New Haven, William Pardee explained, was facing the challenges of the “modern city.” Its streets were dirty. As a growing city in a changing economy, it needed new transportation systems, new developments, new ways of growing without becoming dirty or overcrowded.

The city was facing challenges, Pardee told the Economic Club of New Haven on Nov. 9, 1911, and Yale was uniquely positioned to help the Elm City face those difficulties. But, Pardee said, while New Haven had been a “mother” to Yale, nurturing its development since its birth two centuries ago, the University had done little in return to contribute to the community’s health and welfare.

“Sometimes it seems that children grow so great they outgrow their love for their mother and look to the praises and honors of the outer world,” said Pardee, a municipal reformer. “And, sometimes, I think the underlying sentiment of old mother New Haven is that Yale has forgotten home.”

In response, the University — led by its secretary, Anson Phelps Stokes 1896 — released a pamphlet emphasizing Yale’s economic contributions to New Haven. While Pardee had estimated that Yale’s tax exemption cost the city $182,731 in lost revenues, Stokes argued that the University’s activities generated $3.1 million for the city.

Pardee was not the first New Haven resident to question whether Yale contributed enough to New Haven, and Stokes was not the first Yalie to attempt to show how the University contributed to the Elm City’s prosperity. But their debate over ninety years ago highlighted a challenge that has only become more important as Yale has gone from one of many major institutions to the largest economic player in town.

Playing the role of major economic engine — in addition to world-class university — has not been a task Yale has always been well-suited for. Yet increasingly, the issues that dominate town-gown relations relate back to Yale’s identity not only as an educational institution, but as an employer, a purchaser, an economic developer and a major decision-maker in how New Haven grows.

“Research institutions are the catalysts of economic growth in the private sector,” said Yale Associate Vice President for New Haven and State Affairs Michael Morand ’87 DIV ’93. “That’s a relatively new role for Yale in the last decade, but it’s had very important results for New Haven.”

According to the University, the positive results of this impact can be seen in physical developments — like Broadway or the biotechnology hubs at 300 George Street and Science Park — or in the millions of dollars Yale students, faculty, employees and visitors bring to the New Haven economy.

But for others, like Local 35 President Bob Proto, the University’s increased economic importance gives it a greater opportunity to aid the New Haven community and illustrates how it has not yet done enough.

“I think Yale does a tremendous amount of good for the city of New Haven,” Proto said. “Do I think they’re capable of doing more? Absolutely.”

The new game in town

The changes New Haven experienced — including the flight of the middle-class to the suburbs, the decline of manufacturing firms and the growth of universities and other large non-profits — are not unique to the Elm City. In Philadelphia, Baltimore and Washington, universities are also the largest private employers, and abandoned factories that were once the economic engines of cities can be found across New England and the entire United States.

But in New Haven, these changes have been particularly evident. In 1967, Yale was the city’s largest employer, but the Armstrong Rubber Company and the Olin Mathieson Chemical Corporation were close behind. In all, 16,100 workers were employed in factories in New Haven, according to Yale political science professor Douglas Rae.

Today, Olin and Armstrong are both gone. Olin, which bought out Winchester Repeating Arms in the 1930s, left New Haven in 1980 after a long strike. Armstrong was bought out by the Pirelli Tire Co., which subsequently ended its operations in the United States. By 1997, only 2,804 workers were employed in New Haven factories.

The decline of the city’s manufacturing base began early in the 20th century, but by the 1990s, nearly all of the companies that had driven New Haven’s growth had left town or gone out of business. Yet while factories were closing, Yale was growing — expanding from a college that drew mostly from New England into a global university.

While other Connecticut cities — Bridgeport and Hartford are notable examples — had little else to rely upon when manufacturing jobs disappeared, James Abromaitis, the state’s economic and community development commissioner, said the economic health of New Haven has become increasingly tied to Yale.

“If Yale were not in New Haven, honestly, I’m not sure what New Haven would be,” Abromaitis said.

