Death, Taxes, and Ivory Towers

America’s biggest cities are at a crossroads brought on by decades of mismanagement, shifting demographics and the deep budget shocks delivered by the Covid-19 pandemic. For many, the revenue levers of old are no longer sufficient to cover the budget obligations of today. 

Few have been willing to address the role the nation’s wealthiest, most-selective colleges have played in ushering this moment forward. These elite institutions benefit from tax exemptions that come courtesy of their nonprofit status, a formal designation that equates to tens, in some cases hundreds, of millions in annual tax savings each year. Universities have poured those benefits back into real estate development, lucrative research contracts and some of the largest endowments in the world.

It is a sophisticated system of wealth-generation that the nation’s top schools have fine-tuned for centuries. They are the winners.

The losers in this equation are the poorest and most vulnerable residents in the cities many of those universities call home. Municipal finances are a mess, so much so that elected leaders are resorting to deep cuts to core services and safety nets supporting the homeless and mentally ill. Unfunded promises to retirees have only compounded those challenges. 

The increasingly desperate state of affairs is prompting community leaders and local politicians to reexamine their financial contracts with local nonprofit universities. The saga is playing out along the lines of landlords and feudal economies from another era.

To date, and despite an intensifying national conversation concerning equity in the United States, campus leaders have largely resisted change.

In no place is this dynamic more pronounced than in New Haven, Connecticut, where City Hall’s repeated stumbles and struggles to stay solvent have resulted in years of severe reductions to fire, police and emergency housing. Those cuts have corresponded with recent rises in murders, drug-related crimes and deadly household fires. All the while, the city’s largest resident, Yale University, has methodically expanded its already formidable balance sheet and tax-exempt land holdings while rebuffing calls to make a greater financial commitment to its hometown.