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Yale’s fallen endowment affects more than just the University.

Delays in campus construction and the scarcity of retailers willing to move into storefronts in the city during the current recession — even on Yale-owned property — could prolong and intensify the effects of the faltering economy on New Haven.

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To be sure, the University still does much to help the city, and some major developments, including the 360 State St. complex near the Union Avenue train station, await an opening during the next five years. And although Yale’s endowment has dropped 25 percent since last June, University President Richard Levin reaffirmed his pledge to help the city in a letter to the Yale community last month.

Levin wrote that one of the University’s “principal goals” is “remaining a good citizen of New Haven.”

But faced with the first precipitous decline in the endowment during the tenure of Chief Investment Officer David Swensen, Yale must tighten its belt, and the Elm City will inevitably feel the pinch.

Needed jobs

At the moment, the local economy seems to be struggling less than that of other urban centers.

“The foundation of the local economy is higher education and health care,” said Michael Morand ’87 DIV ’93, the board chairman of the Greater New Haven Chamber of Commerce and the associate vice president for the Office of New Haven and State Affairs, in an interview late last year. “We are, as sectors, more recession-resistant than others, so the forces driving the local economy tend to have less high-ups and less low-downs.”

Yale and Yale-New Haven Hospital are the largest city employers, their wages permitting about one in eight New Haven residents to pay bills and have a savings account, according to state and University statistics.

But local residents still need jobs, and with the economy in decline, they need them fast. The state currently has a 6.6 percent unemployment rate, the highest in at least 10 years according to the Bureau for Labor Statistics.

Prior to the onset of the recession, the University had several prime capital projects slated in the near future that would have provided temporary construction jobs for local residents. But now, construction of the Yale Biology Building and the School of Management campus, for instance, is on hold. The largest University project on which officials have embarked in recent history — the construction of the 13th and 14th residential colleges — may be delayed due to the troubling economic times, pushing back not just temporary construction jobs but also the increase in permanent positions such as dining hall cooks and entryway cleaners.

In his December letter, Levin wrote that these projects will be delayed “until funding is secured or market conditions improve.”

Linked fates

Yale officials also plan to reduce 5 percent of the salaries and benefits of staff members, mainly through attrition. Five years ago, the University reduced staff by 5 percent, generally through retirements, departures and unfilled leaving vacancies, Levin said in the letter.

But if such a cut is approved once more — which is currently being considered by University officials — some Yale workers, many of which are New Haven area residents, may suffer.

Levin said he hoped that the 5 percent cut is achieved by attrition alone, but could not promise that the University would not lay off any workers.

And while the University has employed several new staff members, officials are only “actively” hiring 75 staff positions, down from 450 before the Levin sent his letter, Vice President for Human Resources and Administration Michael Peel said.

This worried some city officials: “The most important thing for Yale to do is to continue to work at growing itself,” New Haven Mayor John DeStefano Jr. said in an interview Wednesday.

The hiring chill creates an awkward situation for University unions. Although union pay increases are unaffected, the University and unions will have the downturn in mind while creating a new contract next year.

One union official said the unions will be having “fun” fretting about the reduced job searching. (Both Local 34 and 35 presidents could not be reached for comment Wednesday and Thursday.)

…for rent

Susan Weisselberg, the coordinator of the School Construction Program for the city, has been looking for a retailer for the new Cooperative Arts & Humanities High School, one block away from Old Campus. She has even had help from ONHSA to search for a tenant.

But after a year of searching, she could not find a viable candidate.

Since the establishment of ONHSA in 1995, University officials have worked hard to contribute to the city that has historically been somewhat hostile. Now, some city and University officials say, the relationship between the two is amiable: Their fates are inextricably tied.

University Properties, part of ONHSA, has over 20 retail locations open right now, from Broadway to the School of Medicine campus. Several have just recently been converted to retail spaces and are waiting for new retailers, UP Director and Associate Vice President Abigail Rider said Thursday, and “many tenants are doing well despite the economy.”

But last year, she also said, several UP retail tenants left Audubon Street because their leases were expiring and they felt it was too “difficult” to renew their leases. She said she expects it will be harder to find local retailers to fill UP spots over the next 12 months because of the faltering economy.

Most of the land Yale uses is tax-exempt, but the University does contribute voluntary payments and pay nationally steep building permits to compensate for much of the lost city revenue.

For the time being, University officials have said over the last months, the formula for determining the voluntary payment to the city and West Haven will remain unchanged.

Levin did stress in the letter that construction on existing projects will be completed. One could observe construction workers in bulldozers and cranes overlooking the site of the new University Health Services last week near the site of the two residential colleges, still buzzing and whirring along.

Paul Needham and Martine Powers contributed reporting.