With 11,000 employees and a gross payroll of $684 million in 2002, Yale is, by far, the largest employer in the New Haven region today. But because, as Morand explains, Yale is a “major net importer of capital from beyond,” its economic impact exceeds its role as a source of jobs.

“We are a stable and growing institution, as is higher education throughout the country,” Morand said.

Because the University is located in New Haven, students and faculty choose to live in the city, buying local homes, purchasing from local businesses and paying (at least in the case of faculty who are New Haven homeowners) local taxes. According to Yale, the University also draws 550,000 visitors a year who spend an estimated $40 million while in New Haven. In addition, the University draws millions of dollars in research grants, tuition bills and alumni donations that are — at least in part — infused into the local economy.

Yale may even bring more spending to New Haven than the city’s government does. In Yale’s last major economic impact study, published in 1993, the amount of spending it brought into the city was estimated conservatively at $275 million in the 1991-1992 fiscal year. Adjusted only for inflation, this figure equals $368 million in 2003 dollars — slightly greater than the city’s general budget.

The University’s leaders — led by the Office of New Haven and State Affairs created by Yale President Richard Levin shortly after his inauguration in 1993 — also emphasize Yale’s effort to take a much more active role in promoting New Haven’s economic development. As prime examples, Yale Vice President and Director for New Haven and State Affairs Bruce Alexander ’65 points to Yale’s efforts to shape New Haven into a center for biotechnology, promote neighborhood stability through its Homebuyer’s program, and revitalize the downtown area through a strong partnership with the city.

“One of the most useful roles we can play in our host community is as a catalyst for economic growth,” Alexander said.

In many cases, Yale’s efforts to promote growth in New Haven have been conducted with the cooperation of the city and the community. At groundbreakings for local development projects, New Haven Mayor John DeStefano Jr. and Yale administrators frequently share the stage.

New Haven Deputy Director of Economic Development Tony Bialecki said Yale has made efforts to reach out to neighborhoods, communities and youth organizations and collaborate with city government on a wide range of projects.

“When you talk with national developers, one of their big priorities is to focus on towns with education and large universities,” Bialecki said.

But the sheer magnitude of Yale’s economic impact is also a source of concern for many members of the New Haven community. As a tax-exempt institution, Yale occupies prime real estate downtown that would otherwise provide the city with property tax dollars.

Yale’s size, union leaders and DeStefano argue, also means it plays, for better or for worse, a major role in setting wages for the rest of the city — a point University officials dispute. And when the University may spend more in the city of New Haven than the city government itself, some members of the community worry whether Yale is doing as much as it can to use its power to help local residents.

“It’s the company in the company town,” said the Rev. Scott Marks, who serves as New Haven director for the union-affiliated Connecticut Center for a New Economy. “You can take that power and abuse it to get special favors and go against the grain. But if you build a relationship in the community and share a vision, then the opposition is not there.”

Indeed, even compared with its comparably-sized rival in Cambridge, Yale’s position is unique. Tom Lucey, Harvard’s director of community relations for Cambridge, said that while Harvard is Cambridge’s largest employer and a significant source of economic growth, its role as a dominant economic institution is tempered by both MIT and the city of Boston.

“While we’re a major player, there are a lot of other things driving wages in the greater Boston area,” Lucey said.

Growing in a new direction

At 300 George Street or Science Park, New Haven’s residents can see their city’s economic past and, perhaps, its future.

In the nine-story, 520,000 square-foot building on George Street, the offices of the Southern New England Telephone Company once stood. By the late 1990s, however, the building was largely vacant and SNET — the oldest telephone company in the world — had been bought out by the Texas-based telecommunications giant SBC, Inc.

Today, the building, after a $20 million renovation conducted with the assistance of Yale, New Haven officials and the state of Connecticut, has been repositioned as a center for biotech growth. At Science Park, where Winchester and its successors once dominated the rifle industry, the story is virtually the same.

Jon Soderstrom, managing director of the University’s Office of Cooperative Research — an institution founded in 1982 to help create new businesses from research in Yale labs — said the location of the two complexes illustrates how critical Yale is to the city’s biotech industry. The George Street campus is two blocks away from the Yale School of Medicine, while Science Park is only a short walk from the Kline Biology Tower on Science Hill.

