unique; it doesn’t quite fit into either of these categories, a situation which contributes significantly to strained relations with the university.
Small suburban and rural towns do not face the same problems that one encounters in more urban areas. Their budgets are smaller and in general, they are more affluent communities.
Large urban areas that host these wealthy institutions generally can offset the loss of property tax revenue because they have larger commercial bases and have the ability to collect local taxes.
New Haven does not have the commercial bases of New York, Philadelphia, Cambridge, or Providence. Admittedly, Providence’s profile is the closest to New Haven’s, but even they can levy local taxes.
This creates a huge challenge for New Haven, and as a result places it in a unique position in which Yale’s property tax exemption strains the city even more. The squeeze is exacerbated because the only tax New Haven can levy is the property tax.
Solutions
So what can we do to ensure that Yale makes a “fair share” payment to the city?
Following are some ideas that are worth exploring. If we are to change this we need bold ideas and bold action.
• The first tactic the city has continued to employ with little efficacy: Ask Yale for more money. This tactic usually results in Yale making grand pronouncements of how much they give to the city, and if they paid more they wouldn’t be able to do everything wonderful they do for the community. Allies will not-so-jokingly remark that New Haven would be Bridgeport without Yale, and who wants that? The time has come to stop talking about philanthropy and start talking taxes.
• Revisiting Yale’s voluntary fire payment is a sensible course of action. In 1990, the city and Yale entered into an agreement whereby in exchange for fire services, Yale would make a payment to the city equal to just under 6 percent of the total fire department budget. That number was agreed to because, at the time the deal was struck, that was the budget gap for that year. This agreement ties the growth of the payment to the growth of the Fire Department and as a result fails to take into account the additional risk the City absorbs due to Yale’s expansion. As the number of students, workers, and employees grow, as well as Yale’s physical footprint, there is increased risk that City’s fire services would be needed. The agreement in its current form makes no allowances for this.
• Opening the agreement would allow the city to incorporate other services to Yale for which the city does not receive compensation. 911 services, which were formerly housed separately in fire and police, have been consolidated into a separate department, a service the university benefits from. The university also relies on city snowplowing in the winter, street cleaning, street lights, bike lanes, crosswalks and students and staff alike enjoy the many parks we have to offer. No one uses all city services, but we nevertheless benefit from their existence. While I have no kids in public school, and have not directly used police or fire services, I receive indirect benefits because these services exist. In much the same way so does Yale. Failure to take swift and bold action here could result in the rationing of city services. Who wants a 911 call from the university to go unanswered? A more prosperous and better New Haven also means a better and safer Yale.
• In addition, Yale’s payment should include a contribution to the city’s payment to the police and fire pension fund.
• Actions at the state could also significantly benefit New Haven. In 2016 Senate Bill 414 was voted out of the revenue and bonding committee. This bill sought to clarify Yale’s property tax exemption. This article in the Yale Law Journal does an excellent job in outlining what can be done at the legislature to clarify Yale’s property tax exemption. The city can also ask the legislature to grant it powers to levy local taxes to help offset the property tax exemption granted by the state and the state’s underfunded PILOT reimbursement.
• Along these lines, the City may ask the state to act as a pass-through for a tax on the income Yale earns on its $31 billion endowment. In 2020, net of fees, the university earned $900 million in interest income from its endowment. As a result, financial managers undoubtedly earned more off Yale’s investments than the entirety of Yale’s contribution to the city. Moreover, the federal government’s 2017 tax relief bill imposed a 1 percent tax on the income earned on endowments of 40 institutions across the country. The state should follow suit.
• Unite HERE locals 34 and 35 can also use their significant political and collective bargaining power to come to the aid of the city. While their organizing work is impressive, they can take bolder action by collectively bargaining for the common good. Nothing to my knowledge precludes them from negotiating with the university contract language that would require Yale to pay a subsidy to the city for every union member who lives outside New Haven. This would also have the added benefit of incentivizing Yale to hire New Haven residents and/or incentivizing more of its workforce to live here.
• If these actions are stalled, residents certainly can take matters into their own hands. Collectively residents can sue in court on grounds that Yale’s property tax exemption violates the Civil Rights Act of 1964. Here we can argue that since schools are funded through the property tax, Yale’s exemption has created a disparate impact on communities of color. This is also augmented by Yale’s lending practices. Since Yale offers its faculty mortgage financing at rates well below market, prospective homebuyers have more buying power. This artificially inflates housing prices, creating redlined areas and effectively shutting out lower income people, resulting in largely segregated schools, like Worthington Hooker.
Given all of these options, we also should look at the transformative power of a deeper partnership with Yale. If Yale embraced more fully, like Harvard and MIT, the power of tech-transfer and the leveraging of Yale’s intellectual property to benefit New Haven, we could create an economy that would help to make New Haven more self-sufficient so it no longer was a ward of the state and its Ivy overlord.
New Haven continues to be squeezed. Yale’s Fair Share Payment will happen only when we work together and place pressure on multiple fronts. It means the city, the state, residents and union members alike working together towards a New Haven where we all pay our fair share. To this end, I am happy to organize residents interested in working to ensure that Yale, like the rest of us, pays its fair share.
Matt Smith grew up in the what is now the SoHu section of the city. He graduated from Wilbur Cross High School and Yale College. He represented the 9th Ward on the Board of Alders, was mayoral staffer for John DeStefano and worked in the Office of Economic Development under Mayor Toni Harp. He currently works for the Connecticut Department of Banking. He now lives in the Westville neighborhood. He can be reached .(JavaScript must be enabled to view this email address).