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PILOT PItchers Vow To Keep Up Pressure

by David Blumenthal | Mar 18, 2014 4:13 pm

(36) Comments | Commenting has been closed | E-mail the Author

Posted to: State

David Blumenthal Photo Next steps: Rally more state legislators to their side, and send the governor a message.

That was the plan of New Haveners who traveled to Hartford Monday to push for changes in the way that the state reimburses cities for tax-exempt properties owned by not-for-profit colleges and hospitals.

The New Haveners testified before the state legislature’s Finance, Revenue and Bonding Committee in favor of a bill by Sen. Martin Looney that would guarantee New Haven would receive at least 50 percent reimbursement under the Payment in Lieu of Taxes (PILOT) program. The law calls for the state to reimburse cities under PILOT for 77 percent of tax revenue lost to state exemptions. But in recent years legislators have slashed that reimbursement down to 32 percent of taxes lost on colleges and hospitals (and even less on state-owned property).

The bill received a mostly positive reaction from people testifying at the hearing, though Republicans raised questions about its affordability.

After the hearing, Anna Festa, who represents East Rock and Cedar Hill on New Haven’s Board of Alders, expressed optimism about the bill’s passage.

“I don’t think it will necessarily affect us this year, but it could maybe next year,” she said. The law would take effect in fiscal year 2016.

She and other members of the People’s Caucus, a dissenting group of alders pushing to avoid a tax increase in the next city budget, organized the trip to Hartford Monday for some of the speakers at the hearing.

“I do feel the fight isn’t over, and it may take more convincing from New Haven residents to get full PILOT [funding],” said Joy Monsanto of Morris Cove, who was among those who drove up to support Looney’s bill.

Monsanto said she was disappointed more New Haveners didn’t drive up to Monday’s hearing. She faulted in part the fact that the hearing had been scheduled on a Friday night for the following Monday morning.

“We do need more Board of Aldermen support, along with more constituent support,” she said. “All citizens of New Haven should support PILOT funding.”

People’s Caucus member Michael Stratton, an alder who represents Prospect Hill and Newhallville, reported that he found New Haven legislators like state Reps. Pat Dillon and Toni Walker “very supportive” of the bill during private meetings at the Capitol Monday. He described legislators from outside New Haven as “noncommittal.”

He said one challenge is to convince legislators to create more structural change by altering PILOT rather than passing year-to-year measures to help the city in the short term. He estimated that the city loses $50 million because of PILOT shortfalls.

“They’re used spending a lot of money trying to band-aid New Haven problems rather than getting to the root of them,” Stratton said of legislators. “PILOT really gets to the root of the problem.”

Stratton labeled a planned visit to New Haven Tuesday by Governor Dannel P. Malloy to announce new money to redesign New Haven’s Dixwell Community “Q” House as a perfect example of a “tinkering zone.” While the project’s goals are admirable, it is a classic example an “around the edges” philosophy behind “special projects,” Stratton argued.

Malloy’s reelection chances, according to Stratton, would be better served by the passage of the PILOT bill, since it would motivate more voters Malloy needs on Nov. 4 in order to serve another term. In the 2010 election New Haven delivered Malloy his largest vote total with a crucial 22,298 votes —and largest plurality, 18,613 votes. That was three times his statewide margin of victory.

“Gov. Malloy needs New Haven to be excited about his candidacy and the only way he can do that this year is to pass the PILOT bill,” Stratton said. “I worry that the governor is not focused on that which is actually going to energize the voters, and the Q House is not going to energize.”

Earlier versions of this article follow:

State Told: You’re Shorting Us $50M

Hartford—New Haven got its chance Monday to push the PILOT button—and showed up at the state Capitol to do so.

A half-dozen advocates from the city appeared at a legislative hearing to support a bill by state Sen. Martin Looney to boost PILOT, or payments in lieu of taxes.

Looney’s bill would set up new “tiers” of needy communities to guarantee that cities like New Haven receive at least 50 percent in PILOT reimbursements for not-for-profit-owned properties that it can’t tax. State law calls for 77 percent reimbursement, but in reality the legislature has reduced payments to 32 percent.

In testimony before the legislature’s Finance, Revenue and Bonding Committee, Looney pressed an “equity” argument. Cities like New Haven have disproportionately high amounts of property it can’t tax but no way to compensate for the money lost, he said.

Other New Haveners testifying including Harp Administration aide Rebecca Bombero, state Rep. Roland Lemar, and Prospect Hill/Newhallville Alder Michael Stratton of the Board of Alders’ dissenting “People’s Caucus.”

 

Stratton estimated that the city loses $50 million a year from this situation. He recommended that the PILOT program raise its funding level to “50 percent of the grand list,” as the Legislature had done before 2001.

