Town­ies Re­volt Against Prince­ton’s Free Ride $23

Ed­u­ca­tion ▶ Home­own­ers are su­ing to get the univer­sity to pay more lo­cal taxes ▶ “I don’t mind bit­ing the hand that feeds me”

Bloomberg Businessweek (North America) - - Politics/ Policy -

Free lec­tures, ad­mis­sion to ath­letic games, and even shut­tles to Trader Joe’s are some of the perks that neigh­bors of Prince­ton Univer­sity get from New Jersey’s only Ivy League school. Some res­i­dents, though, re­sent the wealth that un­der­writes the school’s gen­eros­ity. In re­cent weeks about two dozen Prince­ton home­own­ers have joined a law­suit filed five years ago by four res­i­dents chal­leng­ing the tax-ex­empt sta­tus of the school, which has the fourth­largest univer­sity en­dow­ment in the U.S., at $22.7 bil­lion.

If suc­cess­ful, the suit could gen­er­ate fresh rev­enue for the town and al­low it to slash home­own­ers’ an­nual prop­erty tax bills, which av­er­age $17,699. “They al­most op­er­ate like a hedge fund that con­ducts classes,” says plain­tiff Leighton Newlin. “They have some of the best real es­tate in all of Prince­ton. The fact is, those build­ings do not pay their fair share of taxes.” New Jersey churches, uni­ver­si­ties, char­i­ties, and other nonprofits are ex­empt from prop­erty taxes. Prince­ton Univer­sity pays taxes on nonaca­demic prop­erty, such as grad­u­ate-stu­dent res­i­dences. In pa­pers filed in New Jersey tax court, the plain­tiffs ar­gue that the school from 2005 to 2012 gained $524 mil­lion in li­cens­ing in­come, mostly from a patent that led to the cre­ation of Alimta, a cancer drug man­u­fac­tured by Eli Lilly. It also uses some build­ings for com­mer­cial pur­poses.

The school’s tax bill should be as much as $40 mil­lion a year, about 264 per­cent more than it pays, ac­cord­ing to at­tor­ney Bruce Afran, who rep­re­sents the plain­tiffs. That would be enough to cut home­own­ers’ tax bur­den by about one-third with­out any change to the bor­ough’s $62 mil­lion an­nual bud­get. “The so-called ben­e­fits the univer­sity gives are not real eco­nomic ben­e­fits that help the av­er­age per­son,” Afran says.

Bob Dur­kee, the univer­sity’s sec­re­tary and vice pres­i­dent, says the school is Prince­ton’s largest tax­payer, help­ing the town main­tain Mercer County’s low­est tax rate. “The univer­sity’s con­tri­bu­tions go well beyond fund­ing,” he says. The school pays about $8 mil­lion in prop­erty taxes each year. It kicks in an ad­di­tional $3 mil­lion vol­un­tar­ily for emer­gency ser­vices and pub­lic works.

Congress is ex­am­in­ing tax ex­emp­tions for U.S. uni­ver­si­ties. Law­mak­ers have asked schools with as­sets of more than $1 bil­lion to re­port how their en­dow­ments are man­aged and spent.

Ten­sions be­tween town and gown have erupted in New Haven. Con­necti­cut law­mak­ers have pro­posed leg­is­la­tion to tax Yale’s en­dow­ment. The school, with a $25.6 bil­lion kitty that’s se­cond only to Har­vard’s $37.6 bil­lion, says the bill is un­con­sti­tu­tional and would lead to $760,000 in taxes on its Woolsey Hall mu­sic au­di­to­rium alone.

In Prince­ton, even some with ties to the univer­sity say its free ride should end. “I don’t mind bit­ing the hand that feeds me,” says Janet Martin, 77, a re­tired Prince­ton pro­fes­sor and home­owner in the his­tor­i­cally black Wither­spoon-jack­son neigh­bor­hood, where gen­tri­fi­ca­tion has pushed ask­ing prices for mod­est homes to more than $400,000. “The univer­sity could def­i­nitely pay a larger share.” �Elise Young

bil­lion The bot­tom line Prince­ton Univer­sity pays $8 mil­lion in prop­erty taxes each year. Lo­cal res­i­dents want the wealthy school to pay more.

Edited by Al­li­son Hoff­man

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