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What NU pays: A comparison with peer institutions

Reporter: Evanstonroundtable

 What NU pays: A comparison with peer institutions

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Editor’s note: This is part three of a three-part RoundTable special report. Parts one and two ran earlier this week. We’re publishing this coverage ahead of next week’s Land Use Commission hearing on the Ryan Field redevelopment project, which is scheduled for Sept. 6. The current debate around whether to approve Northwestern’s requests to demolish and rebuild its football stadium and hold concerts and other events at the new facility has prompted renewed calls for the university to make a formal commitment that would ensure larger annual payments to the city and its school districts. Some community activists and groups have promoted the idea of Northwestern providing a payment in lieu of taxes (PILOT) to the city (see part one of this three-part report for more about the history of the Evanston-NU relationship and how PILOTs work; and part two for the details of what Northwestern currently pays). So, how do Northwestern’s contributions to Evanston stack up against town-gown arrangements at similarly sized and similarly wealthy schools, in municipalities that roughly correspond to Evanston in terms of population and demographics? Overall, finding what real estate appraisers would call “comps” to investigate these questions proved challenging, across variables like undergraduate student population and endowment size, to provide a rough measure of campus resources, along with city size and overall economic need.

A couple of the schools and municipalities that came closest, Duke University in Durham, North Carolina, and the University of Notre Dame, adjacent to South Bend, Indiana, declined to respond to the RoundTable’s questions. (See chart below for details.) School and city # of under grads* Endow-ment ** PILOT amount City pop.

*** Median HH income (’17-’21) % in poverty City racial makeup***** City area Cam-pus area Northwestern Evanston 8,494 $14.1 billion — 77,517 $87,345 11.90% 57% white 16% Black 11% Hispanic 10% Asian 5% mixed 7.8 sq mi 0.36 sq mi Duke Durham, NC 6,883 $12.1 billion N/A 285,527 $66,623 13.50% 39% white 36% Black 15% Hispanic 6% Asian 4% mixed 116.2 sq mi 13.6 sq mi Notre Dame **** South Bend, IN 8,973 $16.7 billion N/A 103,353 $46,002 20.90% 50% white 25% Black 17% Hispanic 2% Asian 5% mixed 42.4 sq mi 1.3 sq mi MIT Cambridge, MA 4,638 $24.7 billion $2.3M/yr 117,090 $112,565 12.30% 58% white 11% Black 9% Hispanic 18% Asian 7% mixed 7.1 sq mi 0.26 sq mi Brown Providence, RI 7,349 $6.1 billion $3.4M/yr 189,692 $55,787 21.50% 34% white 16% Black 43% Hispanic 6% Asian 20.6 sq mi 0.23 sq mi Cornell, Ithaca, NY 15,735 $9.8 billion N/A 31,710 $40,973 34.50% 74% white, 7% Black 5% Hispanic 14% Asian 3% mixed 6.1 sq mi 1.16 sq mi Emory Atlanta 7,130 $10 billion N/A 496,461 $69,164 18.50% 41% white 51% Black 6% Hispanic 4% Asian 2% mixed 136.3 sq mi 0.99 sq mi Washington University St.

Louis 8,034 $12.3 billion N/A 293,310 $48,751 19.60% 43% white 43% Black 5% Hispanic 4% Asian 66.2 sq mi 0.54 sq mi Yale New Haven, Connecticut 6,590 $41.3 billion $23M/yr 138,915 $48,973 24.60% 29% white 31% Black 30% Hispanic 5% Asian 4% mixed 20.1 sq mi 0.58 sq mi * Figures as of fall 2021 from U.S.

News & World Report ** Figures as of June 30, 2022, as jointly reported by the National Association of College and University Business Officers and TIAA *** All municipality figures as of July 1, 2021, from U.S. Census Bureau **** Notre Dame is technically in its own municipality, Notre Dame, IN, adjacent to South Bend ***** 2020 Census data, rounded to nearest whole %, N/A = not available The RoundTable reached out to eight private universities to find out their particulars.

In addition to Duke and Notre Dame declining to participate, Cornell University (in Ithaca, N.Y.), Emory University (in Atlanta), and Washington University in St. Louis did not respond to multiple emails, although the City of Ithaca provided its own figures for Cornell. (See accompanying article from part two for information about a study based on 2012 data which reported that 70 colleges and universities nationwide had entered into PILOT agreements.) MIT pays Cambridge over $100 million The Massachusetts Institute of Technology, in Cambridge, Massachusetts, has an undergraduate student body slightly over half the size of NU’s, and an endowment that’s nearly double.

Cambridge, a municipality roughly 1½ times the size of Evanston, has a similar poverty rate and higher median household income (see chart). MIT’s campus takes up about 3.7% of the land in Cambridge. According to figures provided by spokesperson Kimberly Allen, for fiscal year 2022 MIT paid $103.66 million to the City of Cambridge, a figure that included $76.73 million in real estate taxes, which in turn includes a combination of real estate taxes paid by MIT, paid on MIT-owned property through ground leases and real estate taxes generated by independent living groups.