“Living in a city will likely always mean having to deal with additional costs like caring for the needy and dealing with higher social problems,” he said. “But it should not be a double bind where taxpayers also pay for benefits to those outside the city.” (Read further down in this story for a longer statement prepared by the Caucus.)

Looney, a Democrat, estimated that his bill would cost the state $90 million over five years. State Sen. Scott Frantz—a Republican who represents Greenwich, Stamford and New Canaan— expressed concern about the bill’s impact on the state budget. Looney responded that his bill would represent only a partial reimbursement for lost revenue.

“Clearly, there are benefits to having non-profit entities there,” Looney said. “That is why it is a partial reimbursement.”

State Rep. Lemar mentioned his past experience as a New Haven alder, and how low PILOT reimbursements put extra pressure on local lawmakers in trying to balance the budget.

“I remember being on the Board of Aldermen for four years and going through the budget cycle, and every year having to rely upon some late-breaking information about how much aid we’re going to get from the state to balance our budget on the local level,” he said. “I do appreciate [efforts to pass the PILOT program] … It gives our local stakeholders a better opportunity to make responsible budget choices.”

No one testified explicitly in opposition to the bill. Mary Ann Hebert of Bannon & Hebert Real Estate, which owns properties all over Connecticut, said that it was more important that the state not choose to tax individual landlords, regardless of what path it takes in funding the PILOT program. 

An earlier version of this story follows:

“What We Learned In Kindergarten”

As they prepared to join other New Haveners in Hartford Monday to push for greater state aid to cities, members of the “People’s Caucus” drew on their earliest lessons in school.

The seven-member caucus—dissident members of the Board of Alders—prepared a statement to submit to the legislature’s Finance, Revenue and Bonding Committee. The committee is hearing a proposal by New Haven state Sen. Martin Looney that would send New Haven more money than it currently gets each year in Payments in Lieu of Taxes (PILOT). Those are reimbursements for the tens of millions of dollars in property-tax revenues the city forgoes each year because of land owned by not-for-profit universities and hospitals.

Looney’s is one of two game-changing PILOT bills before the legislature this session. Click here to read an overview of the two by the New Haven Register’s Mary O’Leary.

Many people concerned about New Haven’s high taxes have for years clamored for a chance to increase the amount of PILOT money the state sends the city, or else have the state start taxing hospitals and/or universities. The state has gradually dropped the amount of lost revenue for which it exempts cities to about 32 percent, down from a high of 77 percent as envisioned under law. Meanwhile, New Haven is embroiled in debate over a proposed 3.8 percent tax increase for the coming year, weighing the need to take care of basic city services against the need not to tax homeowners out of the market.

That general argument animates the statement written by the People’s Caucus, which planned to join a crowd of people lining up to testify before the committee Monday. The Caucus called Looney’s bill—which would establish “tiers"of needy cities in order to guarantee New Haven at least 50 percent reimbursement a year—a “good start.” But not enough.

“We learned in kindergarten that paying your fair share is a basic value,” the Caucus argues. “This bill has some flaws but is a recognition of that basic principle. ...

“New Haven taxpayers now subsidize the region to the tune of $50 million per year. The home values have fallen, the services have decreased, the pension debt has risen and our taxes rise every year. A vicious cycle that slowly kills our best city. And makes city taxpayers the subsidizers of their regional neighbors benefits. his is classic free-riding. The city pays the tab, and everyone else enjoys the ride.

Following is the full statement:

People’s Caucus Statement

Dear Legislators,

We are a caucus of alders who come from all walks of life, cultures, races and socioeconomic backgrounds. We share two things in common. First, we are all native New Haveners, and have a deep love for our roots here. Second, we each believe that good public policy is driven by doing what’s right not what’s politically expedient, and that special interests should never win out over what’s best for all.

We learned in kindergarten that paying your fair share is a basic value. This bill has some flaws but is a recognition of that basic principle.

PILOT was a law that was supposed to ensure that city taxpayers were reimbursed for benefits state law required them to provide for non- residents.

As you know, State law limits towns to raising revenue through a property tax. So We cannot tax the 40,000 suburbanites who work in New Haven, and we cannot tax commuters or put up tolls. We must focus on taxing property within out boundaries.

And then to really complicate matters state law also prohibits towns from taxing non profit property. And New Haven is central headquarters for many of the states colleges, hospitals, and nonprofits who service most of the regions special needs population.

So in New Haven we are in double bind. Our population is made of many desperately needy people who require many city services, and the only way we can pay for them is to overtax the the 50 percent of property the state lets us tax.

So New Haven is absorbing the region’s needy, and then on top of that subsidizing the region in the form of not taxing nonprofits who mostly benefit the region as well.

