Yale contribution tries to buck past

Yale’s recently-announced agreement to increase its voluntary financial contribution to New Haven to $4.18 million this year has been touted by city and University officials as a lasting compromise indicative of steadily improving town-gown relations. But given the tumultuous history of Yale’s interaction with New Haven, it would be remarkable if the current agreement were to end the debate over Yale’s tax-exempt status.

The University’s new payment, which absorbs a 1990 agreement to compensate the city for fire services, is calculated by multiplying the sum of the University’s dormitory beds and full-time employees by $250. The payment is indexed to inflation and will be updated every three years based on changes in the University’s number of beds and employees.

Yale President Richard Levin said that even if the University does not grow, under the agreement it will contribute $470 million over 50 years, due to the effect of inflation.

“The mayor approached Yale in a spirit of cooperation, and Yale responded in a spirit of cooperation,” Associate Vice President for New Haven and State Affairs Michael Morand said. “We have every reason to believe that that spirit of cooperation from the city will persist and so every reason to believe the framework we’ve set up will endure for many years well into the future.”

But Mayor John DeStefano Jr., who said the major immediate impact of the funding will be to limit the city’s property tax increase, acknowledged the possibility of future changes to the agreement.

“Of course its relationship is going to change because the environment is ever-changing,” he said. “I’m sure as the years go by and circumstances change as to the character of the economy … there will be changes in the relationship.”

And if history can provide a guide, officials should expect town-gown relations to continue to evolve.

First in 1950 and then in 1975, the city legally challenged Yale’s right to avoid paying taxes on some of its properties, and both times courts upheld Yale’s tax-exemptions. In the late 1960s, the city publicly approached then-President Kingman Brewster about making a contribution in lieu of taxes. Brewster rejected the city’s offer.

In an effort to limit the expansion of the city’s tax-exempt base, in the 1970s Mayor Bartholomew Guida put forth the Guida Amendment, which required the University to obtain permission from the city before acquiring new property. The amendment halted the University’s plans to build a 13th and 14th residential colleges.

Some of the city’s fiscal pressure was alleviated in 1978, when the state enacted a payment in lieu of taxes program that partially reimbursed municipalities for their tax-exempt properties. The program — one of only two in the country — remains in place.

“That of course has had a tremendous impact over time in two respects, both in terms of the contribution that is made to the city’s finances and also I think it’s lowered the whole temperature of the situation,” said Benjamin Cardozo School of Law professor Ed Zelinsky ’72 LAW ’75, who served on the Board of Aldermen when the program was put in place.

But city officials continued to feel fiscal pressure, and by 1990 they turned to negotiations with the University. Yale then worked out an agreement with the city to make an annual contribution specifically for fire services, an agreement that still stands although it has been absorbed into the new payment.

Zelinsky said the city’s new agreement would not have been possible in the political climate 15 years ago. The University back then, he said, was “very much tied to” the notion that its payment had to be directly related to city services.

“We ought to understand … in many ways what Yale is doing, as well as the hospitals, is in their self-interest,” Zelinsky said. “That is the perception that President Levin has had that none of his predecessors grasped. The University has a very strong interest in a vibrant New Haven.”

But Morand said the philosophical basis for the contribution has not changed since 1990 and that the payment is tied to city services by nature of the calculation based on the number of people residing in dorms or employed by the University.

“This represents a contribution to the city so that it can do its work, which is the provision of municipal services,” he said. “It’s a different formula, but I think it’s not any sort of break with the past.”

To ensure the future stability of its finances and services, the city is negotiating voluntary contribution agreements with a number of nonprofits in the city.

The Hospital of St. Raphael, the Annie E. Casey Foundation and the Community Foundation of Greater New Haven have all pledged lesser sums to the city, totaling nearly $200,000. Yet the city is still roughly half a million dollars short of meeting its goal of $2.5 million in new nonprofit contributions for the year.

In an effort to close that gap, city officials are currently in the midst of negotiations with Yale-New Haven Hospital. New Haven Director of Public Information Derek Slap said the discussions were “positive” but declined to be more specific on the substance of the talks.

“The hospital has been very cooperative … but right now it doesn’t make sense to negotiate the numbers in the press,” he said.

Discussions with the hospital come at a time when Yale-New Haven is seeking approval from the city to go ahead with its controversial cancer center expansion project. City officials have denied there is any link between the contribution and the zoning approval.

Chicago-Kent College of Law professor Evelyn Brody ’76, an expert on nonprofits, said that though it would be illegal for the city to threaten to withhold approval, such things do happen behind the scenes.

“There are ways of dragging your feet,” she said. “That’s an opportunity then for the town to have some bargaining leverage.”

Meanwhile, DeStefano said Albertus Magnus College has rejected the city’s request for a similar contribution.

“Albertus Magnus indicated it’s not in a position to contribute a dollar to this effort,” DeStefano said. “Frankly, I don’t understand their position at all … What we’ve said is that if there’s financial stress we build in an ability-to-pay factor. [The college's position] doesn’t recognize their own self-interest in collaborating with the city.”

Albertus Magnus officials did not respond to repeated calls this week.

A local church, the Adoni Spiritual Formation Center, announced this week that it will also make a voluntary contribution to the city, an amount estimated to be in the four digits.

The Knights of Columbus, one of the city’s largest nonprofits, has not yet been approached by city officials to make a similar contribution because most of its property in New Haven is taxable. However, DeStefano Deputy Chief of Staff Rob Smuts ’01 said the city may approach the Knights about a contribution for the organization’s tax-exempt property, the Knights of Columbus Museum.

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