Locals ask U. to contribute more in taxes
The current economic recession has taken its toll on the Princeton community, as local businesses are seeing declining revenues and some residents are expressing intentions to move out of the area because of high property taxes. PCTF members are asking the University to pay full property taxes, though much of the campus is tax-exempt under New Jersey state law.
Vice President and Secretary Bob Durkee ’69, however, said that the University’s various financial contributions to the Borough and Township are substantial and were recently increased.
Last year, the University paid a total of $8.9 million to the Borough and Township in property taxes. Durkee said in an interview that the University opted to pay taxes of up to $3.5 million on property it could have taken off the tax rolls.
Durkee questioned the timing of the residents’ demands, as the University moves to cut its own operating budget by 6.8 percent for the fiscal year beginning July 1 and prepares for a projected 30 percent decline in the value of its endowment by the end of this fiscal year.
The University paid the Borough an additional $1,176,030.20 last year, in accordance with an agreement it has with the Borough called Payment in Lieu of Taxes (PILOT), which expires in 2011. The University does not have a PILOT agreement with the Township.
“We have long ago decided that some contribution is appropriate.” Durkee said. He explained, however, that ultimately, “Princeton University is an educational institution, which is the reason it’s tax-exempt.”
Other towns that host large universities — like Cambridge, Mass., and New Haven, Conn. — have periodically pressured the schools to contribute more money to the local government, asserting that these communities lose money from the property tax breaks awarded to educational institutions. In 2006, for instance, the Borough and Township would have earned more than $35 million in property taxes if the University were not tax-exempt, according to a study conducted by the Princeton University Democratic Organization last year.
“We are subsidizing Princeton University by 24 percent,” Borough Councilman David Goldfarb said. “That is the amount you are involuntarily paying to Princeton University. Many of us can’t afford to give that much to our churches or alma maters.”
Borough Councilman Kevin Wilkes ’83 told residents at the town hall meeting on Sunday that the University’s recent “building binge” and new Arts and Transit Neighborhood — which will increase the size of the University’s campus by two million square feet over the next decade and a half — will continue to strain the community’s resources and may alter the demographics of the Princeton community.
“Princeton University threw a huge 50-year growth party — it was quite a big bash and, like the Reunions that they stage so effectively every year, there was plenty of intoxicant to go around,” Wilkes said. “But now the party is over, and we are left with the hangover.”
“As our property taxes go up to pay for this increasing demand, we undeniably change the face of our community,” Wilkes added.
Wilkes said he believes that blue-collar workers, retirees, senior citizens, clerical workers and new immigrants will no longer be able to afford homes in Princeton as a result of the rising costs. As property taxes increase, he cautioned, only wealthy individuals will remain in the community.
Durkee, however, said the Borough receives the funds for more than half of its budget from economic activity generated at least in part by the University, as the campus attracts visitors and generates significant revenue for local businesses. He noted that only $10.5 million in funding for the Borough’s total $24.5 million budget comes from taxes.
The University also makes regular monetary contributions and gifts to local institutions such as the University Medical Center at Princeton and the Princeton Public Library, Durkee added.
These gifts, however, have prevented community members from demanding that the University contribute more to the community, Township Committeewoman Sue Nemeth said in an interview on Monday.
“People are afraid to say things because [the University] sprinkles money,” Nemeth said. “There’s actually an element of fear because they think they’ll lose the little bit they currently get, but our community stands to gain [by pressuing them for more].”
But Durkee noted that, of the University’s four main funding sources — national grants for research, tuition and fees, the endowment and annual gifts to — only gifts to unrestricted funds may be used to make contributions to the community.
Durkee added that, when articles about PCTF began appearing in local papers, several alumni in the area sent letters to the University saying that they expected their gifts to be used to support the University and not the community, adding that they were capable of contributing to the community on their own should they wish to.
“This is an attractive community for people to live in, and that does mean property values are high,” Durkee said. “If you live in this community, you have access to intellectual and cultural activities at a very low cost or for free.”
But Nemeth and Goldfarb both said that peer institutions contribute more to their municipalities than the University does at present.
In February, Yale announced that it would increase its voluntary payment to New Haven from $5.1 million to $7.5 million in 2011. Harvard and MIT both pay roughly $1.7 million under their PILOT agreements with Cambridge, Mass.
“[The University is] placing a strain on the community right now,” Nemeth said. “The longer this takes, the louder this will get.”
Nemeth added that though the University has been responsive in the past, the University’s Office of Communications has largely ignored PCTF’s most recent requests, forcing the group to resort to more “public and embarrassing” methods.
Currently, community members are writing letters and circulating petitions demanding that the University increase its contributions to Princeton. At the town hall meeting, it was also suggested that local residents organize a march on Nassau Hall if the situation does not improve.