Imagine the state with no Yale University, no Albertus, no Yale-New Haven Hospital, no Smilow, no Gateway. The state recognized when it originally passed pilot that 77 percent of the benefits of city-based nonprofits went to non-residents.

At 77 percent we pay over $90 million in benefits to the suburbs that without full PILOT are not reimbursed.

When PILOT was fully funded in the ‘90s and until 2001, New Haven became prosperous. It grew because it had the funding to be autonomous, keep taxes reasonable, and predictably budget.

Then the state started to cut PILOT. Over time it fell to just 32 cents on the dollar. The result: New Haven taxpayers now subsidize the region to the tune of $50 million per year. The home values have fallen, the services have decreased, the pension debt has risen and our taxes rise every year. A vicious cycle that slowly kills our best city. And makes city taxpayers the subsidizers of their regional neighbors benefits.

This is classic free-riding. The city pays the tab, and everyone else enjoys the ride. The unfairness of this cannot be denied. New Haven already deals with a very difficult population of myriad needs. Returning felons, the homeless, the disabled, the generational poor, the special needs children, and so much more. Because New Haven absorbs all these folks, other towns have 2-3 acre zoning, homogenous populations,few social issues, lower taxes, rising prop values. The virtuous cycles enjoyed in the suburbs is attributable to and paid for by the vicious cycle experienced in the city.

When the state adds to this burden by not paying for pilot, it creates an oppressively unfair environment. New Haven is willing to care for this state’s neediest but it goes to far when it plays reverse Robin Hood and makes us also pay for its nonprofit exemption. This is disrespectful and bad for future sustainability

Pay New Haven its full PILOT and we will continue to do the heavy lifting of caring for this states neediest. But make us subsidize the region on top of this work and you have all gone too far. The state owes us $400 million in unsatisfied PILOT over past 10 years. We will even forgive this if we pass a law that guarantees full PILOT.

The bill before you is a decent start but as drafted it leaves New Haven taxpayers still paying for non-resident benefits. The top tier should be at least 70 percent.  If you amended the bill to allow for a top tier of towns who have more than 100,000 people and who have less than 60 percent taxable property, there would be 3-4 cities that would qualify for 70 percent PILOT reimbursement.

The benefit to the state is that you have now taken care if the imbalance. The city needs no more. No special programs. No handouts. The welfare is over. You gave given us our freedom back. That’s all we need. Respect. Autonomy. Dignity. Full PILOT.

We think everyone should be able to choose where they wish to live. We ask only that a choice to live outside New Haven is not subsidized by those who choose to live in New Haven.

Thank you for your hard work and dedication to the best values of public service.

The People’s Caucus
New Haven Alders
Claudette Robinson Thorpe
Brenda Foskey Cyrus
Carlton Staggers
Anna Saracco Festa
Richard Spears
Michael Stratton

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posted by: New Haven Taxpayer on March 17, 2014  8:53am

Bravo!
Glad to see some Alders at least trying.
Keep up the good work People’s Caucus.

posted by: wendy1 on March 17, 2014  9:03am

Good luck with this ass-kissing statement.  Having been to the sharkpool known as the statehouse, they will probably be cut off mid-sentence as the little people are only allowed 2 min.

Yale Corp. (U. and hosp.) should be paying at least a third of that yearly 500 million dollars.

posted by: Dwightstreeter on March 17, 2014  10:34am

Why is this group not backing Brenden Sharkey’s move for a reverse PILOT where the wealthy “non-profits” (which only means no shareholders, but have zillions to pay their CEOs) are taxed and petition the State for reimbursement.
Now there’s a plan that can work!
The Board of Alders needs to update the 1985 Tax Commission Report and stop facilitating the decline in the tax base in New Haven.
No more excuses!

posted by: HewNaven on March 17, 2014  10:46am

Great job, People’s Caucus! This is how you affect a city budget, not by whining about your millrate. That’s not going to change anything. PILOT reform will.

posted by: Scot on March 17, 2014  11:24am

I understand that the People’s Caucus formed out of differences with others on the BOA.  However, does ANYONE on the BOA disagree with increased PILOT funding?  Why isn’t this signed by every alder?  New Haven politicians should be united on this.

@DwightStreeter, what makes you think this group would not back Sharkey’s proposal? While Sharkey’s proposal works a little differently, the underlying complaint is the same. This statement acts in support of Sharkey, not in opposition to it. 

Sharkey’s proposal:
http://www.ctnewsjunkie.com/archives/entry/sharkey_shakes_up_property_tax_system_with_pilot_proposal/

posted by: Esbey on March 17, 2014  11:30am

Dwightsteeter—members of the PC are providing support for both PILOT proposals.  The Looney bill is the one being discussed in Hartford today.  Personally, I think it has a higher chance of passage. 

