INTRODUCTION

This is City Project’s second report to examine aspects of the scope, nature and impacts of real property tax exemptions on New York City’s property tax base and fiscal health, as well as the intersection of tax exemptions with a wide range of public policy issues.* This report analyzes property tax expenditures for all levels of private education, both secular and religious, from pre-kindergarten through graduate and professional schools; reviews the underlying rationales for such exemptions and evaluates their current validity and viability; and examines the policy and practical implications for public education and the city’s overall fiscal stability of continuing to confer unlimited property tax exemptions for properties owned by private educational institutions. It concludes with various recommendations for reform. To our knowledge, this report is the first contemporary quantitative and qualitative examination of these critical public policy issues.

Although we do not suggest that reforming New York State’s unwieldy system of property tax exemptions alone will solve the constant revenue squeeze on New York City and other municipalities, we believe that this report (along with our prior one) makes a compelling case for the need for a full public review of that system , for the following reasons:
1. Cumulatively, property tax exemptions cost New York City over $7 billion in lost revenues in Fiscal Year 2005, with the amount escalating annually and no limitation in sight;
2. Property tax exemptions represent invisible, unfunded mandates that constitute public subsidies, which are implemented outside of democratic public budget processes;
3. The existence, scope and value of current property tax exemptions unfairly redistribute and increase property and other tax burdens for other taxpayers; and
4. Many exemptions were originally granted on the basis that the exempted institutions provided revenue-neutral “public benefits,” which may no longer be the case.
In short, no matter how sizzling the city’s real estate market, property tax exemptions rob the city’s treasury of revenue it can neither afford nor fairly replace, and do so covertly and unaccountably. While property taxes remain New York City’s single largest source of revenues, the array and volume of tax exemptions are taking a heavy toll. In Fiscal Year 2005, the percentage of New York City properties liable for the payment of full real estate taxes

*The first paper in the series, “State of Distress: How New York State’s Property Tax Exemptions are Starving New York City’s Treasury,” cast a spotlight on the city’s $1.5-billion annual loss of property tax revenues from properties owned by the State of New York and five state-controlled public authorities in the city.
plummeted to just above 42% of total properties--a 16% decline from just one year ago. The billable assessed value of these fully taxable properties now represents only 40.2% of the total billable assessed value of all city real estate.
Excluding exemptions for properties owned by different levels of government and quasi-governmental entities, there are hundreds of categories of property tax exemptions conferring full or partial tax exemptions on literally hundreds of thousands of private properties in New York City. The vast majority of such private exemptions are mandated by New York State, but their costs are wholly absorbed by the city. In general, the city has no authority over or input into their existence, scope, duration or amount. These fiscal and local control issues are replicated to greater or lesser degrees in localities around New York State.

Property Tax Burdens
Property taxes are by nature regressive: they are not pegged to a property owner’s ability to pay, and the lower a property owner’s income, the larger the proportion of income (s)he will have to devote to paying them. The disconnect between income and tax levels becomes especially acute during periods of “exuberantly irrational” real estate markets, when the values of all types of property (and the property taxes that reflect the increased book value) may rise to levels completely divorced from any intrinsic value or an owner’s ability to pay.
Although virtually all New Yorkers are affected by rising property taxes, political debates on the effect of property tax burdens tend to focus exclusively on traditional homeowners (and, increasingly, condo and co-op owners), while others who are directly affected, including residential and commercial renters, are left out of the equation. In New York City, for example, the recent 18.5% property tax increase was followed a year later by annual property tax rebates for homeowners, which in fact cancelled out their tax-rate increase, while no relief at all was provided to residential and commercial renters. The question of unaffordable property taxes was once confined to suburban areas, but is now becoming a hot urban issue as well and should, but hasn’t yet, cast a spotlight on the growing revenue--and tax--impact of properties that are excluded from the base of taxable property because of their tax-exempt status.

Unfunded Mandates and “Non-Discretionary” Expenses
The terms “unfunded mandates” and “non-discretionary” expenses have become the latest buzzwords in state and local government circles here and throughout the country. In New York City, an ever-growing portion of the annual expense budget is required to be spent on unfunded (or badly underfunded) state and federal mandates, including Medicaid and the Bush Administration’s No Child Left Behind Act, among many others. The city must also pay for other rapidly escalating “non-discretionary” expenses, including debt service and municipal workforce benefits, over which it exercises less than full control.
Out of a mix of necessity and frustration (perhaps leavened with a little ideology), New York City and other localities have begun to focus on these runaway costs and their limited control over them. The Bloomberg Administration has particularly zeroed in on pension and health costs for municipal workers, as well as skyrocketing Medicaid costs. But while municipal workers and poor people are the often the first to be targeted when it comes to government cost-saving measures and service cuts, tax expenditures from property tax exemptions--which are also unfunded state-imposed mandates--receive little attention from local policy makers, politicians and the public.

Property tax exemptions: 1) shrink the city’s property tax base; 2) shift heavier tax burdens to other taxpayers and residents; 3) impede the city’s ability to develop and implement critical public policies; and 4) contribute significantly to the city’s chronic structural gap between recurring revenues and expenses for public services and infrastructure needs. Tax expenditures play an important, if unnoticed, role in the city’s annual budget balancing act of choosing between cutting services and deferring infrastructure work, or seeking additional revenues from smaller tax bases through (usually) regressive taxes, fines and fees.
And property tax exemptions are more than lost city revenues. They also represent an enormous, undemocratic transfer of public resources to private institutions and individuals, a flourishing system of public assistance to the private sector. They occur “off-budget,” beyond the control of local democratic budget processes and largely invisible to both budget makers and the public.

The Special Need to Re-Evaluate Private Educational Property Tax Exemptions
The specific focus of this report is property tax exemptions conferred on private, not-for-profit educational institutions in New York City. It touches on the following fiscal and policy issues:
- Lost property tax revenues from exempt private educational institutions are both substantial and increasing, as are the number and value of their exempt properties. At the same time, the nature and use of a growing portion of these properties increasingly extends beyond educational uses, which constitute the underlying justification for the exemptions;
- The state and federally mandated civil right of all children in New York City and State to a quality, free public education requires adequate public funding that is increasingly difficult to raise;
- New York City’s evolving role in the global economy calls for new public assessments about the levels and types of education that are adequate and necessary to meet the needs of city residents, businesses and local government, and how to best ensure that such education will be affordable and accessible for all New Yorkers;
- The changing nature and role of private educational institutions, particularly at the college level, raise questions about the extent to which these institutions continue to provide the “public benefits” on which their property tax exemptions are based, as well as the extent to which they remain distinguishable from private for-profit businesses.
Many (though not all) of the recommendations contained in this paper also apply to other state-mandated categories of property tax exemptions, especially religious and charitable exemptions, which, like education, are afforded particular protection by the New York State Constitution. Finally, most of the issues examined here affect not only New York City, but most other municipalities and localities throughout New York State. As you read this report, we urge that you consider the following broad policy questions that apply to property tax exemptions generally:
- Whether the existing property tax exemption structure should be maintained, and if so, for how long, under what conditions, and for which activities, properties, entities and individuals;
- What role should local governments play in determining the nature, duration and scope of property tax exemptions, as well as the uses of such properties;
- Which level(s) of government should bear the costs of property tax exemptions;
- What alternative mechanisms to property tax exemptions might be implemented and funded to provide better-targeted, more cost-effective subsidies for public-benefit activities;
- Whether service or user charges should be imposed on institutional owners of exempt properties to compensate localities for the institutions’ consumption of local services and use of public infrastructure, and if so, in what form(s) and in what amounts.

At any particular moment, whether New York City’s revenue flow is healthy or anemic, annual revenue losses in the billions from tax-exempt properties have a profound but unperceived impact on the city and all of its residents and institutions. Given the uncontrolled growth of property tax exemptions and their fiscal and other policy impacts on local governments, the time is ripe for a comprehensive re-examination of all private tax-exempt properties in New York City and throughout the state. It is our intention and hope that this report (together with our previous report “State of Distress”) will launch an open public debate about these issues, starting with exemptions for properties of private educational institutions.

PART I: THE NEW YORK CITY PROPERTY TAX AND TAX EXEMPTIONS

Real Estate Taxes: New York City’s Fiscal Lifeblood
Since 1980, when federal aid to states and cities began a precipitous 25-year decline and New York State’s aid to the New York City likewise shrank, New York City has increasingly had to raise its own revenues to fund essential local services and crucial infrastructure.
Over time, the city has developed a diverse tax structure that goes well beyond the property tax, which tends to be the only or major revenue source available to other localities. In addition to the property tax, New York City’s tax roster now includes: two other real estate-related taxes; a personal income tax; three major business income taxes; a general sales tax; and an array of other sales, excise and use taxes, along with a smorgasbord of fines, service charges and fees.
The result is a diversified revenue base and freedom from over-reliance on any one tax, especially the property tax. Although this multiplicity of revenue streams has raised charges of over-taxation, in general, it has enabled New York City to meet its service needs and maintain its infrastructure during economic downturns, while keeping its property taxes significantly lower than elsewhere in region.
But even with the city’s broad mix of taxes, the property tax has been and remains its single largest source of income, bringing in much higher revenues than any other source. In FY 2005, the property tax generated $11.6 billion in revenue, representing over 37% of all city tax revenues. If the city’s two other real estate-related taxes (the property transfer tax and mortgage recording tax, both of which were at all-time highs in FY 2005) are included, the total take from real estate-related taxes climbs to $13.9 billion, or fully 45% of all local tax revenues. Because of statutory phase-in restrictions and ceilings on property tax increases, the property tax is also the most stable and predictable city tax.
As Table 1 (below) shows, there is a sharp disparity in the amount of city revenues raised by real property-related taxes on one hand and all other major local taxes on the other. The city’s second largest source of tax revenue, the personal income tax (PIT), generated almost $6.7 billion, representing 21% of locally raised tax revenues--certainly a rich haul (and an all-time high for this tax), but still less than half the funds generated by real-estate-related taxes. Clearly, New York City’s real estate gold significantly trumps revenue from Wall Street salaries and bonuses.

In FY 2005, revenue from the city’s three real estate taxes exceeded federal categorical aid to the city by $7.3 billion and state aid to the city by $5.1 billion. In fact, the city’s real estate-related taxes brought in just $1.5 billion less than state and federal categorical aid combined.
In addition to being the largest source of city revenues, the property tax is unique in that, unlike all other city taxes, it is a zero-sum game. The city establishes its annual property tax levy, which is the actual amount of revenue it must raise from the property tax, and then apportions this sum among all taxable properties within its tax base at the different rates set for each of the four classes of property. Tax-exempt properties are excluded from this base, which means their share of the tax burden is shifted to the remaining universe of taxable properties, a base that is shrinking every year. With all other taxes, exemptions, cuts, or waivers of taxes for some taxpayers reduce the amount of revenue the government collects from that particular tax, but do not increase the amount of taxes paid by others subject to the tax.
In short, owners and occupants of taxable residential or commercial properties in New York City
effectively subsidize the tax-breaks granted to exempt properties. Businesses, primarily small ones, that rent commercial space pay a pro-rated share of their building’s property taxes and all tax increases under universal property tax “pass-through” provisions contained in their leases. And residential tenants likewise share the increased tax burden, either through market-driven rent increases, or annual rent increases set for the city’s declining stock of regulated rental housing, both of which reflect property tax increases.

