As a nonprofit institution, the University does not pay municipal property tax on its land used for educational purposes. Despite this, the University paid $8 million in property taxes in 2012, making it the single largest taxpayer in town.
In addition, the University paid $2.48 million in voluntary contributions to the Borough and Township governments to partially offset the cost of the town’s provision of services to the University community. Similar voluntary payments in lieu of taxes are not uncommon among the University’s peer institutions.
Though the University’s payment in lieu of taxes, or PILOT, is nominally smaller than those of five of its peer institutions, an examination of PILOT contributions made by other universities to their host communities’ operating budget shows that Princeton’s payment is one of the the largest by percentage.
According to data provided by a report by the Lincoln Institute of Land Policy, which lists PILOT payments made by nonprofit institutions, Princeton University’s 2012 contribution comes in sixth out of the top eight university contributions in terms of the nominal dollar amount.
Except for Harvard, Boston University and Princeton, all universities on the list made contributions to a single municipality.
Harvard, which comes first in the list, made voluntary contributions totaling nearly $10.1 million to its three host municipalities. Yale and Stanford rank second and third, respectively. Contributions between second and fifth places ranged between $8.1 and $5.7 million.
The figures in the report were confirmed by each university’s communications office, and adjusted where certain universities’ calculations of their PILOTs differed from those cited in the report. Data for Cornell, whose communications office did not respond to a request for comment, was drawn from the Lincoln Institute report. But when Princeton’s contribution is considered as a proportion of the town’s municipal budget, it ranks second among its peers. The $2.48 million figure represents 3.99 percent of the Borough and Township’s combined 2012 budgets, which together totaled over $62 million.
“The PILOT that Princeton has paid is one of the largest proportions of the city budget of any university,” said Daphne Kenyon, a fellow at the Lincoln Institute and one of the authors of the report.
According to the report, Stanford made a payment of $7.1 million to its local government in 2009, or 4.85 percent of Palo Alto’s municipal budget.
However, whether Stanford’s $7.1 million payment is comparable to Princeton’s is unclear because PILOT contributions are not permitted under California law. Instead, Stanford’s contribution pays for the police services it receives from the town, according to its communications office.
Stanford is in a unique position in that it directly pays the Palo Alto government for services. Rather than maintaining its own campus safety force, Stanford contracts with local police for its campus police presence. But because Stanford’s payment functions as compensation for local government services, the Lincoln Institute considers it a PILOT.
In any case, Stanford’s payment functions to partially offset the cost of providing basic services to the university community in a way that is comparable to Princeton’s PILOT.
Aside from Stanford’s payment, Princeton’s PILOT is unmatched in its size as a fraction of the municipal budget.
Cornell’s payment — third on the PILOT rankings by percentage of the municipal budgets — represents only 2.67 percent of Ithaca’s operating budget.
Meanwhile, Yale’s payment represents only 1.67 percent of New Haven’s budget even though Yale ranks as the second highest PILOT contributor when considering only the nominal figures.
But some schools with large endowments like Princeton’s have refrained from making PILOT agreements.
Northwestern University, whose endowment of $7.2 billion ranks it among the nation’s 20 wealthiest private universities, does not make an annual PILOT to its host city, Evanston, though some citizen groups have in past years requested such an arrangement.
“Evanston has levied other taxes that the University and its users pay,” Northwestern Vice President for University Relations Alan Cubbage said, such as taxes on parking permits and tickets for athletic events. “Those are getting up there.”
In fiscal year 2012, Northwestern paid a total of $6.4 million in taxes and fees to the city of Evanston.
Cubbage explained that since the controversy over PILOT contributions in the community over a decade ago, Northwestern has begun making occasional donations to fund specific projects and community needs within Evanston, such as the purchase of a $250,000 ambulance last year.
In addition to the PILOT, Princeton has also made similar one-time contributions to community projects. In 2011, the University pledged to contribute $300,000 to the proposed expansion of the firehouse. In recent years, the University donated a new ambulance to Princeton First Aid and Rescue Squad and has made half-million dollar contributions to the school board and to the public library in the past few years.
“There are multiple ways in which this University supports this community, as we’ve always thought in terms of the totality of this set of contributions,” University Vice President and Secretary Robert Durkee ’69 said.
For Princeton administrators, achieving the highest-percentage municipal contribution of any university was not intentional, but rather came about as a by-product after years of negotiating the PILOT in various agreements with local government officials.
“We don’t really think about [the PILOT] in comparison with what other institutions are doing,” Durkee said, though he is aware the University’s payment to the local community is larger than those made by its peers.
“But that wasn’t the goal,” Durkee added. “The goal was to arrive at a contribution that allowed us to do as much as we thought we could responsibly do to contribute to the community.”
The 2012 PILOT, which gave $1.7 million to the Borough government and $775,000 to the Township, was the product of a one-year ad-hoc agreement negotiated because the previous agreement, which lasted for six years, expired in 2011. Before the 2011 agreement the University only contributed to the Borough.
Between 2006 and 2011, the University made payments that increased every year according to a six-year contract, reaching nearly $1.7 million to both municipalities in 2011.
“We have dramatically increased our contribution over the last 15 years or so ... and we’ve done that with a focus on what we could do for Princeton and not with a focus on what other institutions may be doing in their own settings,” Durkee explained.
Before the six-year agreement, negotiated by Shirley Tilghman’s administration, the annual PILOT was much lower. In 2005, it was $350,000, approximately 0.016 percent of the Borough’s budget at the time.
The University did pay $9.9 million in property and sewer taxes to the Borough and Township last year, making it the community’s largest taxpayer, without including the PILOT. Some of these taxes are also voluntary, as the University has some properties that would qualify for legal tax exemption, such as graduate student housing. According to Durkee, the taxes paid voluntarily on these properties totaled about $2.5 million.
Consolidated Princeton’s tax collection office could not be reached on Sunday afternoon to confirm this figure.
This year, the University expects to negotiate a new long-term agreement with the new town government, and some in the community have asked that the University pay more. In November, Mayor-elect Liz Lempert explained she would like to see the University increase its contribution to help the new government keep property taxes on its residents low.
Roger Martindell, a Princeton native who served on the Borough Council for decades, said he believed the University could pay more. Comparing the dollar amounts of many schools’ PILOTs, and even their portions of their municipalities’ budgets, is difficult, he said, because “a lot of these things are apples and oranges.”
“The important thing in all this is to have a discussion,” Martindell said, saying he would like to see this year’s negotiating team take on a more comprehensive look at the mitigating factors that make each university community’s situation unique.
“Too frequently what happens is it’s a closed-door session between one or two people representing the town and one or two administrators representing the University, and it becomes something like a tea party,” Martindell explained.