Don’t forget that Yale’s tax exemption is in the state constitution and can’t be changed by single majority vote of the legislature—it would have to go through the full amendment process. 

By the way, why isn’t our mayor in Hartford supporting some form of PILOT reform?

posted by: Threefifths on March 17, 2014  12:43pm

A true People’s Caucus would have there own party.They are still part of the Democratic party.They would be more powerful under Proportional Representation.

posted by: connecticutcontrarian on March 17, 2014  12:57pm

Tax exemptions for institutions of higher learning must be addressed at the state AND federal level. Given that institutions of higher learning are so dependent on federal support, those in New Haven and Hamden who want to tax these institutions would do well to also lobby their Congressional delegations.

posted by: robn on March 17, 2014  2:41pm

The reporting on this subject has been continuously incorrect. As NOTEWORTHY recently pointed out, the law (paraphrased) says that the Legislature must reimburse towns and cities for 77 percent of tax exemptions UNLESS the legislature just decides not to. So simply put, the law is written so that the Ledge making PILOT payments is elective rather than compulsory. What SHOULD be done is to remove the elective language from the law. No more begging; the Ledge needs to do what’s right or face a historic lawsuit addressing the subject of tax exemption that will rock the nation.

posted by: TheMadcap on March 17, 2014  2:48pm

It’s not just a matter of the city being burdened with so much nontaxable property and aside from the fact New Haven(and cities everywhere) host a hugely disproportionate share of the state’s poor population, where do you think all the criminals from surrounding areas currently released to halfway houses go? As well as the homeless from all of the county who seek services and shelter in NH.

@Dwightstreeter
Because one of these things is much easier than the other. One requires just a slightly higher state budget, the other involves a mass overhaul local and state budgets as well as the tax code.

posted by: Dwightstreeter on March 17, 2014  3:33pm

Esbey:
Please read the history of Yale’s limited exemption on its own web site. The provision allows for taxation over a level, but has been conveniently ignored and misrepresented by the Yale multi-national corporation while it decries the need for “emotional intelligence”.
It is the web of Yale connections that makes politicians loathe to take on the behemoth.
As Wendy1 says, “Tax Yale or tax you!”
The law can be and should be changed and updated.
You will NEVER get full PILOT funding.

posted by: Esbey on March 17, 2014  4:12pm

@Dwightstreeter: I have read the exemption.  It appears to say that Yale’s commercial property that brings in more than $6,000 in revenue can be taxed.  And, indeed, all of Yale’s commercial property is on the tax rolls and as a result Yale is one of the city’s largest taxpayers.  The constitution protects the amended charter that prevents additional taxation of non-revenue producing (educational)  property.  Sen. Looney made this clear at the hearing today.

There is a much better chance of increasing the PILOT payment to 40 or 50% than there is to winning a state-wide referendum on amending the state constitution.  I agree that New Haven is not going to see a 77% PILOT reimbursement, ever.

posted by: alex on March 17, 2014  4:54pm

I sincerely doubt the Connecticut Constitution would need to be amended to tax Yale Corporation.

Article Eighth, Section 3 of the Connecticut Constitution states only:

“SEC. 3. The charter of Yale College, as modified by agreement with the corporation thereof, in pursuance of an act of the general assembly, passed in May, 1792, is hereby confirmed.”

At the time that constitutional provision was ratified, 1818, the Governor of the State of Connecticut was considered a Trustee of Yale College:

http://www.yale.edu/about/University-Charter.pdf (see pages 14-16)

This document also shows that the legislature passed a tax exemption bill affecting Yale in 1834 (page 16). That law also contains the language regarding property that generates more than $6,000. If the constitution required a tax exemption, that 1834 law would be mere surplusage; what’s more, nothing in the text of the constitutional provision refers to property taxes.

Yale will certainly get lawyers to argue that the state constitution protects their tax exemption, if the time ever comes that it gets removed, but that doesn’t mean that it’s correct or based in law.

posted by: Esbey on March 17, 2014  5:10pm

After doing a little research: to top it off, the 1819 Supreme Court decision “Dartmouth v. Woodward” holds that colonial charters granted to colleges are binding contracts. The US Constitution forbids any legislature from voting to invalidate a contract.  Therefore, the colonial charter that grants Yale a perpetual tax exemption cannot be revoked without violating the US Constitution.

posted by: Esbey on March 17, 2014  6:37pm

@ Alex, the Governor and the Lt. Governor of the state were then and are now “ex officio” members of the Yale Corporation. 

