University and city leaders gathered yesterday in East Rock Park — property donated to the city by Yale over a century ago — to announce that Yale will raise its annual voluntary contribution to the city, giving New Haven an additional $1.8 million this year.

This payment will be on top of the $2.3 million the University currently gives voluntarily for fire services, bringing Yale’s contribution for this fiscal year to nearly $4.2 million. New Haven has struggled with fiscal shortfalls its leaders have attributed in part to the city’s large number of tax-exempt nonprofit institutions, of which Yale is the largest.

“Yale has been part of this community for three centuries, and today’s agreement, while being a landmark agreement, is nonetheless a reflection of a long tradition of contributions to our hometown,” Yale President Richard Levin said at the press conference. “There are lots of ways that Yale contributes to the vitality of the city, and one important way is to help the city enjoy fiscal stability so that it can provide the necessary services to its citizens.”

The new payment — calculated as the sum of the number of dormitory beds and full-time employees at the University multiplied by $250 — is tied to inflation and will also increase if the University expands its student population or labor force.

The Hospital of St. Raphael, the Community Foundation of Greater New Haven and Casey Family Services also announced financial contributions totaling nearly $200,000 for this year. The mayor’s office is currently negotiating with Yale-New Haven Hospital about making a similar contribution, and the city will also ask for support from other nonprofits, like Albertus Magnus College.

The already-negotiated contributions almost meet the $2.5 million the city budgeted from nonprofit contributions for this fiscal year to help fill a budgetary gap caused by rising costs and diminishing state aid. The city is heavily reliant on state funds because Connecticut law makes municipalities dependent on property taxes, and New Haven has a relatively small taxable property base.

“In this state, so dependent on property taxes, 50 percent of the property in New Haven is exempt from taxes,” New Haven Mayor John DeStefano Jr. said. “That contradiction of dependency on the property tax [and tax] exemption creates an overburden on our families and our business competitiveness. But nonetheless the city thrives because we work together.”

Yale’s new total contribution of nearly $4.2 million is the largest made by any college in the nation to a single municipality.

Though it is a tax-exempt institution, Yale also pays $3 million in annual taxes on its profit-generating property, making the University the largest taxpayer in the city. In addition, the University paid $2.4 million last year in building permit fees associated with the ongoing campus improvement program.

Ward 2 Alderwoman Joyce Chen ’01 said that the increase in Yale’s contribution was an important step but that she hoped to see more partnership between the University and the city in the future. In particular, she said she hopes Yale will eventually raise its voluntary contribution to fully match the difference between Yale’s tax value and the Payment in Lieu of Taxes funding New Haven receives from the state.

New Haven Director of Public Information Derek Slap said the contribution comes at an opportune time because Connecticut’s PILOT program, which partially compensates the city for tax-exempt property, has been cut back over the past few years. In fiscal year 2000-2001, the state paid a 75 percent reimbursement rate, while in 2004-2005 the rate dropped to 63 percent, Slap said. Meanwhile, the proportion of the city’s property that is tax-exempt has been increasing.

“This is something that made sense,” Slap said. “Yale’s been incredible in its cooperation with the city. The strategy now is to … pressure the state to pay its fair share, which it has not been doing.”

Several members of the Board of Aldermen, including Ward 1 Alderman Ben Healey ’04, are placing calls to key legislators today to ask for more state aid than was allocated in Gov. M. Jodi Rell’s budget proposal, possibly through the PILOT program.

Yale’s voluntary contribution is an agreement in perpetuity, though the University holds the option of backing out with two years’ notice.

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