The Thriving Underworld of New York City Property Tax Exemptions
In FY 2005, New York City lost at least $7.3 billion in property tax revenues as a result of a bulging array of full and partial property tax exemptions, the vast majority of which the city has no control over.
To place the city’s $7.3 billion exemption-caused tax loss in context, it represents more money than was generated by either the personal income tax or the general sales tax. It is more than the amount money brought in by the three major business income taxes combined, and more than all of the city’s fees, fines and user charges combined. (See Table 1, above.) It is exactly the same amount of funds that the city received in federal categorical aid. The amount of money lost to property tax exemptions represents almost 24% of total local tax revenue and slightly less than 14% of the city’s total expense budget for FY 2005.
And the figures pertaining to these lost revenues are almost certainly significantly understated. Their validity depends on the accuracy and frequency of the New York City Department of Finance’s (DOF’s) property tax assessments. DOF is charged with annually assessing all of the nearly one million properties in the city--unlike other jurisdictions in the state that do not even attempt to reassess tax-exempt properties. But with finite resources and a small assessment staff, logic and good management would dictate that DOF concentrate its assessment activities on the city’s many thousands of taxable properties, which obviously will bring in the most revenue. In fact, a DOF source informally acknowledged that given the huge inventory of properties in the city and the relatively small property tax assessor staff, exempt properties do not receive comparable attention to taxable ones, and that the total tax expenditure figure is underestimated.
In FY 2005, according to DOF, there were 988,561 properties located throughout the five boroughs, which together were worth over $181.6 billion in total billable assessed value.
But because of hundreds of categories of tax exemptions, only 416,532 properties, or 42.1%, were fully taxable, down from just over 50% in FY 2004. This marked a 16% decline from just one year before. What’s more, the fully taxable properties were worth only 40.2% (or $73 billion) of the total billable assessed value of all city properties, a small decline in value from FY 2004.
By comparison, in FY 2005, only 3.62% of all properties in the city (a total of 35,610) were fully tax exempt. But this relatively small number of properties accounted for a staggering $68.7 billion in total billable assessed value, or just $3.3 billion less than the total value of hundreds of thousands of fully taxable properties. And while the number of fully exempt properties increased by just over 1% from the previous year, their value rose by 2.84%.
Completing the exemption picture, the city had 536,210 partially taxable properties in FY 2005, representing a one-year increase of 17.55%; their total billable assessed value climbed by almost 17% to $38.9 billion. Together, the city’s 572,029 fully and partially tax-exempt properties represent less than 58% of all city properties and a staggering 59.7% of the total billable assessed value of all real estate in the city.
In other words, just over 40% of the total billable assessed value of the city’s real estate is being fully captured by the property tax.

Tax Expenditures: A Fiscal Oxymoron
In budgeting parlance, the term used for revenues that are not collected because of tax exemptions is "tax expenditures." The New York City Department of Finance defines tax expenditures as “deviations from the basic tax structure that reduce taxes for specific taxpayers or groups of taxpayers. Traditionally, tax expenditures have been used to alter the distribution of the tax burden and to create incentives for taxpayers to change economic behavior. Tax expenditures provide economic benefits and are often used as alternatives to direct governmental allocations.”
But a more apt description of “tax expenditures” is “fiscal oxymoron.” The term sounds as though it entails the active spending of tax dollars, when, in fact, it refers to tax dollars that are not collected. Unlike the annual budget process through which collected tax revenues are spent for public services and other public needs, tax expenditures occur "off-budget.” They do not appear anywhere in the city's budget as expense items and are therefore not subject to the public scrutiny or accountability of the formal budget process.

An Out-of-Date, Out-of-Control State Property Tax Exemption System
The last official joint state legislative committee that examined New York State’s system of property tax exemptions, over 35 years ago, characterized it as “a complex mixture of some reasonable subsidies interwoven with anachronisms, patent gifts, statutory ambiguities …entrenched inequities and fair incentives which are misdirected in whole or in part.”
This same committee also predicted that, absent major reform, by 1985, 50% of property throughout the state would be tax exempt. This prediction turned out to be depressingly on the mark. Less than three decades ago, in 1967, tax-exempt properties in New York City comprised just over 33% of the total assessed value of city real estate. Today, almost 60% of the city’s properties are fully or partially tax exempt.
The number, categories and value of exempt properties, and, above all, the amount of lost revenue, continue to grow at an alarming rate, like mushrooms in dark spaces hidden from sunlight. Tax-exempt properties present a problem that is literally open-ended, without any legal, practical or political limitation or end in sight.
Because property tax exemptions are in fact public subsidies and are proliferating rapidly, they should be subject to close ongoing public scrutiny and periodic re-evaluation. Unfortunately, this is not the case. As far as City Project could discover, there is no official state or city agency keeping count of the exact number of categories and subcategories of tax exemptions on the books (at last official count, there were over 180 statutory exemptions for individuals and institutions, and that was nearly 15 years ago ), or publicly reporting on cumulative revenue losses from the entire universe of property tax exemptions.
The New York City Department of Finance produces two city Charter-mandated annual reports--the Annual Report on Tax Expenditures and the Annual Report on the New York City Property Tax--each of which contains partial information, but with significant holes.
DOF’s Annual Report on Tax Expenditures (ARTE) restricts its analysis to a small portion of the properties receiving full or partial property tax exemptions in New York City. The report only covers tax-expenditure (and abatement) programs related to “city-administered real estate,” housing and economic development programs, as well as a number of city-administered business income and tax excise expenditure programs. The most glaring omission is its failure to report on any tax expenditures granted to non-profit institutions by virtue of their tax-exempt status, as opposed to pursuant to any city or state tax-exemption program, which excludes the vast majority of expenditures from educational, religious and charitable organizations, among others. On the other hand, the Annual Report on the New York City Property Tax (ARPT) now provides, among other information, comprehensive and detailed data about all exempt properties in New York City --except the value and cost of their tax expenditures. (See below, The Missing Roadmap to New York City Tax Expenditures.)
The city’s narrow tax expenditure reporting practices deny both policymakers and the public complete and accurate information about critical revenue losses and effectively preclude public debate about the validity and viability of continuing to grant current tax expenditures.

Property Tax Exemptions for Whom?
In FY 2005, DOF’s ARPT reported that 680,938 property tax exemptions were taken by 572,029 properties in New York City, with the number of exemptions actually exceeding the number of properties receiving them because a portion of these properties received multiple exemptions. Together, these properties had an exempt tax value of $79.25 billion.
According to DOF, exempt public properties--properties in New York City owned by the city, state, federal and foreign governments, and by various state and city public authorities--account for nearly 70% of the total exempt value of exempt properties, although the total number of exemptions for these properties amounts to just over 20,150, or less than 3% of the total number of exemptions. Various governmental properties alone account for almost 45% of the total value of exempt properties in New York City, with the properties of state and city public authorities accounting for just under 24%. These properties tend to be larger in size and concentrated in high-value neighborhoods, leading to a relatively small number costing the city a king’s ransom in lost property tax revenues. (See City Project’s report “State of Distress” for analysis of $1.5 billion in annual tax losses from properties owned by the state and five public authorities.)
In direct contrast to public properties, where a relatively small number of exemptions account for a huge portion of the total exempt value, private properties received more than 660,700 exemptions (or 97% of the total number of exemptions), but together, they accounted for a total exempt value of $24.6 billion, or 31.1% of the total value of exempt properties.
DOF tracks four main categories (each with many subcategories) of tax-exempt private properties: 1) those owned by “institutional” not-for-profit organizations, which include but are not limited to the three state constitutional categories of religious, educational and charitable entities; 2) various categories of residential property, owned by both non-profit and for-profit entities; 3) categories of commercial and industrial properties; and 4) residential properties owned by specific classes of individuals.
As a rule of thumb, tax exemptions granted to private properties in categories 2, 3, and 4 tend to be restricted in duration and eligibility and may be subject to governmental approval or oversight. Many tend to be partial rather than full exemptions (or abatements), and some may allow for or require Payments In Lieu Of Taxes (PILOTs). Some of these exemptions actually enable localities to opt out. They derive from state (or, to a far lesser degree, local) laws, rather than the state Constitution, and may be amended or repealed at the discretion of the legislature that created them, usually the state’s.
Tax exemptions granted to education, religious and charitable properties in category 1 stand in stark contrast to this general rule. They are constitutionally conferred and are mandatory, full (for the most part) and permanent. In FY 2005, all category 1 institutional non-profit properties were worth almost $11.9 billion in exempt value (or 15% of the citywide total private exempt value of $24.62 billion) and receive over 15,300 exemptions (or 2.25% of the number of private exemptions).