The 1965 State Constitution explicitly reaffirms the 1792 charter with revisions as accepted by the Yale Corporation.  It doesn’t have to repeat the terms of the Charter as amended because those are independent parts of state law.  The 1834 amendments are not “surplus,” they are part of the text that is protected by the 1965 constitution. 

The 1792 charter exempted real estate (including faculty real estate) up to “500 pounds sterling per year” however that would be interpreted today.  The 1834 change (which allowed taxation of faculty property and set the limit at “$6,000 per year”) was accepted by the Yale Corporation and so it still stands and is protected by the state constitution. 

The city has previously tried to sue and claim that educational or collegiate sport-related revenue counts towards the $6,000, but Yale has always won in court.

posted by: Dwightstreeter on March 17, 2014  7:11pm

Esbey:
All of Yale’s property is NOT on the tax rolls. The golf course was claimed as “educational” for a long time before it was challenged.
When has there ever been an inventory of Yale’s properties and appraisals?
A century’s old scheme to give fledgling institutions a break for the benefit of society now looks like a totally unfair scheme to protect the $22 billion dollar endowment at the expense of the less privileged and less well connected others - the residents and business owners in New Haven.
FYI, New Haven is not the only town with too many “non-profits” escaping taxation.
Maybe we can organize a “coalition of the willing” and end this scam.

posted by: FacChec on March 17, 2014  7:50pm

@ alex

The linked report of the charter is a document reproduced by Yale as follows:

THE YALE CORPORATION
PRINTED FOR
THE PRESIDENT AND FELLOWS
NEW HAVEN
PUBLISHED BY THE UNIVERSITY
1976

This document is not signed or sealed by anyone, particularly not by the State of CT. There are several references made to a number of special acts throughout the years including Trinity college, weslesylan University and Yale college.

On the last page the article affirms that the name of Yale University as been added to the charter in year 1882:

An Act concerning Taxation of the Property of Colleges.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
SECTION 1. The funds and estate which have been or may be granted, provided by this
state, or given by any person or persons to the president and fellows of Yale College, and by
them invested and held for the use of that institution, shall, with the income thereof, remain
exempt from taxation; provided, however, that the said corporation shall never hold in this state
real estate free from taxation, affording an income of more than six thousand dollars.
SEC. 2. Trinity College and Wesleyan University shall have the same exemption,
subject to the same restriction, as is provided in the preceding section for the president and
fellows of Yale College.
SEC. 3. All acts and parts of acts inconsistent herewith are hereby repealed, and
particularly so much of section one hundred and thirty-eight of chapter seventy-seven of the
public acts of 1872 as pertains to the taxation of the estate, funds, or property of said corporation
of Yale College.

COMMENT:
Public acts are not constitutional provisions, they are amendments subject to revision.

posted by: alex on March 17, 2014  10:19pm

Esbey,

Has Yale ever won in court against the state?

FacChec,

The document you quote says “Be it enacted by the Senate and House of Representatives in General Assembly convened:” if true, couldn’t the General Assembly repeal it?

I’m not yet convinced this is a constitutional problem…

posted by: Threefifths on March 17, 2014  10:38pm

For get Yale.Look at who controls Yale.How do you stop them.

Skull And Bones
Secret Yale Society Includes America’s Power Elite.

http://www.cbsnews.com/news/skull-and-bones/

posted by: Dwightstreeter on March 18, 2014  8:05am

According to economist Rick Wolff, Chair of the 1985 Tax Commission Report in New Haven, “No one should forget that PILOT lets Yale escape taxation while pressing the rest of Connecticut’s tax payers (already suffering an excessively regressive tax system) to pay more. This is looney and Looney knows it (I discussed this with him years ago and explained it at length). Other Connecticut residents would pay more in taxes to New Haven to enable Yale to escape paying what it should…how would that sit with them. No wonder other legislators always turn this down. Pilot was Yale’s idea and ought not to be carried by New Haven”.
So PILOT shifts what should be the responsibility of the wealthy non-profits onto the shoulders of the middle class, an endangered species.

posted by: Dwightstreeter on March 18, 2014  8:17am

It is acts of the CT legislature that Yale hides behind to avoid all sorts of taxation, not the State Constitution. Acts of the legislature can be amended or repealed by the legislature in the usual ways.

Second, a huge part of Yale’s so-called educational property is in fact revenue producing. Yale professors routinely use their offices for consulting, book writing, and other revenue producing activities on which they pay income taxes. Their offices, their computers, etc are thus revenue-producing properties and ought to be taxed as such. The Yale handbook for professors explicitly entitles them to specific amounts of time to be spent on private revenue producing activities and does not prevent them from using Yale property to do so. The Yale golf course is a revenue producing entity. The Yale computer center used to earn revenue and so on.

