U. to pay more to municipalities

Every year, the University makes a voluntary contribution to the Borough and the Township operating budgets in addition to its tax payments. This year, the University has increased its total community contribution — also called a payment in lieu of taxes, or PILOT — to $2.475 million, University officials announced last month.

In 2011, the University made a contribution of $1.2 million to the Borough operating budget as the last annual gift under a six-year agreement. In 2012, the University will contribute $1.7 million to the Borough, of which $250,000 is to be used for transition expenses incurred as the two municipalities consolidate under a single government starting on Jan. 1, 2013.

The much-awaited Borough contribution came as a relief to some in the Borough who had doubted over the past year that the University would renew its contribution.

Though University officials now deny that they threatened to end or decrease their annual contribution, University President Shirley Tilghman and other University officials said earlier this year that the contributions would depend on how well the University could cooperate with the community governments on the zoning issues surrounding the University’s planned Arts and Transit Neighborhood.

As a result of these statements, several town officals accused the University of bribing locals to secure construction approval.

The University made its first-ever contribution to the Township operating budget in 2011, with a payment of $500,000. The University has agreed to contribute $775,000 in 2012, of which $250,000 is to be used for transition expenses.

Because of the ongoing conflict over the University’s requested zoning this year, some community members had questioned whether the University would increase its contribution or even renew its contribution at all this year.

For the past six years, the University has been making plans to build its Arts and Transit Neighborhood, a $300 million arts complex along the Alexander corridor. The project required zoning changes from both the Borough and Township governing bodies.

Members of Borough Council unanimously opposed the requested zoning ordinance for most of the past year because the University planned to move Dinky station 460 feet southward.

In January 2010, University President Shirley Tilghman spoke to the Borough Council about both the zoning ordinance, saying that the council’s decision whether to cooperate with the University would influence the University’s decision about renegotiating the PILOT for 2012. Some councilmen and community members saw this as a threat to reduce or withhold the University’s contribution in 2012.

“It’s very difficult when we have a partner who will threaten to withdraw his money,” said councilwoman Jo Butler in speaking out about the alleged threat early last year.

In May, a quotation from University Vice President and Secretary Robert Durkee ’69 in The New York Times hinted that the University was considering reducing its contribution due to the council’s opposition to the zoning.

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“It would be difficult to justify continuing contributions at existing levels to local officials who not only refuse to help the University achieve a key educational objective, but in some cases have sought to prevent the project from going forward,” Durkee told the Times in an email.

In December, Durkee said that the University never seriously considered reducing its contribution to the Borough and denied that University officials had threatened to reduce it.

“I think I tried to send a pretty clear signal that we weren’t thinking about eliminating it or reducing it,” Durkee said. He explained that the comments in question indicated that the zoning decision would influence the University’s decision whether to increase the contribution or simply maintain it at its original level.

Durkee said that some members of the community continued to insist that the University had threatened to cancel its contribution even after University officials had clarified their comments.

The Borough Council unanimously opposed the zoning ordinance for almost the entire year. In June, the council issued an official resolution opposing the plan to move the station. Meanwhile, the Township Committee unanimously passed the Township portion of the zoning ordinance on Nov. 14.

On Dec. 6, the Borough Council passed the zoning ordinance 3-2. All of the council members who voted for it had previously opposed the zoning. The contribution agreement was finalized in the following weeks.

Butler, who voted against the zoning ordinance, said that she was disappointed that the University postponed this year’s PILOT negotiations until after the zoning ordinance had been passed.

Borough Councilman Roger Martindell, who voted for the zoning ordinance, noted that the expectation of the upcoming negotiations had not influenced his vote. While he said he believed that there was “no direct line of connection” between the zoning decision and the University’s decision to increase its PILOT, he added that he believed that the zoning vote had encouraged the University to increase its contribution.

“I imagine that the resolution of the E5 zoning issues and related matters was sufficiently encouraging to the University that they felt the increase was warranted in the circumstances,” Martindell said.

Martindell said he believed that “a new spirit of cooperation emerged” after the zoning had been approved. “I would say there was a serious breakdown in communication and a suspicion of the other on both sides,” Martindell said of the University’s relationship with the Borough Council over the past year.