PART II: TAX EXEMPTIONS FOR PRIVATE UNIVERSITIES

The Why and What of Special Tax Protections for Educational Properties
Any discussion of educational property tax expenditures must begin with an acknowledgement of their special exempt status and what it does--and does not--mean in terms of potential reforms.
In 1938, the New York State Constitution was amended to codify the state’s existing crazy quilt of property tax exemptions that had developed in an ad hoc fashion over time. The amendment established that, in general, property tax exemptions could be created, changed or repealed by state law, rather than requiring subsequent constitutional amendments. However, one provision carved out an exception to this rule for properties owned by not-for-profit religious, educational and charitable institutions:
“Exemptions from taxation may be granted only by general laws. Exemptions may be altered or repealed except those exempting real or personal property used exclusively for religious, educational or charitable purposes as defined by law and owned by any corporation or association organized or conducted exclusively for one or more of such purposes and not operating for profit.”
The state legislative committee that drafted this language described its rationale for making educational properties one of three protected classes in its report to the State Constitutional Convention:
“(E)ducational institutions render a service which, in great measure, would otherwise have to be rendered by the State itself, and each institution lessens the burden which would have to be borne entirely by the community at large and discharged by taxation. … It can readily be demonstrated that the…cost and value of the services rendered to the public by the private…institutions, and the saving thereby effected to the budget or taxpayers of states and cities, greatly exceed the aggregate of all exemptions granted or other allowances and payments made to them.”
The exception of educational institutions to the main thrust of the amendment was premised on the claim “that private property necessary to the essential support of government ought not to be the subject of taxation.” This early formulation of a public cost-public benefit analysis was asserted without reference to or support from any research or data that actually measured the relative public benefits of private education or the public costs of their tax-exempt properties.
Furthermore, however powerfully expressed and widely believed this notion may have been in 1938, the decision to include the particular protection in the amendment was arrived at with little legislative or public discussion about and no consensus as to the concrete meaning of the “public benefit” principle or the contemplated covered usages of the exempt properties. This is why the amendment contains language specifically authorizing the state Legislature to define the types of properties to be covered by the exemption. (A more pungent, wide-ranging and ideological rationale was expressed by Nicholas Murray Butler, the president of Columbia University, who declared that property tax exemptions for private universities were essential to preserve “the fundamental and far-reaching” principle of the “distinction between the field of Government and the field of Liberty,” against the “most subtle form of [social, economic and political] revolution which confronts American democracy today … which is easily and silently possible thorough taxation.” )
Three points must be made here. The first is that what seems to be a blanket constitutional exemption does not confer absolute or permanent tax exemption on properties owned by educational, charitable or religious institutions. Rather, it requires that any alteration or repeal of such exemptions be accomplished through constitutional amendment rather than by state law, in contrast to all other categories of institutional or individual exemptions, which permit alteration or repeal by state statute. Second, it does not grant wholesale exemption to any and all properties owned by these groups. In fact, it restricts the mandatory exemption to properties “used exclusively” for one or more of the three exempt purposes. Finally, through the phrase “as defined by law,” the amendment not only authorizes, but, we would argue, mandates that the state Legislature enact language to define and restrict the allowable uses of such properties, which the Legislature has failed to do. Lacking any such qualifying legislation, judicial interpretations of this clause have established that properties owned by these three types of exempt institutions that are used wholly for commercial revenue-generating purposes are required to pay full local property taxes; those that are put to mixed use (exempt and non-exempt purposed) are required to pay taxes calculated on a pro-rated basis for the non-exempt portion. We will return to these qualified conditions later.
While it may have been true, even as late as 1938, that private educational institutions provided a service at little or no cost to the public coffers, this has long since ceased to be the case.
As this report documents, the public costs of exempting properties owned by private educational institutions, far from lightening public tax burdens, actually impose heavy and spiraling costs on the public treasury over and above the legally mandated costs of providing free public education at the primary and secondary levels, and subsidized public higher education.
Scrutinizing Public Subsidies for Private Education
Currently, of “institutional” non-profits, under which DOF includes charitable, religious, educational, cultural, medical, and “special interest” organizations, educational institutions have the third highest exempt property value at $2.31 billion, after religious properties (with $3.83 billion) and medical facilities (with $3.39 billion). Charitable properties trail in fourth place, with a value of $1.12 billion, a significant amount, but less than half the value of educational properties and one-third that of religious and medical properties.
While they do not represent either the highest value of exempt properties or the largest tax expenditures, all levels of private educational properties together cost New York City at least $385,826,261 in lost property taxes in FY 2005--money that would otherwise have flowed into the city’s coffers for spending on public education or other public services and needs. For this reason alone, educational tax exemptions merit scrutiny.
(For a description of how City Project created a reliable property tax exemption of educational properties for this report, see Appendix C, How City Project Recreated the (Property Tax Exemption) Universe, p. 101.)
But just as Congress is now calling for closer scrutiny of the federal income tax exemption of private non-profit hospitals because of questions about the extent to which they provide charity care and other concrete public benefits, City Project believes that property tax exemptions of private educational institutions, particularly colleges and universities, deserve special scrutiny because of the nature of their “public benefits” and the ways in which they differ from many other types of non-profit institutions. These issues include:
- Their major public benefits--their educational services--are not open or available to the general public and they have no obligation or substantial incentive to educate local residents;
- The majority of individuals who benefit from educational services at private universities are, in fact, not residents of New York City (Appendix A, City Resident Enrollment at Property-Owning Private Institutions Compared to Public Institutions, p 95), and the fruits of their research and other non-teaching activities likewise extend well beyond the city’s borders to the state, the nation and even internationally, while their costs are borne by local taxpayers;
- Instead of providing a unique public benefit that would otherwise either go unmet or fall to government, they duplicate (and compete for public funding with) public primary and secondary education, a constitutionally mandated and public obligation, and with public higher education, which is substantially funded through the city and state public university systems, at far lower costs and with far greater public accessibility;
- They collectively own a large, valuable and growing inventory of property (and are actively acquiring more), an increasing portion of which are used for purposes other than their exempt educational purpose;
- Many are increasingly engaged in commercial revenue-generating activities in collaboration or competition with for-profit enterprises and are adopting other indicia of the corporate world that blur the distinctions between them and certain segments of the for-profit private sector, which diminishes or may negate the rationale for their property tax exemptions;
- They deliver educational services to large numbers of students in highly concentrated geographic areas, which places a heavy burden on city-funded public services (police, fire, sanitation, transportation, etc.) and infrastructure, which the institutions use and consume without paying any compensation to the city.
If the historic, theoretic and practical foundations of the wholesale, permanent tax exemption of properties owned by private non-profit educational institutions are no longer applicable, and if, as we believe, New York City’s public interest is greater than the sum of the interests of individual educational institutions, then a full inquiry into continuing such exemptions in their current scope and form is, itself, very much in the public interest.

New York City: A College Town on Steroids
New York City hardly fits the stereotype of the typical American college town: a small city, suburb or rural area, with one or at most two large educational institutions that by size and impact resemble the proverbial 900-pound gorilla, dominating the local economy and shaping day-to-day life in ways that tend to produce sharp “town-gown” tensions. Harvard and MIT and Cambridge/ Boston, Yale and New Haven, or Cornell University and Ithaca, NY, all come to mind.
But New York City nonetheless is a college town–on steroids. It is home to at least 52 private non-profit colleges and universities, which together serve almost 214,000 full- and part-time degree-seeking students and employ tens of thousands of people. (Recent years have seen a burgeoning industry of private for-profit higher education institutions in the city, many of which receive various state-funded higher education subsidies, but their properties, if they own any, are not tax-exempt, and therefore they are outside the scope of this report.)
While no single private university dominates the city’s economy or other major aspects of local life (although a small number do have disproportionate impacts), by virtue of the cumulative number of institutions, their geographic locations and concentrations, private higher education as an industry has a significant impact on the city’s economic and cultural life, as well as on its fiscal bottom line. And in terms of strained community relations with host neighborhoods, a handful of private universities unfortunately have functioned in ways that are highly reminiscent of the traditional town-gown model.
Higher education in the city also encompasses the City University of New York (CUNY) and four city-sited institutions of the State University of New York (SUNY), which together have an enrollment nearly 232,000 students. (See Table 2, below.)

Altogether, more than 430,000 students are enrolled in degree-granting programs at New York City higher educational institutions, including two- and four-year colleges and graduate and professional schools. Students enrolled in public higher institutions slightly outnumber those in private ones (by 33,311) and constitute slightly less than 54% of all degree-enrolled students in the city. These figures do not include at least an additional quarter-million New Yorkers who are taking non-degree courses at colleges and universities in the city.

Tax-Exempt University Properties
Of the city’s private non-profit higher education universe, 40 institutions own property (38, if Barnard and Teachers College, as affiliates, are folded into Columbia University’s totals). Citywide, in FY 2005, these institutions cumulatively owned at least 706 individual tax-exempt properties, the assessed value of which was $2.63 billion, with their exempt value amounting to $2.21 billion, indicating that the overwhelming majority of educational properties receive full tax exemption. Together, these properties cost New York City at least $266,795,568 in foregone property taxes in 2005 alone. (See Appendix B, Private College and University Property Tax Expenditures, FY 2005, p 98.) These figures and Table 3 (below) do not include eight properties owned by non-NYC-based institutions or four higher education properties that, like the International House, are not owned by an individual university.
It is important to view this data in its historical context. As recently as FY 1992, the total assessed value of properties owned by higher educational institutions in New York City amounted to $934,795,421, with an exempt value at slightly over $858,925,000. Most significantly, in 1992, they cost New York City $90,859,046 in foregone property taxes.
In other words, the city’s lost tax revenues from tax-exempt college and university properties almost tripled in just 13 years. And remember, the current $266+ million in tax expenditures is a conservatively estimated, recurring loss that continues to rise year after year.
As Table 3, below, illustrates, Manhattan is the epicenter of private higher education in the city and, given the extraordinary value of its real estate, the unrivalled seat of lost city revenues.
The loss of revenues from higher educational properties is considerable, but the bulk is attributable to a relatively small number of colleges and universities that own a disproportionate number and value of properties.
As Table 4, below, demonstrates, ten universities account for almost 83% of higher education property tax expenditures. But most striking is the size of the real estate footprint and tax consequences of just two of them: Columbia University (including Teachers College and Barnard) and New York University. Together, they are responsible for fully 45% of the total revenue loss from all higher education properties, and own 381 properties, or 54% of the number of properties owned by private colleges and universities in the city.
Columbia alone owns 261 tax-exempt properties, with NYU in second place with 105 properties. But the numbers of both universities (as well as several others) are increasing almost daily as they expand beyond current campuses into new neighborhoods. (See profiles of Columbia and NYU, p. 50 and p.60, below.)

The remaining top ten universities own relatively few properties, but they tend to be of high assessed and exempt value and hence account for significant tax expenditures. Yeshiva University, the only real exception to this general rule, owns at least 123 properties, but the vast majority of them are individual condos or other single housing units.

City Subsidies for Non-Residents
Since the historic justification for property tax subsidies for private colleges and universities are the public benefits they allegedly provide, one concrete way to measure these benefits to the city and its residents is to determine who actually receives and directly benefits from their services.
To do this, City Project obtained and analyzed data relating to the recorded residences of enrolled higher education students, and then compared the number and proportion of city residents attending private property-owning colleges and universities to those attending CUNY and SUNY’s four campuses located in New York City.

Our findings were stark: overall, only 38.2% (79,505) of a total of 208,012 students enrolled in private property-owning colleges and universities in New York City in 2004 were city residents. By comparison, 83.3% or 181,696 of CUNY’s total student body were city residents. Rounding out the picture, 49% (6,662 of 13,579) of the students attending the four city-sited State University of New York (SUNY) institutions were residents of New York City. (For comprehensive student residency information for all private and public colleges and universities in New York City, see Appendix A, City Resident Enrollment at Property-Owning Private Institutions Compared to Public Institutions, 2004, p. 95.)

The city residency rate for students among the top ten property-owning universities drops even lower than the overall rate for all private institutions. These ten universities, which together account for over $221 million or almost 83% of all higher education property tax expenditures, enroll a total of 132,619 students. Of this number, only 38,800 or 29.2% are city residents.
With a few exceptions, as Chart 1 (below) depicts, it appears that the higher the profile and reputation a university has, the greater the value of its properties and its tax expenditures, and the more likely it is to attract out-of-town students, while providing substantially fewer city residents with the benefits of its publicly-subsidized private education.
Besides Columbia and NYU, the two real estate giants, it’s instructive to compare Fordham University and St John’s University, two facially similar top-ten institutions, each of which costs the city over $23 million a year in foregone property taxes. Both are Catholic institutions (Fordham is Jesuit; St John’s is Vincentian); both have multiple campuses, with the main campus for each located outside of Manhattan (Fordham’s is in the Bronx, St John’s’ is in Queens); and both offer undergraduate, graduate and law degrees, among other programs. St John’s is larger by almost 6,000 students, as well as less expensive, although tuition for both is well above $20,000. Both market themselves nationally and internationally. But beyond the city limits, Fordham is better known and more competitive than St John’s. As a result, Fordham attracts a far more geographically diverse student body: only 12.4% of its students are from the city, compared to 61.4% at St John’s. Fordham’s entering students also have substantially higher paper credentials,
with 72% of entering full-time freshmen in the top quarter of their high school class, and 34% in the top 10%, compared to 51% of those entering St John’s ranking in the top 25% of their high school class, and 23% in the top 10%. Similar differences exist between the two schools with respect to entering freshmen SAT scores and grade point averages.
While the benefits to New York City from private higher education are not confined to the city residents who actually attend the schools, the public subsidies are not restricted to city residents either. With the rising cost of public higher education and shrinking public funding, it seems appropriate to ask whether indiscriminate, permanent property tax exemptions are the best and most cost-effective way to finance higher education for New Yorkers.