An honest city administration would long ago have begun a public campaign to collect taxes on revenue-producing property whether or not it was also used for education.

posted by: FacChec on March 18, 2014  11:24am

Looney’s bill would set up new “tiers” of needy communities to guarantee that cities like New Haven receive at least 50 percent in PILOT reimbursements for not-for-profit-owned properties.

This bill is actually a reduction in pilot payment due cities under the current public act. Currently the state mandates reimbursement at 77% of non-taxable property, provided the legislature allocates the money to the budget. The legislature has only been allocating pilot at 32% colleges and 23% hospitals. It stands to reason that it would only take a modified version(remove legislative allocation)  of the current bill to insure 77% pilot. Instead Looney devises a wrap-around plan which proposes a tier system, that continues to under fund cities like New Haven.

Festa is correct, this bill will have no impact on New Haven this fiscal year, therefore, the mission of these alders and the recalcitrant others, should be to reduce the 13.7M highly questionable increase in spending.

posted by: Carl Goldfield on March 18, 2014  11:46am

Someone more technically and social media adept than I should start an on-line petition/pledge for voters to commit not to support Malloy in upcoming election unless Marty’s bill get passed. You don’t have to vote for Foley or any other Republican-just pledge to stay home.  It is what I plan to do. Given Malloy’s margin in the last election a few thousand signatures might work wonders.

posted by: Esbey on March 18, 2014  12:07pm

We are going in circles, so this is my last comment on this thread.

—Looney clearly states that there is a constitutional issue with Yale.  So do many newspaper articles that you can google.  I am not making this up.

—The inclusion of the Yale Charter in the state constitution is clear, read the Education Article of the current 1965 constitution.

—You are looking at the documents posted by Yale, which do say that changes were voted by the legislature.  They also indicate that the changes were accepted by the Yale Corporation.  Both parties to a contract have to accept changes before they are valid. The legislature cannot unilaterally overturn a contract.

—To see that the charter is likely a valid contract that the legislature cannot overturn, even if it wasn’t in the state constitution, see the Wikipedia article on Dartmouth v. Woodward (1819).

—Dwightsteeter is certainly correct that logically speaking one can dispute which of Yale’s properties should be counted as producing “revenue”.  Newspaper articles from the 1990s (when this was a big issue) say that New Haven tried over the years to tax various Yale properties that Yale considered to be “educational” (sports facilities, etc.) and always lost in court.  (The property that Yale classifies as “commercial” is already on the tax rolls.)  The city eventually gave up and Yale agreed to make large-ish “voluntary” payments.

—Clearly, the legislature can set the PILOT to whatever level it wants, including the supposed “statutory” 77%.  That’s why I think pushing for a somewhat higher PILOT is more likely to work.

posted by: robn on March 18, 2014  12:41pm

Carl,

I’m staying home unless the Ledge removes the “maybe” language and fulfills the promised 77%. Looney’s bill is capitulation.

posted by: FacChec on March 18, 2014  2:01pm

I do see how the yale charter of 1792 which in part reads as thus:

Be it enacted by the Senate and House of Representatives, in General Assembly
convened, that the Governor, Lieutenant Governor, and six senior senators, for the time being,
shall ever hereafter, by virtue of their said offices, be trustees or fellows of said college; and
shall, together with the President and Fellows of said college, and their successors, constitute one
corporation, by the name and style mentioned in the charter of said college, with all the powers
and privileges, thereunto pertaining, by virtue of their charter, as modified by said act of the legislature.

Relates to property exemptions for Yale in the CT. State Constitution, which reads in part:

ARTICLE EIGHTH.
OF EDUCATION.

SEC. 3. The charter of Yale College, as modified by agreement with the corporation thereof, in pursuance of an act of the general assembly, passed in May, 1792, is hereby confirmed.

See State constitution Art 8 Here:

http://www.cga.ct.gov/asp/Content/constitutions/CTConstitution.htm

posted by: robn on March 18, 2014  2:21pm

What does it mean legally for the Legislature to “confirm” the charter of a university, other than to merely recognize its existence as a corporation?

posted by: Dwightstreeter on March 18, 2014  2:31pm

Rather than summarize the arguments made by Prof. Wolff, I am posting his comments on this dialogue - which shows the need for reliable information - below:


1. That Looney and others unwilling to challenge Yale repeat its arguments as to why they must remain tax exempt is neither news nor relevant to any informed debate on the matter. All sorts of erudite arguments to the effect that Yale is indeed very vulnerable to being taxed under existing law (let alone different laws) have been published over the years by the law professors at UConn and others. Looney’s failure to offer any refutation of them suggests he does not know of their existence or else joins with those who pretend they do not exist. Many of the relevant arguments and their sources were expressly cited during the hearings and in the final report of the 1985 New Haven Revenue Commission - the last time serious public attention was paid to taxing Yale.