Butler said she was disappointed with what she called the overly simple way that the parties had determined the Borough contribution.

“Frankly, this agreement looks like something that was drawn up on the back of an envelope,” Butler said. Butler referred to recent research and PILOT agreements proposed in other communities that have based their PILOT amounts on estimates of the nonprofits’ share in the city’s services.

“There are any number of things that people have considered, but it doesn’t appear that we considered any of them. But we wouldn’t know. It wasn’t discussed with us, and I certainly don’t see it in the contract,” Butler said.

In 2011, a Boston task force asked Boston nonprofit organizations with property worth over $15 million to increase their PILOT contributions, asking for up to 25 percent of what the institution would pay if its property were not tax-exempt. The task force based its requested contributions on an estimate of the nonprofit’s share in the cost of city services that benefit the nonprofits, including police and fire protection, emergency medical treatment and snow removal.

Harvard University paid Boston $2.1 million in 2011. The task force asked Harvard to increase its payment year by year until it is paying $5.8 million in 2016. Boston University paid slightly more than $5 million in 2011 and was asked to pay $6.8 million in 2016.

Harvard also has long-term PILOT agreements with Cambridge and Watertown, where much of its land holdings lie: Harvard has committed to pay Watertown more than $3.8 million every year until 2054 and to pay Cambridge more than $2.4 million per year until 2056.

Princeton University officials have said on previous occasions that the discrepancy between Harvard’s PILOT payments and Princeton’s PILOT payments can be misleading and has asked observers to consider the size of each contribution relative to the size of the city’s municipal budget. The contribution that Princeton University makes to the Borough and Township makes up a much larger share of the municipal budget than the share Harvard’s contribution makes up of Boston’s budget.

Boston’s 2011 budget was $2.3 billion according to the city’s website — Harvard’s $2.1 million payment represented less than one-tenth of 1 percent of Boston’s municipal budget, and the requested $5.8 million contribution would represent one quarter of one percent. The 2011 combined municipal budget of the Borough and Township was $62.6 million according a consolidation commission report — Princeton’s $1.7 million contribution represented 2.7 percent of that budget.

Princeton Borough and Princeton Township will become a single municipality beginning in 2013. After members of the new government are elected in November 2012, they will negotiate with University officials to determine the contribution for 2013 and further.

University officials hope to forge a new multiyear agreement with the new municipality, Durkee explained, though they may first negotiate a one-year agreement for 2013 while they work out longer-term plans. He added that he believes a multiyear agreement is in the interest of both the University and the community.

“Once you enter into an agreement where the municipality is counting on a certain contribution from the University, it’s really not a good idea for anyone if every year that number is uncertain,” Durkee said, explaining that a multiyear agreement would allow the University to budget its future contributions.

Durkee denied the accusation that the University has threatened to reduce the PILOT over the past year as a way to bully the Borough into approving the zoning, as well as the suggestion that negotiating the PILOT year by year would give the University the upper hand by allowing it to threaten to reduce its contribution every year.

A multiyear agreement on the main part of the contribution would establish the backbone of a good relationship with the community, Durkee explained, while negotiation of any additional contributions would depend on the quality of the University’s working relationship with the community.

“If we had a multiyear agreement, we still would have points where it would need to be renegotiated and there might be other requests separate from the agreement that would come up along the way and whether we’d be willing to entertain them would depend on whether relationships were solid,” Durkee said.

University officials held discussions with Township Mayor Chad Goerner, Deputy Mayor Sue Nemeth and members of the Citizens’ Finance Advisory Committee. The agreement was announced at a Township Committee meeting on Dec. 19, but was finalized several days before then.

University officials discussed the Borough contribution with Mayor Mildred Trotman and Administrator Robert Bruschi. The agreement was announced at a Borough Council meeting on Dec. 20.

In addition to the primary payments, in its contract with the Borough, the University committed to contribute an additional $300,000 to a proposed project to expand the firehouse on Witherspoon Street, if and when that project is undertaken.

In the agreement as written, the University has committed only to the project as proposed at the Witherspoon location. If the new municipality decides to expand its firehouse at an alternative site, the University intends to make the same contribution to the costs of the expansion at the newly chosen site, Durkee said.