Asked how vibrant the biotech industry would be in New Haven without the University, Soderstrom answers, “But for Yale, there wouldn’t be any.”

While Yale stands to reap significant economic benefits from companies founded on the basis of University-sponsored research, city and state officials have also taken an active role in repositioning New Haven as a hub for the biotech industry.

“Frankly, what’s competitive in New Haven — the sector of the economy that’s growing — is ideas,” DeStefano said at a recent public event. “It’s science and research that comes out of Yale University that’s creating jobs.”

Yet whether biotechnology will live up to its promise as the new economic development strategy for New Haven remains to be seen. While University and city officials said new facilities would have little trouble finding tenants, 300 George Street remains only about 50 percent occupied. Science Park has struggled at times to remain financially viable, although developers hope a multimillion-dollar renovation effort will make it a more attractive location.

Some community members are also concerned a growing biotech industry will do little to help city residents. The Rev. David Lee DIV ’93, who ran a high-profile campaign to win a seat on the Yale Corporation in 2002, said he hoped Yale would put resources into the city schools so local residents have the education needed to get jobs at biotech firms.

“I applaud them on what they’re doing, but let’s equip and prepare people to benefit from what they’re creating,” Lee said.

Lee’s sentiment reflects a larger concern that while Yale’s development efforts may be beneficial for the University community, they may come at a cost for the city. The Rev. Scott Marks said while Yale’s efforts to redevelop downtown New Haven have been good for the University, they sometimes seem like efforts to gentrify the city.

“A lot of the development they’ve participated in — a ton of the folks who live in the areas around the University can’t afford to shop at the new stores,” Marks said. “Who is this development for?”

Marks and others are even more ambivalent about the development because Yale’s so-called “super tax-exemption” prevents the city from receiving revenues from over $1 billion worth of real estate. While Yale’s payments to the city and the state’s Payment-in-Lieu-of-Taxes (PILOT) program cover about $27 million of the $39 million in foregone taxes, the University’s exemption — especially during an age of city and state budget deficits — raises the question of whether the city gains when the University purchases property downtown.

“On the whole, the expansion of the University has been undertaken without an informed appreciation of the impact of a large non-taxpaying employer on economic development,” said Peter Dobkin Hall, a Harvard professor who has written extensively on property taxes in New Haven.

But Morand said the ability of Yale and other tax-exempt nonprofits to attract businesses and workers to New Haven far outweighs the impact of the University’s tax exemption.

“Creating jobs in new companies helps everyone,” said Morand, who also points out that Yale is responsible for 8 percent of the city’s revenues. “Whether it’s jobs filled by local residents or by new families who join the local economy — all those jobs create more economic activity.”

How much is enough?

On March 4, 1968, Joseph Lieberman ’64 LAW ’67, a young lawyer at the prestigious New Haven firm Wiggin & Dana, wrote a letter to University President Kingman Brewster offering his unsolicited advice concerning growing calls for Yale to pay the city in return for its property tax exemptions. The University’s problem, Lieberman wrote, was that it was proclaiming its inability to pay just as the city’s residents were reading about a $750,000 donation to the music department.

“My thought is that in proclaiming its poverty to the people of New Haven who wish it to make payments in lieu of taxes, Yale would be aided if the good people of New Haven did not read repeatedly of the great sums of money which are showered on the university,” wrote Lieberman, who is now a U.S. senator and Democratic presidential candidate.

With Yale’s endowment now over $11 billion, the challenge Lieberman identified 35 years ago is even more acute today. For the Yale Corporation and top administrators, the endowment is a gift from past generations that must be preserved and cultivated. For others, the endowment — which has more than tripled in the past decade — presents the University with an opportunity to do more for the community.

One challenge Yale faces — and both its leaders and critics acknowledge — is that, unlike a for-profit corporation, Yale’s mission is not clearly defined. As Bruce Alexander notes, since the University’s culture is “not driven by bottom-line imperatives,” it is harder to measure how well the University is achieving its goals.

