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”

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 Bloomberg.com