Educators or Real Estate Empire Builders?
Not all tax-exempt educational properties are equal. They vary widely in terms of their type, usage and degree of connection to an institution’s fundamental educational mission, which is, after all, the rationale for granting them property tax exemptions in the first place.
As discussed above, DOF implicitly recognizes the different nature and uses of such properties in the manner in which it classifies them in its property tax exemption rolls. It uses three major categories or exemption codes to record these properties: “college/university” (Exemption Code 1601); “student dorm” (Exemption Code 1603); and “faculty & student housing” (Exemption Code1604).
When it comes to college and university properties in New York City, there is a distinct but largely unacknowledged difference between two general types of properties and real estate activities. First, there is the majority of properties that are specifically educational in nature. Classified for the most part under DOF’s code for “college/university,” these properties tend to be learning facilities (classrooms, libraries, laboratories, etc.), along with support facilities, including faculty and administrative offices. With some exceptions, they tend to have been originally constructed to serve the educational purposes they actually perform: to provide space for students to learn, for faculty to research and write, and for administrators to keep the institution functioning.
On the other hand, there is a second category of real estate activities and properties, currently in the minority but growing apace, which City Project is calling “real estate empire building,” which generally refers to tax-exempt educational properties that are not directly educational in nature. This category usually involves a university’s acquisition of existing, privately owned non-educational properties, frequently entire residential apartment buildings, for use as permanent housing by university faculty, staff and, occasionally, graduate students. It may also entail the purchase of existing commercial properties for university use as commercial, mixed-use, or administrative buildings. “Empire building” also includes the less frequent but growing practice of purchasing and demolishing various existing properties and replacing them with newly constructed buildings for use by the university for residential, mixed-use, or educational purposes.
Under City Project’s definition, real estate activities are considered empire building when the number and tax expenditures from non-educational (or extra-educational) properties either exceed those of educational facilities or constitute a significant portion of an institution’s total property portfolio. (In this definition we would also include institutions whose general real estate development activities constitute a significant portion of their capital expenditures, but this report does not analyze this factor.)
As illustrated in Appendix B, a significant number (and value) of properties acquired or developed by universities and colleges are permanent, full-year apartment buildings, which DOF records under its category of “faculty & student housing,” more to distinguish them from instructional and other educational facilities than to differentiate them from regular rental housing, which the vast majority of them are. As of FY 2005, such properties represented more than $34 million in tax expenditures, with Columbia University’s housing stock alone worth almost $16 million in tax expenditures ($16.26 million if the “faculty & student” non-dormitory residential properties of its two affiliated institutions are included).
Several universities and colleges other than Columbia and NYU are also engaged in actively adding non-educational properties to their real estate portfolios. For example, Yeshiva University currently owns 86 non-educational properties, which tend to be individual condo or co-op units; Marymount Manhattan College owns nine non-educational properties and one educational property; Teachers College, affiliated with Columbia, now owns five extra- or non-educational properties compared to three educational ones; and Jewish Theological Seminary owns thre non-educational properties compared to four educational ones.
Many of these properties were privately-owned, pre-existing residential buildings that were purchased by colleges and universities, taken off the tax rolls, removed from the general housing stock of the city, and repurposed for use as below-market rate faculty and other institutionally restricted housing. Such tax-exempt activities drain the city treasury of much-needed revenues and may have the additional effect of artificially inflating housing values and reducing housing affordability for the residents of the neighborhoods where these buildings are located.
Another activity that may be occurring more broadly is the purchase by educational institutions of individual units of housing, primarily condos, for use by faculty and administrators. Yeshiva University seems to have the lead in this area of residential housing. This type of housing purchase has similar impacts to the purchase of entire residential buildings, but on a smaller, more scattered scale.
Above all, both types of permanent housing purchases have one fundamental characteristic in common: they bear no intrinsic relationship to the exempt educational mission of their institutional owners and can by no stretch of either imagination or definition be classified as being used “exclusively for educational purposes,” as required by the state Constitution.
However important--or necessary--the incentive such below-market rate housing may be for recruiting and retaining valued faculty and other staff, it is absurd to claim that such benefits should be subsidized by all city taxpayers. In a city where the term “affordable housing” has become a true oxymoron, the development and allocation of rare housing subsidies should be determined by publicly established city housing policies, not by the unreviewable, unilateral and self-interested actions of private educational institutions.
And then there is the issue of student dorms and other types of unique student housing facilities. Such properties (categorized by DOF as “Student Dorms”) accounted for an additional $26.9 million in tax expenditures in 2005. We have not included such properties as non-educational empire-building, although it could credibly be argued that dormitories also constitute an extra-educational use of property. Student dorms are, however, at least more closely related to the basic educational mission of colleges and universities than providing publicly-subsidized permanent housing for faculty and other university personnel, or displacing taxpaying for-profit businesses. In addition, most dormitories are uniquely and exclusively of use in housing students and could not be used to house the general population, since individual units tend to lack bathroom and/or kitchen facilities and do not conform to New York City’s legal definition of self-contained general housing (Class A) units. In addition, dorms tend to be fully occupied and used on an academic- rather than calendar-year basis.
But while providing student housing may be more closely related to the exempt purpose of educational institutions, it too merits closer review and at least some recalibration because it represents an expanding public subsidy to non-city residents and may also cause the direct or indirect displacement of long-time neighborhood residents where they are being developed.
Increasing numbers of New York City-based universities (e.g., NYU, St John’s, etc.) are evolving from “commuter schools,” where student bodies were overwhelmingly comprised of city residents who lived at home or elsewhere off-campus, to “campus schools,” attracting many more of out-of-town students. As Appendix A illustrates, of the city’s 40 private property-owning colleges and universities, in 2004, only 12 had student bodies containing a majority of city residents. This shift is creating a greatly expanded need for additional residential student space.
The result is an ironic and untenable situation in which private universities are developing more properties as student dorms and other forms of less-than-permanent housing for their growing number of non-city-resident students, while receiving greater city-subsidized property tax exemptions for them. With the exception of new construction on vacant land, the development of student housing almost always entails a university’s purchase of a taxable property and its removal from the city’s property rolls.
These activities also transform properties previously available to segments of the city’s residential or commercial publics to uses accessible only to a restricted class of individuals or activities affiliated with the educational institution. Finally, in many cases the institution may upgrade the purchased property, yet no portion of the property’s increased value benefits the city.
Empire building is still a distinctly minority practice in terms of the number of educational institutions engaged in it, but it is on the rise in importance, numbers, impact and value--especially in terms of lost city tax revenues--and there are no current legal limits to its restrain its expansion.
The threshold question is whether the nature or use of a property by a private university or college should determine its eligibility for an education-based tax-exemption? The straightforward answer is absolutely. Even under the existing 1938 constitutional amendment, tax-exempt properties must be used “exclusively for” educational purposes “as defined by law” to be protected from legislative change, which certainly seems to exclude at least faculty housing from classification as an “educational purpose.”

Other Subsidies for Private Universities
Property tax exemptions are not the only type of public subsidies that private colleges and universities receive from New York City and State. Many receive substantial amounts of tax-exempt bond financing for the purchase, improvement or construction of tax-exempt facilities. (This issue is beyond the scope of this report).
There are also a number of education-specific subsidies, including the state’s Bundy Aid program, which provides an annual cash payment to all private universities that apply, based on the number of degrees granted each year. The exact amount of the payments is governed by state law, which establishes a sliding scale that varies by the type of degrees awarded. Bundy Aid is a source of totally unrestricted aid, with no requirements as to usage, which makes these funds highly coveted by all private colleges and universities.
For FY 2004, $42 million in Bundy Aid was disbursed to 103 institutions statewide. This is substantially lower than the maximum amount allowable under state law, which the state Legislature routinely circumvents through language in its annual appropriations bills. The last year of full statutory funding was FY 1990, when the state provided $107 million in Bundy Aid payments to private colleges and universities. Though the program has not been immune to the budget cuts of the 1990s, nevertheless, some of the wealthiest universities in the city and state are receiving taxpayer money to do precisely what their property tax-exempt purpose requires them to do: confer academic degrees. For example, in FY 2004, NYU received $4.5 million in Bundy Aid, Columbia University received $2.9 million, Cornell University received $1.8 million, and Fordham University received $1.4 million.

PART III: HIGHER EDUCATION IN CONTEXT

The Growing Importance of Higher Education to New York City
Historically, education has been fundamental to the city’s ability to successfully integrate waves of new immigrants and provide a pathway to the middle class for many other New Yorkers. As information- and technology-based jobs replace the manufacturing jobs that once formed the backbone of the American economy and provided entry into the broad middle class, there is a growing consensus among educators, business leaders and public policy makers that most American workers need a college degree or some level of post-secondary training to qualify for and retain well-paying employment.
Private business isn’t the only sector to benefit from a college-educated workforce. For local government, higher education is an extremely cost-effective investment. College educated residents earn more, which translates into increased public revenues from personal income and sales taxes; they make fewer demands on public social services and more informed health and lifestyle choices, which produce public savings; and engage in more prudent decision-making about personal finance, retirement and health, likewise reducing government responsibility and expense in these areas. They also tend to be more active participants in the civic, political and cultural life of the city, further enriching our collective social environment.