But since its founding, Yale has articulated — and its controversial property tax exemption has been justified by — a commitment to serving New Haven as well as its own students and faculty.

“Universities are uniquely poised to strengthen urban America. As large employers seeking to attract students and faculty from afar, we have compelling practical reasons to do so,” Levin said in a speech earlier this year. “But our efforts also flow naturally from our mission and purpose.”

Yet if both the University and its critics are agreed that Yale should serve the community, the nature and extent of its efforts are frequently subject to debate. If Yale provides subsidies to employees looking to buy homes in some New Haven neighborhoods, should it extend the Homebuyer’s program to Fair Haven? Is it enough for Yale to provide its workers with stable employment, or should it ensure that its workers can support their families without taking a second job?

According to the Rev. David Lee, the sheer magnitude of Yale’s wealth — especially in contrast to the poverty that surrounds it — creates an imperative for it to do more, whether in terms of giving workers a “living wage” or improving the city’s schools.

“Yale has the capacity and the resources to do it,” said Lee. “If they didn’t, we wouldn’t demand it. And that’s what we’re going to continually demand — that Yale does the best it can for the host community.”

The Connecticut Center for a New Economy, which has become a counter-balance to ONHSA in many town-gown disputes, explicitly made the connection between Yale’s endowment and its ability to help New Haven in a recent report. Arguing that Yale’s tax exempt status drains precious resources from the city’s school system, the report said the University had a “self-interest and a responsibility” to directly contribute to the city’s public schools.

“Yale University’s endowment grows an average of $5.4 million a day,” the report said. “One day of endowment growth would go a long way towards addressing New Haven’s need for an additional source of long-term school funding.”

But Douglas Rae said challenges to Yale’s role in the community may result as much from New Haven’s history as from anything the University has done. “The big problem here is that you’ve got a strong union movement that grew up around factories that looks around and says, ‘Who is there to organize and fight with?'” Rae said.

From Alexander’s perspective, Yale — like any other institution — is limited by its budgetary constraints. While Alexander said the endowment always makes Yale a “target” of others in the community seeking resources, the University is limited in how much of the endowment it can spend in any given year.

“I always wonder when students come in and say that we should be doing X, or Y, or Z, which history professor they are going to give up, or which part of their financial aid package they want to see reduced, or how much of their tuition bill they want to see go up, or when they are going to join the development board to bring major donors so the University can do all these things,” Alexander said.

The $368 million question

When DeStefano is asked how much Yale should give to the city in return for its property tax exemption, the mayor gives a very simple answer: “Some.”

But determining exactly how — and how much — Yale should give to New Haven is a much more complex task. From DeStefano’s perspective, Yale has a responsibility, like other institutions in the city, to contribute to the Elm City’s well-being.

“It’s not like we have bilateral relations,” DeStefano said. “They are a member of the community.”

But the University is also a member of the community that has become increasingly important in all aspects of New Haven’s economy, from the real estate market to retail sales to local wages. And while DeStefano acknowledges that Levin has made a more conscious effort to get involved in the New Haven community than previous Yale presidents, the University’s growth has brought its share of controversy as well as capital to the city.

According to Ira Harkavy, director of the Center for Community Partnerships and a professor at the University of Pennsylvania, Yale’s impact on New Haven is perhaps the best example of growing importance of universities on the economic life of cities.

“To a considerable extent, the intellectual and human resources of universities represent [cities’] greatest economic resource, and that hasn’t been fully taken advantage of by universities or cities,” Harkavy said. “Given Yale’s relative position in the city, it’s probably as visible an opportunity as anywhere in the country.”

As DeStefano has said on multiple occasions, the University and the Elm City are in a “marriage without the possibility of divorce.” Unlike Olin or Armstrong Rubber, Yale is not going anywhere, and its position as the dominant economic institution in New Haven is not going to be challenged anytime soon. But how Yale and the New Haven community respond to the University’s role as an economic as well as an educational giant may determine the future of both.

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