MIT also paid $8.32 million in water and sewer fees and $16.32 million in other fees and permits. In addition, the school made a $2.29 million PILOT based on a 2004 agreement between the university and the City of Cambridge. That agreement stated that MIT owned, at that time, 157 tax-exempt acres used for educational purposes and 241 acres total – and the agreement included “protections” for the city’s tax base in the form of additional PILOT amounts, if any taxable property was later converted to tax-exempt, for the succeeding 40 years. Centrally located on MIT’s campus along the north bank of the Charles River, the university’s Steinbrenner Stadium and Roberts Field “are used for MIT athletics and recreation,” Allen said in an email, while the school’s Division of Student Life “notes that, on rare occasions, the Institute hosts a one-night music event for MIT students on a field near the football stadium or in the adjacent ice rink.” Yale University, in New Haven, Connecticut, has an undergraduate student body similar in size to Northwestern and an endowment nearly three times that of NU.

The city of New Haven is nearly twice the size of Evanston, its poverty rate is nearly double and its median household income is roughly half. Yale’s campus takes up about 2.9% of New Haven’s land area. Yale made a six-year pledge in 2021 to boost the university’s voluntary payments from $83.4 million to $135.4 million over that period – an average of $22.9 million per year.

“This is not a close comparison” to Northwestern, wrote university spokesperson Karen Peart in two separate emailed statements. The agreement includes a new commitment, similar to that of MIT, to offset any loss in tax revenue to the city based on property that Yale takes off the tax rolls going forward for 12 years.

That would involve a 100% voluntary payment equal to the property tax amount for the first three years, then decreasing by 10% per year through year 12, when it would reach 10%. Exempt like all nonprofit universities from paying taxes on academic property, Yale pays more than $5 million in property taxes per year on nearby properties redeveloped through its community investment program.

Other economic impacts include the more than $35 million Yale has committed to help more than 1,300 employees purchase homes in the city that have a total value of $268 million, according to the school’s estimates. In addition, the university pays “up to $5 million per year” through the New Haven Promise scholarship for graduates of New Haven public schools who attend college in Connecticut; and Yale pays up to $20,000 in tuition and fees per year, for four years, to local students who attend historically Black colleges and universities, through the James W.C.

Pennington Fellowship. The 2021 pledge agreement also includes the establishment of a Center for Inclusive Growth, to which Yale is contributing another $5 million over six years, to “develop and implement strategies to grow the city economically in a way that benefits all of New Haven’s residents,” according to a university news release. One resident marching in this summer’s Evanston Fourth of July parade holds up a sign demanding a payment in lieu of tax from Northwestern.

Credit: Ed Finkel Brown University has a student body size close to that of Northwestern and an endowment that’s less than half. Its hometown of Providence, R.I., is about 2½ times the size of Evanston, its median income is considerably lower and its poverty rate of 21.5% is about double. Brown’s campus takes up about 1.1% of the land in Providence. Brown paid Providence $19.5 million in 2023 and a total of $268.4 million over the past two decades. Brown entered into a PILOT agreement with Providence 20 years ago under a memorandum of understanding (MOU), as did Johnson and Wales University, Providence College and the Rhode Island School of Design.

Brown’s voluntary contribution to the PILOT was more than $1.4 million this year and has totaled more than $24.6 million over the past two decades. The MOU signed in 2003 also included transitional payments for properties taken off the tax rolls, an amount that totaled nearly $750,000 this year and more than $15 million since 2003. In addition, the university and city entered into a second, separate memorandum of agreement in 2012 for Brown to annually pay another $3.9 million between 2012 and 2016, and $2 million between 2017 and 2022, on top of the PILOT payments in the 2003 agreement.

That has netted an additional $31.5 million for the city. Brown’s contribution Brown also voluntarily paid about $30.6 million in property taxes on commercial properties between 2003 and 2023, and Providence receives 27% of the estimated value of the university’s property taxes through a separate PILOT disbursed by the Rhode Island state legislature, which has netted another $166.7 million for Providence in the past 20 years. “We have voluntarily elected to pay taxes on properties we operate commercially,” spokesperson Brian Clark wrote in an emailed response.