Declining Public Support for and Access to Higher Education
Despite overwhelming evidence of the enormous benefits of enabling the American workforce to obtain higher education or other post-secondary training, public funding for higher education has been on a significant decline here and throughout the country in recent years. Economic and education experts continue to raise dire warnings that public underfunding of higher and continuing education is creating an impassable bottleneck in the availability and affordability of higher education, which threatens to undermine American businesses’ ability to effectively compete in the global economy and to create even wider income disparities in our increasingly diverse workforce.
One report by a mainstream national commission dramatically characterized the impact from this growing gap between societal and individual educational needs for higher education and its availability as “a time bomb ticking under the nation’s social and economic founda-tions.” The prescription for bridging the gap and preventing this scenario is the immediate and substantial increase in public funding for both secondary and higher education.
Experts have pointed to a number of explanations for the decline in state funding and involvement in higher education, including: 1) decreased funding for public higher education from rising public demand for other public services, including health care and public schools, coupled with pressure to reduce state and local taxes and decentralize and privatize state services; 2) shifting the burden of the costs of higher education away from public funding through subsidies to institutions and need-based aid, to individual students and their families through increased tuition and fees; and 3) the expansion of new modes of providing higher education, including for-profit and distance-based institutions, and their growing alliance with traditional non-profit institutions in support of shifting public financial support from institutions to individual students. In response to these and other political and fiscal pressures, most state legislatures and governors have “refocused the state role away from institutional oversight and regulation in favor of greater campus autonomy and market adaptability, and are encouraging institutions to be entrepreneurial to best compete in the markets they deem most appropriate.”
Although such changes may have benefited some individual institutions, “some key functions that serve the public do not flourish in a market-defined climate: affordable college access, particularly for low-income students; addressing achievement gaps between racial and economic subgroups; retaining students to a degree or other objective; assuring learning results…assuring adequate programs and student places in areas of public need and high costs; and responsiveness to high priority needs of employers and communities.”
The situation in New York State is particularly disheartening. In its annual 50-state “report card on higher education,” the National Center for Public Policy and Higher Education gave New York State an “F” for affordability of public higher education. The report found that New York required low- and middle-income families to pay a higher share of their incomes (nearly 50%) toward the cost of a public 4-year college (and almost the same amount for 2-year colleges) compared to other states, even after factoring in financial aid. The authors deemed New York’s system of public higher education “one of the least affordable systems in the country for students and families,” one that “does not offer low-priced college opportunities.”
New York State also received only a C+ in “participation,” which measures the opportunities that residents have to enroll in higher education, noting that “over the past decade, [New York] has made no notable progress in enrolling students in higher education,” with the chance for doing so by age 19 actually declining by 23%. The authors also noted that “the percentage of working-age adults who enrolled part-time in college-level education or training had likewise declined, by 19% compared to a national decline of 11%.”
At the city level, one educator summarized the situation thus: “[T]here is a quiet crisis in
higher education in New York City. It is … the permanent recession.” His prognostication for additional public disinvestment was as glum as it was colorful: “The recession in higher education in New York us like a chronic cough; there may be an occasional respite, but, given current conditions, it is sure to persist.”
Higher Education as Big Business
There is no question that private colleges and universities bring multiple benefits to New York City. In addition to educating students, they create jobs, buy local goods and services, and contribute to the city’s cultural and intellectual life. While the importance to the city’s economy of the so-called FIRE sector (finance, insurance and real estate) has always been highly touted, some observers claim the ICE sector (intellectual, cultural, educational and spiritual institutions) is key to the city’s remaining a global mega-center.
In terms of employment, Crain’s New York Business ranks NYU as the sixth largest private employer in the city in 2003, with 13,216 employees, and Columbia University as the eighth largest, with 12,525 employees. The number of employees at NYU and Columbia has grown by 2% and 3.3%, respectively, since 2002. Overall, the so-called “education supersector” (which includes primary and secondary education) constitutes the 12th largest employment supersector in the city, with a total of 122,100 employees in 2004.
Ironically, as education grows in economic importance, its cultural impacts may be diminishing. Historian Thomas Bender writes of the “academicization of intellectual and artistic life” in New York City, as growing numbers of writers, artists and other intellectuals, who in the past would have been “deeply involved” in city affairs, have instead become employed by universities and are focused on “increasingly insular campus concerns.” He notes, “If cities need universities, so the academy, if it is to avoid the fate of the dinosaur, desperately needs the intellectual, artistic and political provocations of a vibrant metropolitan culture. Others claim that New York City is experiencing a decline in its “creative class” as a result of the lack of affordable housing, an imbalance of payments between it and the federal government, federal cuts in critical urban programs, and inadequate state and local support for arts, culture and education.
In fact, in many respects, colleges and universities increasingly operate like big business. According to Crain’s, in 2003, NYU’s revenues were a staggering $2.005 billion, while Columbia’s were $2.074 billion, having grown by 7.4% and 3.3% over their respective 2002 revenues. Moreover, each was recently the recipient of individual private donations of $200 million.
And CEO compensation at colleges and universities is also beginning to rival the corporate world. The highest paid education CEO in New York State is Theresa Bischoff of NYU Hospital Center, one of nine college presidents nationally who were paid more than $900,000 in 2003-04. She received over $945,900 that year. NYU’s president, John Sexton, trailed not far behind with just over $897,000, and Syracuse University’s president received almost $802,000. More surprisingly, in the world of public higher education, CUNY Chancellor Matthew Goldstein was paid $444,800 (including a generous housing allowance) in the same period, while the president of SUNY at Albany ranked second with a salary of $371,000, and the president of SUNY overall received $340,000.
At the same time, universities have increasingly begun to seek and succeed in generating substantial revenues from fees for-services, the production and/or sale of goods, and commercial research. Some of the research activities involve fierce competition with the for-profit private sector, but a growing segment, particularly in higher education and healthcare, entails close collaborations.
One study found that between 1980-81 and 1987-88, “private-industry support for university research more than doubled in real terms,” with “virtually every major U.S. university” joining “forces in some manner with large multi-national firms, especially pharmaceutical and chemical firms,” and in the area of life sciences. Such private corporate support is naturally targeted to universities’ applied or commercial profit-oriented research, rather than basic or “pure” research. Similar patterns exist for relations between major private universities and various levels of government, especially at the federal level.
But the financial benefits from such market-oriented relationships may not turn out to be an unmitigated blessing, since they raise the specter of profound conflicts “between a nonprofit’s focus on raising revenues and its public-serving social mission.” As Bart Giametti, former president of Yale University, characterized the conflict, “the academic imperative…[is] to seek knowledge objectively and to share it openly and freely, while the industrial imperative is to garner a profit, which frequently creates the incentive to treat knowledge as private property.” The conflict is far from academic, as illustrated by a growing number of examples of troublesome commercial partnerships involving major American research universities and various corporate giants in which the academic obligation to share information fully and freely has been squelched by the terms of university-corporate partnership agreements.

An equally threatening issue is “goal displacement, as the social mission [of the institution] slips from sight in the drive for revenue…sometimes forcing organizations to choose between ‘capitalist appetites and…integrity.” Experts have warned that “if nonprofit…commercialism continues to increase in magnitude and scope, nonprofits will become even more entwined with private enterprise and less distinct from it.” One close-to-home example of this is Columbia University’s proposed biotech/biohazard research center and its collateral commercial development in the Manhattanville area of Harlem. (See Columbia University: “Who Owns New York?,” p. 50.)

The New York City Partnership, a leading trade association of the city’s most powerful businesses, and the New York City Economic Development Corporation, the city’s business and economic development public authority, have encouraged the increasing commercialization of higher education as a potential stimulus to economic development in New York City. But they have ignored the negative effects of blurring both practical and legal distinctions between non-profit universities and the for-profit private sector, and on higher education in New York City.

Partnerships between universities, private enterprise and government may indeed create new businesses or revitalize existing ones, as well as generate much-needed jobs and revenue for the city. If the products of such arrangements fall within the parameters of other city tax-exemption and abatement programs designed to create or retain jobs and facilitate economic development, universities should apply for these particular benefits just as private businesses do and be subject to the public scrutiny (limited as it may be) and other restrictive terms and conditions of such programs.
But however much the private sector and the city government itself might welcome such partnerships, the economic value of non-profit educational institutions to the city is neither the historic justification nor an adequate legal basis for their wholesale property tax exemptions as non-profit institutions. If the economic importance of a particular for-profit sector or business were a categorical reason for exempting properties from taxation, then Wall Street, Madison Avenue, Century 21 and others would not be paying any property taxes and the city’s tax base would shrink to almost nothing.
As a matter of public policy, we believe that the increasing commercial activities of universities must be factored into a public review of whether and under what conditions university properties should be accorded educational tax exemptions. In numerous ways, from increased revenues and CEO compensation to growing competition and/or collaboration with for-profit companies, private higher education in New York City has become increasingly indistinguishable from big business, regardless of its non-profit ownership garb. If it looks and acts like a profit-making sector, it should be treated like one, including paying taxes on its properties.

The Case for Greater Aid to Public Higher Education
In light of the widely acknowledged need for more American workers to have access to a college education or advanced training, and given the rapidly rising cost and unaffordability of private higher education, we believe that city and state policy- and budget-makers must make hard decisions now about the relative cost-effectiveness and reach of public and private higher education in determining how to marshal and target scarce public resources for higher education.
At a time when theories favoring the “free market” and the privatization of virtually every function and institution in society are increasingly in the ascendant, it might seem quaint to suggest that increased public support for higher education is most effectively directed to public, rather than private, universities, but we do so on the following grounds:
- Public universities can be held publicly accountable and responsive to meet identified and prioritized public needs;

- Public universities have a deeper reach into underserved segments of the population who are in greatest need of higher education and skills training;

- Public universities provide much greater educational bang for the buck, educating larger numbers of students at significantly lower prices.

CUNY and the Future of Public Higher Education: “American Dream Machine” or Harvard-on-the-Hudson?
No analysis of the importance, costs and problems of higher education in the city would be complete without a portrait of the City University of New York (CUNY), the city’s own public university system. Offering liberal education and employment skills to hundreds of thousands of poor, working class, immigrant and female New Yorkers for almost 160 years, CUNY’s senior and community colleges have functioned as the city’s gateway to the middle class and to full economic, civic and political participation in the city’s life.

While Columbia, NYU, Fordham and other top-ranked private universities in the city compete to attract “the best and brightest”--and most well-heeled--students from across the country, most poor or immigrant graduates of New York City high schools (as well as growing numbers of moderate and middle income students) find their higher education options more circumscribed by finances: for them, it often comes down to a spot in one of CUNY’s senior or community colleges or no college at all.
CUNY’s system currently includes 11 senior colleges, six two-year community colleges, a graduate school, a medical college and a law school. It is the nation’s largest urban university and the third largest university in the nation. In Fall, 2004, 218,000 full and part-time students were enrolled in CUNY’s various degree-granting institutions. Another 230,000 students were enrolled in adult, continuing and professional education courses throughout the CUNY system. All told, CUNY serves approximately 450,000 students a year, which, if it were a city, would rank it as the 35th largest in this country.
Over 83% of CUNY full- and part-time degree students are New York City residents, ranging from a high of 85.6% of the 188, 476 undergraduates, to a low of 54% of Law School students. Both low and high extremes, however, are considerably higher than the overall percentage of city residents enrolled in property-owning private colleges and universities, which averages only 38.2%. (See Appendix A.)
Of equal importance in terms of CUNY’s long-term impact on New York City, ten years after graduation, 80% of CUNY graduates continue to live and work in the city. As a mirror of New York City’s remarkable ethnic and racial diversity, CUNY far surpasses the city’s top private universities. (See Table 5, Student Enrollment by Ethnicity, NYU, Columbia and CUNY, below.)
As New York City rapidly transforms into a majority “minority,” multi-ethnic show place, only CUNY--not the city’s leading private universities-- has kept pace with these sea-changes, at least at the undergraduate level. The question is whether CUNY remains committed to doing so.

Notwithstanding CUNY’s historically high enrollment, its enormous student diversity and a century and a half of documented successes, public financial support for CUNY has been on the decline for 30 years, dropping to its lowest per-student rate in its history, while tuition continues to rise.

The three-part Table 6, below, depicts a distressing trend: over the last fifteen years, there has been a downward spiral in state and local funding for the city’s only public university, accompanied by substantial increases in tuition and fees, which cause a parallel shift in relative burden-sharing among these three major revenue sources.

Using CUNY’s own figures, between 1991 and 2005--a period that encompassed a soaring economic boom in New York City--state and city aid (in inflation-adjusted dollars) declined by more than one-third each, while revenue from student tuition rose 89% and now constitutes almost 44% of CUNY’s total revenues. For senior colleges, state and city aid has declined even more, with tuition supplying an even larger share of the costs.