2. As with all law, the issue is how readers variously interpret the law. The Connecticut Constitution is not exempt from interpretation as countless debates over it have occurred over the intervening years. The bald attempt to act as if one interpretation (the one favored by the writer) is a settled matter above or beyond interpretation is a crude attempt to foreclose or forestall the debate over the Constitution’s relevance to taxing Yale that is long overdue for proper public debate.

3. The same applies to whether or when an acceptance by the object of a law functions as a contract. Otherwise many laws that all sorts of individuals and institutions “acceted” would somehow be immune to amendment or repeal…a strange construction indeed. And we are asked to look at Wikipedi to see if something is a “likely contract” (which is quite a step down from a “contract” without qualifying adjective)?

4. The fact that the city gave up is the problem, not evidence of anything other than the city’s temerity and weakness. New Haven tried to tax the Yale Press a

posted by: Esbey on March 18, 2014  3:52pm

This is foolish, but I am breaking my promise to let this go.  From the Connecticut Supreme Court re: Yale v. City of New Haven, 1975, saying that the Yale Press building cannot be taxed:

“The taxability of property owned by Yale University is governed by the charter of Yale as confirmed 466*466 in the constitution of Connecticut, article eighth, § 3, and by § 12-81 (8) of the General Statutes, which we have printed in footnote 1, supra. This court has had occasion to construe the language of § 12-81 (8) as well as the pertinent section of the Yale charter. Yale University v. New Haven, 71 Conn. 316, 42 A. 87. That section of the charter provides as follows: “[F]unds which have been, or may hereafter be, granted, provided by the State of Connecticut, or given by any person or persons, to the corporation of `The President and Fellows of Yale College in New Haven,’ and by them invested and held for the use of that Institution, shall, with the income thereof, be and remain exempt from taxation. Provided, however, that the said corporation shall never hold in this State, real estate free from taxation affording an annual income of more than six thousand dollars.” Public Acts 1834, c. 25. In the case of Yale University v. New Haven, supra, 335, Justice Hamersley, speaking for a unanimous court, wrote that “[t]he charter [and the statute], in the broadest terms, exempts all the property of the College from taxation…. “

The court finds that the Yale Press building is not “productive” real estate because it fulfills an educational mission and furthermore that after allocating all relevant costs the Press loses money and so does not generate more than $6,000 in net income.  This argument applies to all of Yale’s non-commercial buildings.

Go to google scholar and search the legal citations for the CT supreme court Yale v. New Haven

posted by: FacChec on March 18, 2014  4:27pm

@Dwight: Any statute can be amended, the language in the statute is not in the Ct state constitution.

Your reference to Ct. Sec 12-81 follows:

(8) College property. The funds and estate which have been or may be granted, provided by the state, or given by any person or persons to the Trustees of the Berkeley Divinity School, the board of trustees of Connecticut College for Women, the Hartford Seminary Foundation, Sheffield Scientific School, Trinity College, Wesleyan University or The President and Fellows of Yale College in New Haven, and by them respectively invested and held for the use of such institutions, with the income thereof; provided none of said corporations shall hold in this state real estate free from taxation affording an annual income of more than six thousand dollars.

So beyond the colleges mentioned in 12-81, do all other private colleges such as Albertus Magnus, required to pay taxes on educational property?
From the NHR, 3/13/14.

Connecticut House Speaker Sharkey wants to tax colleges and hospitals
State’s system is broken, he says,

The speaker’s bill would provide a mechanism where the colleges and hospitals, provided they can convince a town, could pay less than the full tax and seek reimbursement for a portion of it from the state over what the traditional PILOT would have paid.
The proposal would be phased in incrementally, with 20 percent of the tax due in fiscal 2015; they would be liable for the full tax bill in fiscal 2019.
The speaker said other states with county government can spread the burden of tax exempt institutions among towns, but here it falls on the host community, usually an urban center. Almost half of New Haven’s grand list is non-taxable.

posted by: robn on March 18, 2014  4:53pm

The 1834 text shows the Legislature’s clear intention to grant Yale tax exemption on both investment income and minimal-profit bearing property. Simplified it reads, “..funds granted by the State of Connecticut or given by any person to Yale and invested for the institution shall, with interest, remain exempt from taxation provided that (Yale) shall never hold real estate (with an annual income of more than $6000) free from taxation.”

Thought experiment…there is a big logical chink in that armor.

All Yale property serves its students. All Yale students pay tuition. The 1834 language tax-exempts investment interest and also funds “given”, but not funds paid. Therefore, paid tuition is Yale’s income (irrespective of profit which isn’t mentioned in the language). Therefore all Yale property exceeds the $6000 income limit and is taxable.