“For the years in which these agreements have been in place, this is not a requirement that has been codified into law, but it’s the approach we have long believed is right.” Both the 2003 MOU and 2012 MOA expired as of June 30 of this year, and negotiations are underway between Brown and the city as to how such PILOT payments will proceed going forward, Clark said. The city of Ithaca, New York, provided figures showing that it entered into an agreement with Cornell University in 1995, amended in 2003, that started with Cornell paying $250,000 for fire and other municipal services (mostly the former), rose to $1.1 million by 2007-08 and has been indexed to inflation since then, reaching nearly $1.6 million this year. Cornell also pays about $200,000 per year in user fees for stormwater service and a modest amount of taxes on a few taxable parcels, “though Cornell’s real estate in the city is overwhelmingly tax exempt,” according to city spokesperson Melody Faraday. Cornell’s endowment is smaller than that of Northwestern, while its undergraduate student body is nearly twice as large.

Ithaca’s population is smaller and significantly poorer than Evanston’s. Cornell’s campus is about 19% of Ithaca’s total land area. Should NU benchmark itself to peer schools? Northwestern spokesperson Jon Yates said NU is well aware of the arrangements that peer institutions have with their municipalities, but “each university’s contribution reflects its own circumstances, endowment size and mutual agreements with its city,” he said.

“Therefore, it is not an apples-to-apples comparison.” Evanston Mayor Daniel Biss said he’s interested to know what other schools and cities are doing, and he thinks Northwestern should be, as well. “Those examples are constructive. I’m certainly paying attention to them. I’m sure I’m not the only one,” Biss said.

“It’s a fact of arithmetic that Yale is an outlier; Yale is an outlier because of a recent, dramatic change they made.” The mayor said he sees the actions of Yale and others as part of a “trend that’s occurring in elite academia” in recent years. “It’s an opportunity for the city and an opportunity for Northwestern to be in keeping with what’s happening around the country,” he said.

“It’s played out in non-identical ways in different places. It’s not like a formula.” He said he’s observed a range of developments elsewhere, “from PILOTs, to community engagement, to partnerships toward equity work, to reparations.” Mayor Daniel Biss called a PILOT “an opportunity for Northwestern to be in keeping with what’s happening around the country.” Credit: Heidi Randhava Council Member Clare Kelly (1st Ward) said she finds contributions from peer schools to be useful as “a frame of reference,” but she also raised the possibility of looking at the estimated value of Northwestern’s property and asking for a percentage of what it would pay in taxes if it were a commercial entity.

The City of Boston, for example, asks nonprofits for 25% of that amount, up to half of which can be paid through in-kind community benefits, she said. Kelly cited a study performed by former Evanston Assistant City Manager and Chief Financial Officer Marty Lyons using 2015 figures that calculated NU would have paid $28.8 million annually in taxes as a for-profit business – compared with the $200 million total that the city, school districts and other entities were then collecting. Under an agreement like Boston’s, Northwestern would pay about $7.2 million per year to the city, half of which could be covered by community benefits, but at least $3.6 million would be cash for the city budget. Sixth Ward Council Member Tom Suffredin said Northwestern should be looking at what its peer institutions do for their towns.

He emphasized that he does not consider other Big Ten schools, all public universities, to be those peers. “When it behooves them, they benchmark themselves against … other schools that are way below their weight class,” Suffredin said. “Private universities, and towns of comparable size – those are the ones they should be looking at.” Schools ‘differ widely’ Council Member Eleanor Revelle (7th Ward) said the amount NU provides shouldn’t necessarily be based on what other universities lay out, although it’s worth considering.

“Certainly, these schools do differ widely in terms of the size of their endowments,” she said. “You wouldn’t want to say, ‘They have to match what Yale does.’” Council Member Devon Reid, who represents the Eighth Ward, thinks a PILOT should be calculated like Boston’s. “As much as folks are concerned about the fact that Northwestern has a huge endowment, they still are a nonprofit with the goal of educating folks,” Reid said.

“I do think it’s fair to look at what their overall property tax bill would be and calculate what 25% of that would be. And potentially knock half of that off. … I don’t think we need to benchmark against other communities. I think we need to benchmark against ourselves.” While noting the amounts other universities give is useful in providing “an order of magnitude,” David DeCarlo, co-founder and president of the Most Livable City Association and a Seventh Ward resident, believes the best calculation would come from figuring out a percentage of the land’s taxable value.

“They own tons of lakefront property,” he said. “You’ve got to start there. Otherwise, you’re taking a guesstimate and potentially selling the city short.” According to Lesley Williams, president of the Community Alliance for Better Government, “Northwestern is not looking so good right now, particularly the athletics department.

… There are many things they could do to change the narrative of how they’re relating to the community, and how they’re relating to people of color and low-income people.” Biss said he looks forward to continuing these conversations. “As [NU] President [Michael] Schill interacts with the presidents of institutions that Northwestern rightly sees as its peers, he’s talking to a bunch of folks having these conversations in their communities,” he said.

“That’s good and healthy for all of us and makes me optimistic about the ways in which we can move forward together.” And Northwestern’s Yates said, “We are in active dialogue with City leaders to explore ways to increase our financial contribution strategically and are open to learning more from Evanston residents about other ways to support the Evanston community.”

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