Overall, CUNY experienced an inflation-adjusted net decline in funding of at least 7.4% between 1991 and 2005. Some observers, using different models to adjust for inflation, arrive at higher figures for the decline in state and city support, as well as total support.
The net effect on institutional affordability speaks volumes: in 1990, a student at one of CUNY’s 4-year colleges paid less than $1,400 in tuition and fees, while New York State contributed $7,023 per student; by 2003, tuition and fees had climbed to $4,000, while state support had dropped to $5,846. As a result, tuition costs for New York City and State public higher education are “among the highest in the country,” particularly in their community colleges, which ranked third highest in 2003-04, and substantially higher than the national average.
The changes in CUNY’s funding reflect a dramatic realignment in the burden of public higher education from the public treasury to individual students and their families, a trend that began under Governor Mario Cuomo and accelerated dramatically under Governor
George Pataki. It represents a substantial decline in CUNY’s affordability and accessibility, and may signal a serious departure from its historic role of integrating wave after wave of new immigrants, poor and working class New Yorkers into the city’s middle class.
Chancellor Matthew Goldstein (himself a graduate of CUNY when it was still tuition-free) has publicly complained about the loss of state support for CUNY schools and warned that the state was “slipping mightily” in its ability to prepare workers. But he has been remarkably quick to turn to tuition increases as a fix, most recently proposing tuition hikes of between 10 and 13% over four years, that, amazingly, seek to equalize tuition for the four-year and two-year colleges (by increasing the tuition for the latter), as part of a four-year master plan to improve the quality of CUNY’s colleges and to ensure their financial stability.

The State of Need-Based Student Financial Aid
While no-string-attached institutional subsidies continue to flow to private colleges and universities through the state’s Bundy program, public aid to individual students, especially poor and working class students, has become far more restrictive at the same time it has failed to keep pace with the cost of education.
The state’s flagship Tuition Assistance Program (TAP) is a case in point. Any New York
State resident with an eligible income attending college in the state, be it public or private, non-profit and for-profit, can qualify for a grant, with the amount of the award varying by both income level and educational costs.
When this program began in the 1970s, the maximum grant for poorest students covered 60% of the annual cost of a private four-year college. By 2001-02, the maximum grant had shrunk to just 25% of the annual cost. Although the state Legislature increased the minimum and maximum TAP awards (to a $500 minimum and $5,000 maximum awards) and raised the income eligibility bracket from $50,000 to $80,000 in 2000, these changes have not kept up with the soaring costs of higher education. According to the New York Public Interest Group (NYPIRG), since academic year 1995-1996, TAP’s maximum grant has increased by 21% while tuition costs have risen 64% and fees have skyrocketed 150%.

Governor Pataki and the state Legislature have also placed new restrictions on the number of semesters students are eligible to receive TAP awards and imposed a minimum “C” average requirement for recipients. Only full-time students are eligible for TAP, which significantly restricts its availability and usefulness to low-income and community college students, who are more likely to have to work and attend school on a part-time basis. Further hurting these students, the state grant program specifically targeted to community college students, Aid to Part-Time Study (APTS), receives just a fraction of the funds that TAP gets ($14.6 million in 2005 for APTS, as compared to $906 million that year for TAP) and still requires students to be enrolled at least half-time (more than six units), a condition that can present an impossible hurdle to poor working students.

The governor’s proposed budget for 2006-07 sought to cut $189.9 million from TAP and raise minimum course-load eligibility from 12 to 15 credit hours per semester, with students earning fewer than 15 credits receiving a 20% reduction in their tuition assistance award. These restrictions on part-time working students fly in the face of modern economic realities that require more students to work in order to attend college and to take longer than the standard two or four years to complete their degrees. They are punitive to precisely that segment of students who need and should receive the most assistance and time. In addition, the governor’s budget again proposes to withhold half of the TAP award each year until the student graduates, which would make it yet more difficult for poor and working class students to finance the cost of higher education.

In light of reduced funding for student aid, it is ironic that one area in which restrictions are only now being imposed and further discussed is the fast-growing and seriously under-regulated “cottage industry” of commercial profit-making colleges, which target their heavy advertising efforts at poorly educated students, promising them career training and jobs.

There are now 41 degree-granting for-profit colleges in New York and about 400 for-profit “career schools” that do not award degrees. The New York State Board of Regents recently imposed a moratorium on new commercial colleges, while Governor Pataki has proposed denying state financial aid to college students who have not graduated from high school, many of whom attend such schools. At a time when student enrollment in these institutions is exploding, at least five of them have come under close scrutiny for problems ranging from falsely certifying student eligibility for financial aid to failing to provide adequate academic support to its students. These problems are magnified by the fact that although enrollment in profit-making colleges is only 7% of statewide college enrollment, their students are receiving 17% of state-funded financial aid.

Also noteworthy is the lack of parity among the other state-funded student aid programs
that provide academic and mostly non-tuition financial support to disadvantaged students. For 2003-2004, for example, the Higher Education Opportunity Program (HEOP), which provides assistance to students at private colleges, received greater public funding and served fewer students than either equivalent program available to students at the city and state public university systems, revealing a strong bias in favor of aiding students who attend private rather than public institutions. (See Table 7, below.)

The decrease in per student aid available to poor and working class students and the addition of onerous time restrictions and other stringent requirements for eligibility, along with significantly reduced public funding for the state and city public university systems and increased tuition and fees, add up to a short-sighted, self-defeating policy that will not only disadvantage individual students in New York City and state, but restrict opportunities for entire groups of New Yorkers, while shrinking the trained workforce necessary for private business and participants in local government, politics and civic life.

Years of disinvestment in local public higher education have occurred at the same time
that many of the largest, best endowed, and most elite private universities in New York City and elsewhere are clamoring for and receiving bigger shares of public subsidies and funds, while raising their tuition and fees to stratospheric levels. Moreover, according to a recent study of grants by 1,000 foundations, more and more private giving is going to prestigious private universities: 14 of the top 20 grant recipients between 1992 and 2001 were elite universities, with one of every four grant dollars awarded to top colleges and universities, compared to one in ten dollars to non-profit human services organizations.

Meantime, at CUNY, decreased public funding has resulted in a significant reduction in the amount of funds it spends for instruction: down to only 13.4% on a student FTE basis, despite this being the university’s very purpose for existing. According to CUNY’s chancellor, between 1989 and 2001, the percentage of full-time faculty at its community colleges was reduced from 54% to 43%, resulting in an “excessive dependency on adjuncts [which] negatively impacts the quality of the students’ educational experience,” and remains painfully short of CUNY’s stated goal of having “at least 70% of instruction provided by full-time faculty.” CUNY’s Professional Staff Congress (PSC), the union representing 20,000 CUNY faculty and staff, has long criticized this trend, and continues to try to reverse it.

Workforce Development Initiatives
One area in which CUNY is having a growing impact on the city is its expanding role in workforce development in the city. Through a variety of programs based at individual colleges or run through the central administration under the two-year old School of Professional Studies, CUNY now provides an array of programs tailored to job training, work skills improvement and career pathways. Such workforce development initiatives focus on three basic areas: 1) adult education; 2) worker education/training for government, unions, private companies and industries, and non-profits, frequently through business- or public-sector contracts; and 3) welfare-to-work services. While some programs have been in existence at different CUNY institutions for many years, they have grown in number and importance recently.

According to Chancellor Goldstein, “workforce training is now a university-wide priority.” Many of these programs are funded either by private employers or government agencies, with some foundation funding, and are becoming an important source of revenue for CUNY. CUNY has been criticized, however, for its failure to integrate workforce programs into its major educational mission by making them part of its credit-offering and degree-granting programs, as NYU’s School of Continuing and Professional Studies has increasingly done.
Whither Goes CUNY?

Public funding cuts for public higher education have occurred during a period in which New York City has experienced explosive growth in the number of new immigrants, coupled with the weakening or decline of older, established institutions, including Tammany Hall, trade and industrial unions and the Catholic Church, that city historians have traditionally credited with providing pathways to the middle class for immigrants and poor New Yorkers. If allowed to continue on its current course, this disconnect will not only drastically restrict opportunities for hundreds of thousands of city residents, it will have an enormous negative impact on the quality of New York City’s workforce and economy, as well as its civic, political and social fabric.

The combination of reduced public funding and rising tuition and fees at CUNY may represent two prongs of an overall strategy to transform CUNY from an institution committed to educating “the children of the whole people,” to one that more closely resembles the traditional private model of higher education: leaner, meaner and more exclusive, a more highly competitive, corporate-oriented institution with a greater ability to attract top students and top dollars from undertapped portions of the private sector.

This longer-term battle for the soul of CUNY reached a boiling point in the late 1990’s, when Mayor Rudolph Giuliani engineered an abrupt end to the nearly 30-year-old experiment of “open admissions,” under which every graduate of a city high school with an 80 (or higher) average was assured a place in one of CUNY’s senior colleges (and those with lower averages, a place in a community college). Under Giuliani’s prodding, CUNY also abolished remedial education in its four-year colleges and restricted its availability to one year in community colleges, actions that epitomized the mayor’s (and others’) false but convenient dichotomy between the paths of wider student access and academic excellence for CUNY.

In 2001, CUNY began an Honors College program located on seven campuses and serving over 1,000 students. Admission is highly competitive, with the program attracting top graduates from the city’s premier high schools. This program has raised $20 million
in private funding, which CUNY claims covers much of its costs. While the Honors College student body resembles the general CUNY student body in terms of gender (2/3 are women) and immigrant status (3/4 are immigrants or children of immigrants), it is very different in terms of race and ethnicity: 16% of Honors students this year were black or Hispanic, compared to 44% of the students at the seven undergraduate schools where the honors programs are located; likewise, a higher proportion of Honors College students are white and Asian than their peers at the host schools. The program has attracted strong support, as well as serious criticisms for its insularity on the campuses where it is located and its disproportionately large funding.

While a full analysis of open admissions and remediation policy is well beyond the scope of this report, it bears noting that the transformation of CUNY from a free, open academy to an institution that charges tuition, imposes more restrictive admissions standards, and provides far less remediation and other support services occurred after more than 20 years of declining public financial support and a drastically increased reliance on underpaid and non-career-track part-time and adjunct faculty.

Just as open admissions itself was the product of the mass political, social and economic struggles of the 1960’s and ‘70’s, its termination and the imposition of restrictive new directions are the result of triumphant political and economic forces that favor lower taxes, smaller government and privatization. The decline in public funding for CUNY and rising tuition at CUNY and SUNY, which were accompanied by an assortment of state and city tax cuts primarily for wealthy individuals and corporations, have occurred at the very time when New York State has achieved the dubious distinction of having the highest income gap in the nation, with the average income of the top 20% of state families (at $130,431) 8.1 times higher than the average income of the lowest 20% (at $16,076). The income gap in New York City is even larger and without public intervention will likely widen further. Full funding for CUNY and fair and open admissions policies would provide one hedge against this disastrous direction.
The CUNY administration’s apparent embrace of higher tuition and other policies that
place obstacles in the paths of low income, working, and head-of-family students has met with strong opposition from CUNY students and the Professional Staff Congress, the 20,000- strong union that represents CUNY faculty and staff. As one of the architects and chief defenders of open admissions put it during the battle to end open admissions: “For all its shortcomings, City University is the social engine of the city. The attempt to convert it into Swarthmore or Harvard is ridiculous, and is not what people of New York need.”

