Even as Yale and New Haven work toward building stronger ties, one city legislator’s questions about Yale’s tax obligations serve as a reminder that aspects of the relationship could stand to improve.
All the top players in city politics — aldermen, city officials and Yale officials — say town-gown relations have improved dramatically over the course of the last decade. Yale President Richard Levin and New Haven Mayor John DeStefano Jr. have as a close a relationship as any two men in their positions ever have. And city officials like Board of Aldermen President Jorge Perez say the Yale Homebuyer Program and the Yale-New Haven Teachers Institute are signs that a new era is beginning.
But when Ward 17 Alderman Matt Naclerio opened an inquiry earlier this year into the tax status of the Yale Golf Course, he began writing a new page in the 250-year story of Yale’s tax status.
Naclerio did not return phone calls last week seeking comment for this article.
About half of the golf course, like much of Yale’s property in New Haven, is not taxed. While the city does collect taxes on the other half, it has only done so since the two entities signed an unprecedented taxation agreement in 1990.
Regardless of his motives — some colleagues and observers say he has a penchant for getting under Yale’s skin — Naclerio’s investigation is likely to lead where many such inquiries have lead in the past: nowhere. Expert opinion and an extensive legal record suggests that Yale’s ability to claim exemptions on its property is likely beyond appeal.
A daunting task
In seeking changes in the town-gown tax relationship, Naclerio, is working against extensive precedent — much of it as old as the state constitution.
In 1745, Connecticut’s colonial government granted Yale a charter exempting its educational facilities from taxation on the grounds that the University was providing a public service. Colonial leaders assumed Yale would furnish the state and the church with many future leaders.
The charter tax exemption was later incorporated into the state constitution, where it remains today.
A series of court rulings — the first of which was handed down in 1895 — have granted Yale and other Connecticut universities wide latitude in claiming tax exemptions.
Newspaper records indicate that at different times during the past century, city officials tried to tax Coxe Cage, Ingalls Rink, the Kline Biology Tower dining hall, and the building housing Yale University Press.
Ultimately, these attempts ended in failure. The University successfully maintained in each instance that the properties were somehow related to Yale’s mission as an educational institution.
With the legal record stacked against direct taxation, any attempt to alter the University’s tax-exempt status on a large scale would have to come from the Connecticut Legislature — the only body with the power to initiate changes in the constitution.
And historically, that has not worked either.
Over the past 25 years, state legislators twice tried to alter the section of the constitution pertaining to the charter — and failed both times.
In 1977, a state representative tried to remove the charter from the constitution completely. In testimony, Yale defended itself with the landmark 1819 U.S. Supreme Court “Dartmouth College” decision, which protects charters as legally binding contracts.
The town-gown relationship in troubled times
The issue of taxation is bigger than the 491-acre golf course.
Since Yale moved to New Haven in 1716, periods of economic hardship have frequently provoked fierce town-gown debates over the tax relationship.
Yale has at times given money to the city voluntarily. But more often, the city has tried to tax Yale’s exempt properties, only to meet with failure in court.
The 1990 agreement — created when the city was experiencing economic hard times — did move part of the golf course onto the tax rolls. But in the same agreement, signed by then-Mayor John Daniels and former Yale President Benno Schmidt, Yale gained the rights to parts of Wall and High streets that cut through the center of campus by Sterling Memorial Library.
Since Yale gained the rights to close the streets for a one-time cash payment, many New Haven residents felt that the University was taking advantage of a city strapped for money.
And over the course of the last decade, many aldermen and other city residents have suggested that Yale should help New Haven at a time when the municipal tax base is shrinking. New Haven’s grand list — the list of all taxable property in the city — has declined since 1996, while the amount of property off the tax rolls has increased by 23.6 percent.
But the new tax exemptions have been granted predominantly for personal property. Tax exemptions for real property — which is how most of Yale’s land is classified — have actually decreased by 6.3 percent since 1996.
What Yale gives to New Haven
Yale currently owns about 905 acres of land in New Haven, and though much of it is off the tax rolls, the University does pay its share of taxes.
In fact, the University is the city’s third largest taxpayer. In 2000, Yale paid about $2 million to the city on its commercial holdings and non-dormitory apartments.
But University officials have couched the financial relationship in different terms. Excluding the state of Connecticut, Yale says it is the largest single contributor to New Haven’s city budget. As the Office of New Haven and State Affairs Web site explains, the city receives money from the state in compensation for Yale’s tax-exempt properties.
In 2001, such payments accounted for about $36.1 million, or 10.5 percent, of all city general fund revenues. $26.8 million of that money came from the state PILOT, or Payment in Lieu of Taxes, program, which compensates municipalities for the tax-exempt properties of educational institutions and other not-for-profit organizations. But PILOT gives cities like New Haven only 40 percent of the value of tax-exempt land.
In addition to the taxes it does pay, Yale also gives the city about $2 million in building permit fees each year and contributes further to the city’s economy through its Yale Homebuyer Program, which subsidizes University employees’ home purchases in New Haven.
Yale also likes to point to its buying power and the impact of its employees. With its 10,500 jobs, Yale is the largest employer in the city. According to the University’s own estimate in 2000, Yale and its students, faculty and employees purchased about $240 million in goods and services from Connecticut businesses.
As for Naclerio’s inquiry, School of Management professor Douglas Rae, who served as the city’s chief administrative officer in 1990, said he does not think it will lead to any significant changes in the tax scheme and added that town-gown relations have never been better.
“I think the tenor of [Yale’s] relationship with New Haven is as good as it’s been in the last 100 years,” said Rae, a specialist in the political economy of cities. “Small gestures and real commitments have added up to real improvement.”
From a practical standpoint, Perez said, town-gown taxation is not as complex as it seems.
“I think the relationship with Yale has improved dramatically,” he said. “I think this is going to come to a very simple point. If it should be taxed, it will be; if it shouldn’t be, it won’t.”