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New Haven to Ask Yale for Greater Contribution in Lieu of Taxes

Posted on May 22, 2020

New Haven, Connecticut, is planning to ask Yale University to contribute an additional $2.5 million to help the city reduce a fiscal 2021 budget gap.

The request was included in a budget amendment adopted by New Haven Board of Alders’ finance committee during its May 13 meeting. The $2.5 million would be in addition to the university’s $13 million voluntary contribution in lieu of taxes.

In testimony submitted ahead of the meeting, New Haven residents bemoaned the university’s state property tax exemption. One resident said the exemption has saved the university more than $100 million annually, “leaving the taxpayers of New Haven to make up the difference.”

The fiscal 2021 budget proposed by Mayor Justin Elicker (D) would eliminate 80 vacant positions, eliminate programs, and increase taxes by 3.56 percent to address a $50 million budget gap. The Board of Alders’ budget proposes a 1.81 percent tax increase, and final debate and a vote on the budget will be held May 26, according to Gage Frank, the mayor’s spokesman.

Elicker, who is a Yale alumnus, told Tax Notes May 20 that although his budget proposal didn’t include the increased contribution from Yale, he supports the request. “Yale does a lot for New Haven, but compared to its capacity, it does a fraction of that.” If the university were fully taxed on its tax-exempt properties, it would owe $145 million, Elicker added.

The university had a $30.3 billion endowment as of last year. 

Connecticut law exempts real estate owned by certain colleges and universities from property tax unless it generates annual income over $6,000. The state supreme court has ruled that the income threshold applies only to real estate that generates income without serving any educational purpose. A bill introduced in 2016 (S.B. 414) sought to change that by requiring private colleges with real estate valued at over $2 billion to pay property taxes, but eventually it was tabled.

Elicker said the university pays city taxes on the commercial property it owns; however, the university’s noncommercial property in New Haven is tax-exempt. Approximately 55 percent of property in New Haven is tax-exempt, and most of that property is part of the university. State intervention would be required to increase taxes on the noncommercial properties, Elicker said. 

“There is an incredible amount of inequality in the United States, and Connecticut has one of the most significant differences between haves and have-nots,” Elicker said. “Now more than ever this inequality has been exacerbated by the COVID-19 pandemic. It is vital that those that have the capacity to do more should. Yale has an incredible capacity to help those residents in the city that it calls home.”

Yale University did not respond to a request for comment by press time.

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