Just a few weeks before Chancellor Matthew Goldstein recently revealed his multi-year plan to raise CUNY tuition annually on a consistent basis, City College announced that Dr. Andrew Grove, a founder and retired chairman of the Intel Corporation, had made a $26 million gift to his alma mater, City College, the largest gift ever received by any CUNY institution. Grove attended City College as a newly arrived immigrant from Hungary, when it was still free, and graduated at the top of his engineering class. In an interview about his donation, Dr. Grove called City College “an American dream machine” and observed that without stronger support for it and places like it, the United States would lose its middle class and become “a country of educational haves and have-nots.”

The question begging an answer from CUNY’s current leadership--and state and city budget-makers--is whether CUNY’s direction and public funding levels will result in growing the number of educational haves--or have-nots?

PART IV PROFILES IN PROFIT: NYC’S TOP PROPERTY-OWNING UNIVERSITIES
Cooper Union and the Chrysler Building: Blind Benevolence
The next time you gaze with awe at the graceful profile of the Chrysler Building, especially after dusk when its spectacular spire is magically back-lit, think about this: you might as well own it, because you’re paying for it lock, stock and barrel. The reason for this is more bizarre than fiction, known only to a small number of New York City history buffs and budget wonks.
Since its completion in 1930, the magnificent, hugely valuable, wholly commercial Chrysler Building has not paid one cent in property taxes to New York City. But that’s only half the story. Every year, an amount equal to the real estate taxes the building would pay if it were on the city’s tax rolls is collected from the commercial tenants and put into the coffers, not of New York City, but of Cooper Union, a private non-profit university that owns the land beneath the building. And this unique situation applies to two other completely commercial properties that Cooper Union owns.
How much tax revenue does the city lose, and Cooper Union gain, from the Chrysler Building? In FY 2005, this bizarre and antiquated arrangement cost New York City exactly $17,410,972 in lost tax property revenues. And the amount just keeps climbing. Just over a decade ago, in 1994, the Chrysler Building’s tax exemption cost New York City $8 million in revenues.
Peter Cooper, the self-educated industrialist and philanthropist, founded Cooper Union (full name: The Cooper Union for the Advancement of Science and Art) as a tuition-free institution in 1859 under a charter given to him by the New York State Legislature. One section of the state charter provided that property owned by the new institution would not be subject to taxation if it were used for its chartered educational purposes, a situation that eventually became the general tax rule for all non-profit education properties and was enshrined in the state Constitution in 1938.
But Cooper Union’s actual property tax situation is a far cry from this universal rule. The institution is a private college uniquely authorized to charge, collect and keep property taxes from the Chrysler Building and two other wholly commercial properties, all of which are used for purposes totally unrelated to the institution’s core exempt educational mission. Cooper Union itself sometimes calls these payments “tax-equivalency charges,” notwithstanding that the properties are tax exempt. That one of them happens to be the iconic Chrysler Building makes this singular arrangement all the more remarkable--and unfathomable.
Cooper Union has always been a small (fewer than 1,000 students), highly competitive private college for architecture, engineering and art. It continues its historic tuition-free policy for all students, currently worth over $26,000 per student per year, which is provided with no consideration of financial need.

Currently, slightly over 47% of Cooper Union’s students are New York City residents, compared to CUNY’s 83+%. The irony of this situation is stunning: New York City taxpayers are providing a free education to 955 students without any regard to economic need at the privately owned Cooper Union, while tens of thousands of students struggling financially at the city’s own public university are being charged ever-increasing tuition and fees.
Shortly after the Chrysler Building’s completion, New York City in 1931 tried to impose property taxes, but Cooper Union successfully mounted a legal challenge and the building remained off the city’s tax rolls, even as its value continued soar.
Despite the city’s chronic fiscal problems, it appears that no further action was taken to try to reverse the Chrysler Building’s aberrant tax status until 1969, when Mayor John Lindsay pressed the state Legislature to amend Cooper Union’s charter for the explicit purpose of eliminating the Chrysler Building’s tax exemption. But in a series of classic Albany back-room maneuvers, the Legislature passed and Governor Nelson Rockefeller signed a bill that left the unique tax-exempt status of the Chrysler Building and two other Cooper Union commercial properties intact and instead mandated normal exemption restrictions only on future commercial property purchases or uses. Thus, despite the prevailing rule of New York property tax-exemption law that requires non-profit owners of properties used for profit-making commercial purposes to be fully taxed at the appropriate tax rate (or taxed on a pro rata basis for mixed purposes which include an exempt use), the spectacular Chrysler Building and two other properties to this day continue to be tax-exempt while generating enormous revenues for Cooper Union.
The legal basis for sustaining the 1859 charter-based tax status of Cooper Union’s three commercial properties is shaky. It has, in fact, been attacked in written memoranda by at least one New York State Attorney General (the legendary Louis J. Lefkowitz) and at least two attorneys for New York State’s Division of Equalization and Assessment, the agency charged with supervising property assessments throughout the state, once in 1980 and again in 1994. Despite this, no legal or political challenge has been made to it since 1969.
Pouring salt on the wound from the Chrysler Building’s tax exemption is the continued exemption and collection of “tax equivalency” charges for two of Cooper Union’s other current real estate ventures. These involve two of the institution’s tax-exempt but revenue-generating commercial properties located in the heart of the trendy East Village, both of which are now undergoing high-end, large-scale market redevelopment by private developers for the specific purpose of generating much higher revenues for Cooper Union, which will retain title to the properties and collect both tax equivalency payments and rents from the new uses. The city will not capture one red cent from the hugely increased value of these properties. No wonder that, in 2003, after the Bloomberg Administration increased property taxes by 18.5%, Cooper Union’s Treasurer and Vice President for business affairs endorsed the increase, saying “It’s the city’s system. We think it’s good for us.”
On its website, Cooper Union publicly bemoans the declining percent of support that “payments
from commercial buildings such as the Chrysler Building” are providing for institutional operations, but details and touts its current plan to “maximize returns on other real estate assets, which represented significant untapped commercial potential.” This, despite its simultaneous acknowledgement that it has “received record contributions during the last three years, averaging $15 million in gifts annually.”

With the city facing recurring budget deficits, and with public elementary, secondary and higher education costs rising without adequate revenues to fund them, we think it’s time for city residents to demand answers to these questions:

1) why isn’t the city aggressively seeking--through legislation or litigation--to restore the Chrysler Building and Cooper Union’s two other commercial, profit-making properties to the tax rolls, so they receive the same tax treatment as all other revenue-generating properties owned by higher educational institutions (and other non-profits);

2) would the state Legislature refuse to repeal the unique and aberrant tax status for the Chrysler Building and two other Cooper Union properties that it re-affirmed in 1969 if the city so requested;

3) why are New York City’s crusading media not reporting on and editorially demanding reform of the astonishing tax-exempt status and tax collection privileges of Cooper Union?

Columbia University: “Who Owns New York?”
Columbia University is the oldest higher education institution in New York State and the fifth oldest in the nation. Founded by royal charter from the King of England in 1754, it was originally called King’s College and its original insignia was a small crown. Closed during the American Revolution, it reopened in 1784 under the name Columbia, with the royal crown intact as its logo. The crown remains its insignia.
From its beginning in Lower Manhattan next to Trinity Church, where its first classes were taught by Samuel Johnson, there was nothing terribly modest about the institution. Its original self-proclaimed mission was to provide future colonial leaders with an education designed to “enlarge the Mind, improve the Understanding, polish the whole Man, and qualify them to support the brightest Characters in all elevated stations in life.”
Perhaps the vestiges of immodest goals mixed with its royal heritage accounts for Columbia’s fight song, that goes:
Oh, who owns New York, oh who owns New York?
The people say,
Why we own New York, why we own New York,
C-O-L-U-M-B-I-A!
Since its colonial beginnings, Columbia has had an intricate, significant and sometimes fractious history with its host city and the neighborhoods it dominates. Columbia takes credit for “quite literally … shap[ing] the city,” through, among other things, educating 15 men who went on to become mayors of New York and, more recently, requiring its engineering, law and graduate teaching students to provide pro bono services to various local public and non-profit institutions. But at the same time, its current mission statement seems to emphasize its goal of being recognized as a leading world university and of having a broad international impact.
According to Columbia, for Fiscal Year 2003-2004, its capital spending included $143.7 million in new construction and an additional $145.5 million in property renovations. Its operating budget for the fiscal year ending June, 2004 was just under $2.190 billion, while its revenues amounted to over $2.198 billion. Its single largest source of revenues (published before its recent receipt of a $200 million private donation) was government grants and contracts, which contributed 26%, followed by tuition and fees (20%), “medical faculty practice plans” (16%), “other educational and research activities” (13%), “private gifts, grants and contracts” (11%), which was matched by “investment income and gains utilized” (also 11%), with 4% listed as “other” revenues. The diversity of Columbia’s revenue sources reveals an institution with a strong and successful entrepreneurial approach to revenue generation.
Tuition and fees for Columbia undergraduates during the 2005-06 academic year were $33,246, excluding room and board; tuition and fees for its affiliate, Barnard College, are $30,676.
As the only Ivy League university in New York City, Columbia has always been a magnet for attracting non-New Yorkers as students. Its undergraduate student body of just over 8,300 includes only 2,187 or 26.3% New York City residents, which is exactly the same ratio for its various professional schools. The ratio of city to non-city residents improves with its larger body of graduate students, of whom almost 35% are city residents. Overall, of Columbia’s total student enrollment of 23,234 (not including its affiliates Barnard and Teachers College), 31% are New York City residents, a proportion that is lower than the overall rate for private colleges and universities in the city. (See Appendix A.)
In terms of racial/ethnic breakdown, 7% of undergraduates and 6% of graduate students are African American, 17% of undergraduates and 9% of graduates students are Asian, and 7% of undergraduates and 4% of graduate students are Hispanic/Latino. (The percentage of white students is not given, although it seems safe to assume that 69% of undergraduates and 81% of graduate students are white.) (See Table 5.)

The King of Real Estate
Columbia University is the undisputed king of property empire builders, owning a far greater number of properties than any other college or university in New York--over 2 1/2 times more than NYU, its closest competitor, although this has not always been the case. (See Table 8, below.) Together, the 276 Columbia-affiliated properties (including those of Teachers College and Barnard) are worth more than $791.7 million and cost the New York City over $79 million in lost property tax revenues in 2005 alone. (See Table 4; Appendix B; and Appendix F, Property Holdings of Columbia University and Affiliates, p. 104.)
And, alone among all the private colleges and universities in the city, a significant majority of Columbia’s properties are non-educational or extra-educational in nature and use. As of the FY 2005 property tax rolls, Columbia alone owned 261 properties (excluding those of its two affiliates), only 31 of which are classified by DOF as educational properties. Of the balance, 143 or 55.4% were listed as “faculty & student housing,” which, as discussed above, overwhelmingly denotes traditional apartment buildings and/or individual housing units (like condos) that provide permanent, year-round housing to university-affiliated residents, most of whom a re faculty members. The remaining 84 were classified as “student dorms.” And as many New Yorkers and virtually all residents of Harlem know, Columbia’s overall property holdings, including its housing inventory, are on the verge of exploding in a new neighborhood, Manhattanville, which would be the third community it takes dominion over.
Just over a decade ago, in Fiscal Year 1992, Columbia’s exempt properties (excluding those of Barnard and Teachers College) cost the city treasury $13,775,046, while by 2005, tax losses from Columbia’s properties (also excluding Barnard and Teachers College) had soared to $61,217,801.This represents an astonishing increase of more than 344% in tax expenditures in less than 15 years.