Its a simple chain of logic and the only way out of this I could possibly see would be for Yale to discontinue charging tuition. But I don’t think that would happen because…Yale has approximately 5,400 undergrads paying room+board+tuition of approximately $59,000 (almost $318M). This is far more than the missing $50M in PILOT funds so it wouldn’t make much sense to stop charging tuition (although Yale probably could pay the annual $2.82B operating costs out of endowment returns if they could squeeze out a return of 15% annually.)

All that being said, the Ledge giveth and the Ledge taketh away. The State Constitution is a living document; that’s why it’s always had amendments.

posted by: Esbey on March 18, 2014  6:30pm

@FacCheck—I think you make an intelligent argument about the 1834 language and it is similar to @Dwightsteet’s.  Unfortunately, the Connecticut Supreme Court has ruled otherwise at least 3 times, most recently in 2009.  in “St. Joseph’s Living Center v Windham” they reject that kind of argument, saying:

“This court never has held that accepting payment or charging a fee, without more, alters the character of a charitable or otherwise tax-exempt organization. In Yale University v. New Haven, 71 Conn. 316, 42 A. 87 (1899), we declared what common sense requires: “A church is none the less a church, because the worshippers contribute to the support of services by way of pew rent. A hospital is none the less a hospital, because the beneficiaries contribute something towards its maintenance. And a college is none the less a college, because its beneficiaries share the cost of maintenance….” Id., at 328, 42 A. 87. Likewise, a charitable, nonprofit nursing home is no less charitable simply because some patients pay for all or part of the cost of their care.”

In “Yale University v. City of New Haven” (1975) the CT Supremes say that the $6,000 limit applies to net revenue after cost.  Since tuition doesn’t cover Yale’s full cost of education, the $6,000 limit is not violated. 

@Dwightstreet, as I have learned, I am not talking about my opinion or Senator Looney’s opinion, but 100 years of CT Supreme Court decisions (from 1899 to 2009).  The city didn’t lack the temerity to sue (indeed they sued several times), they just lost each time in the CT Supreme Court. 

And, are we really going to make fun of Wikipedia while writing in the comments section of the NHI?  If Prof Whoever doesn’t like Wikipedia, then the full US Supreme Court decision in Dartmouth v. Woodward is at scholar.google and it does actually say that a state legislature cannot unilaterally change Dartmouth’s state charter, even if the charter has no special place in the NH state constitution:

posted by: FacChec on March 18, 2014  7:58pm

@Esbey

The obvious conclusion to rectify this 1792-1834 Charter and its reference to sec. 12-81(8) of the state statue is to amend Sec. 12-81. This is entirely within the purview of the general assembly. The CT State Constitution nor the charter, do not reference 12-81(8); it only speaks to the fact that the general assembly members in 1792 were “Bought IN” as charter members.

The problem of course will be what house or senate member would have the courage to take on Yale and offer the necessary amendment to 12-81(7&8).

posted by: SteveOnAnderson on March 21, 2014  10:29am

This is one of the best comment threads I’ve read on the NHI, and I applaud the commenters above for all of the points you bring to the discussion. I believe this is an extremely pressing issue of our time, not just here in New Haven, but all over the country as university endowments provide tax havens for financial speculation and biotech R&D. PILOT can never be a real solution at any percentage because it is ultimately still public money being shuffled around to make up for the tax responsibilities being abdicated by wealthy institutions.

robn says it well: “The State Constitution is a living document; that’s why it’s always had amendments.” With all due respect for Esbey’s points about the trial record, I am in strong agreement with the points made by Dwightstreeter. If Yale is going to act like a corporation, then it must be held to the same public accountability of a corporation.

Yale Corp is extremely dynamic in changing strategies and transforming the university; they do not hold to the model of the university as it existed in 1834. It is obvious that the rules are in serious need of an overhaul. Again, this is true not only of New Haven, but cities all over the country:

The Rich University: The Mother of All Tax Breaks
http://www.thefiscaltimes.com/Articles/2011/10/07/The-Rich-University-The-Mother-of-all-Tax-Breaks

posted by: SteveOnAnderson on March 21, 2014  11:22am

We should also recognize that the Governor and Lieutenant Governor of Connecticut are members of the Yale Corporation. This *could* be a potential point of leverage for public insight into and voice within Yale’s governance. I know that’s awfully optimistic, but it does make you think about what might be possible with the right governor.

posted by: Dwightstreeter on March 21, 2014  11:41am

Remember, CT was a theocracy for a long time, hence the interconnection of institutions.

As the wise man said to the Emperor who demanded to have a statement that would be true for all times, ” This too shall change.”

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