Columbia’s Manifest Destiny
Columbia moved uptown to what became its main campus in Morningside Heights in 1897 and began to spread out from there. Columbia’s major existing property holdings are currently centralized in three neighborhoods: Morningside Heights/Harlem, the home of its main campus for undergraduate, graduate and several professional schools; Washington Heights in northern Manhattan, where its medical college, hospital center and related facilities are congregated, and a neighborhood called Manhattanville. Its current property holdings and planned acquisitions are graphically illustrated in a building-by-building, block-by-block fashion in three maps corresponding to these neighborhoods that are posted on its website. (See also Appendix F.)
Despite its vast real estate holdings, Columbia has long complained about its shortage of space, frequently using a chart that compares its alleged 326 square feet of space per student to the 800 or more square feet per student owned by its self-proclaimed rivals Yale, Princeton and Stanford. Columbia acknowledges that its “space needs have necessitated the development of approximately one million square feet every five years since 1994.
Most of Columbia’s recurring town-gown problems center on its efforts to acquire new property to fulfill its perceived needs for additional academic, research, housing and other facilities. The university’s current Manhattanville expansion and development project targets an area of West Harlem, which is bordered by 125th Street to the south, 133rd Street to the north, Broadway (and part of Old Broadway) on the east and 12th Avenue/Riverside Drive on the west. Columbia is estimated to now own about 60% of the properties in the area, but says it requires rezoning of the entire area and acquisition of much of the rest of the area’s properties, including occupied commercial and residential properties.
Its Manhattanville project represents Columbia’s largest and most ambitious expansion in its 250-year history and is likely to prove its most contentious. If fully implemented, it would literally and permanently change the face of this area and probably the surrounding areas of Harlem. According to the university, the entire project is slated to cost $5 billion and take 25 years to complete. Components of the expansion include a new campus with a bio-tech research center, additional classrooms and administrative offices, art and performance spaces, underground parking and loading facilities, and student and faculty housing.
The project may include a bio-terror research facility for government-funded contracts, which Columbia is already seeking in conjunction with a consortium of other institutions. A 2003 article in The Scientist by Peg Bricken, subtitled “US universities competing for plum designations as bio-terror research centers,” reported that Columbia University and the New York State Department of Health’s Wadsworth Center are leading a large collaboration of universities and research institutes in a regional effort to gain bio-terror research funding on behalf of New York, New Jersey and Connecticut.
Columbia touts the broad economic benefits of the project, claiming it will create thousands of temporary construction jobs, and generate construction revenues of $122 million for the city and $94 million for the state. It also says that it will create 14,500 permanent jobs in the area, many for community residents, and that “operating expenses” will generate tax revenue of $33 million for the city and $29 million for the state every year, from unspecified sources. Columbia neither mentions nor quantifies the loss of current city property tax revenue if it succeeds in evicting the hold-out commercial businesses and private housing, much less the permanent loss of property taxes from all the property it has already acquired and plans to build and develop in the area, or the many community impacts.
Organized community opposition centers on Columbia’s plan to acquire and evict existing residential tenants and commercial businesses and demolish these buildings, possibly through the use of eminent domain; safety concerns arising from the planned bio-tech/bio-hazard center; as well as support for a competing community-initiated and -approved development plan for the area. While university officials describe the area as blighted and undeveloped, its long-time business owners, residential tenants and others regard Manhattanville as a viable mixed-use community with affordable housing and a well-developed moving and storage industry that depends for its existence on its proximity to the West Side Highway, all of which they believe merit preservation and improvement, rather than demolition and displacement.
Four of the apartment buildings targeted by Columbia for demolition are owned by the city’s Department of Housing Preservation and Development (HPD) and provide affordable housing for low-income tenants, an increasing rarity in this city. After at least 18 months of largely secret negotiations between representatives of Columbia and HPD, the agency has approved Columbia’s takeover and demolition of all four buildings and issued detailed guidelines for how the process of relocating tenants should proceed. The university has now publicly committed to finding replacement housing for displaced residents, but tenants remain skeptical and anxious.
Other residents of the neighborhood and immediately surrounding areas fear their own ultimate displacement from their homes as a more indirect, but nonetheless real, result of Columbia’s expansion, which will add fuel to the fire of already blazing Harlem property values and escalating rents. As the president of a nearby 1,200-apartment project that recently opted out of the subsidized Mitchell-Lama program put it, “All I can see is disruption of a community we worked damn hard to build, to keep safe, clean and affordable.”
You don’t have to be of “a certain age” to recall the 1968 mass student takeover of Columbia’s main campus, but it helps. The underlying reasons for the protests of almost forty years ago bear a striking resemblance to the causes of the growing community opposition to Columbia’s current Manhattanville project.
The 1968 student sit-in, which temporarily shut down the university, was fueled by community and student opposition to Columbia’s plans to expand deeper into Harlem and build a private university gym in city-owned Morningside Park. Also at issue was Columbia’s involvement in military research associated with the Viet Nam war, with students specifically demanding that the university end its affiliation with a Pentagon think tank and terminate various defense-related research contracts. Although--or perhaps because--the student takeover ended in the mass arrests of hundreds of students (which were choreographed by Columbia’s President, Grayson Kirk, and accompanied by significant police misconduct televised on national and local news), the students ultimately succeeded in achieving their demands. Columbia renounced its plans for the Morningside Park gym, ended certain classified research projects on campus, and the unpopular university president resigned.
Today, even more than in 1968, Columbia’s physical expansion plan itself is unifying concerns about community displacement with opposition to the university’s potential involvement with war-and bio-hazard-related government research contracts.
In its early outreach and planning efforts around the Manhattanville project, Columbia made efforts to distance itself from the bad old days of 1968 by creating a community advisory council and frequently attending and participating in meetings of local Community Board 9. It also maintains on its website a community-oriented component called simply “neighbors.columbia.edu,” which presents a face of university transparency and community concern.
Early in the process, Columbia’s new president, Lee C. Bollinger, declared, “I have done everything I can to put the ghost of the gym behind us,” and “Columbia is a different neighbor now.” But whatever the initial community reaction to the plan, this view is hardly shared now by the diverse and growing opposition to both the plan and the way in which Columbia is seeking to
implement it.
A series of missteps by Columbia since the public announcement of the plan has galvanized an organized opposition that now includes area business owners (united into the West Harlem Business Group), residents of the targeted area facing direct displacement by demolition of their buildings, and other community residents and activists of nearby surrounding areas of Harlem who fear secondary displacement through rising housing costs, as well as the loss of the diverse nature and community feel of their neighborhood (the Coalition to Preserve Community), Community Board 9, the local official planning board, a growing number students (the Student Coalition on Expansion and Gentrification) and individual members of Columbia’s faculty. Despite different priorities and emphases, these groups have begun to coalesce into a unified front, increasingly engaging in joint events and community and press outreach.
Some of Columbia’s blunders include: contradictory public statements and private actions, an inadequate Environmental Impact Statement that failed to address community safety concerns about planned bio-tech and bio-hazard research in a densely populated area, as well as the prevention of primary and secondary commercial and residential displacement.
Adding heat to the controversy, Columbia University’s application in late 2005 to the Dormitory Authority of the State of New York (DASNY) for a $500 million tax-exempt bond issue to pay for a large chunk of its acquisition, demolition and redevelopment costs for the Manhattanville project also raised community ire that Columbia, an institution with a $2 billion operating budget, was seeking even deeper public handouts. But topping all of these missteps was Columbia’s secret expedition into the latest and hottest national political third rail: the use of the extraordinary public power of eminent domain to benefit private development, which was recently and narrowly upheld by a 5-4 vote in the U.S. Supreme Court decision Kelo v. New London.
Notwithstanding Columbia’s public claims that the university was committed to buying the private properties it claimed to need through negotiating fair purchase prices with their owners, in July, 2004, the university secretly submitted an official written request to the Empire State Development Corporation (ESDC) to consider using its power of eminent domain to engineer Columbia’s Manhattanville expansion. Columbia paid ESDC, New York State’s most powerful and aggressive development authority, $300,000 as a down payment toward any expenses it might incur in the process and assumed full liability for any lawsuits that might be brought against ESDC relating to Columbia’s project. Columbia’s letter described the purposes for which eminent domain might be used as assisting its development of “facilities to be used for academic, administrative, student and faculty residences, retail, parking, on-site energy, open space, a hotel and other related ancillary uses and public amenities.”
Columbia’s eminent domain request and preliminary agreement with ESDC remained secret until it was disclosed by The Spectator, Columbia’s undergraduate student paper, in April, 2005, after the paper obtained the document through a Freedom of Information Law request. The discovery turned a deteriorating situation poisonous. With state legislatures across the country seeking to limit government’s use of eminent domain to seize properties for private economic development purposes, Columbia’s timing could not be worse. Nor, in fact, could its cause--since the development Columbia contemplates, contrary to the one approved by the Supreme Court for New London, will take properties off the city’s property tax rolls, rather than enrich them.
Finally, framing and intensifying Columbia’s other gaffes is the issue of the clash between Columbia’s Manhattanville plans and the community’s own official, comprehensive local land use and development plan (called a 197-a plan, after the section of the Uniform Land Use Procedure Law that empowers such local planning). It took some 15 years for Community Board 9, along with many community members and organizations, to produce, review and unanimously approve this plan. The community plan contains recommendations for zoning changes that would encourage residential and business development without displacing the current commercial and industrial businesses, and addresses mitigation of predictable secondary displacement that any substantial university expansion or other private development would generate. It also calls for the establishment of environmentally friendly construction guidelines, as well as pedestrian-friendly improvements, and the integration into the community of the new city-state park along the Hudson that is in its infancy. Finally, it would specifically outlaw the use of eminent domain for any development in the area.
In October, 2005, the New York City Planning Commission gave its initial approval to this community plan. Many in the community believe that this plan could accommodate reasonable Columbia expansion if the university were open to real dialogue and compromise. Instead, Columbia has apparently chosen to ignore this extensive, broad-based effort in community planning, and seeks to impose its own vision on the community. Columbia’s “all-or-nothing,” demolition-displacement approach has presented the planning commission with a first: it is considering the two very different plans simultaneously, while urging the two sides to find “common ground.”
In fact, the combination of a broad and increasingly sophisticated opposition, which is beginning to attract the support of more elected officials, serious missteps by the Columbia that have undercut its credibility, its threatened use of eminent domain, and the sheer magnitude of its proposed expansion could add up to the perfect storm for Columbia, far overshadowing its 1968 crisis. As one community activist succinctly put it, “This is not 1968. This is not about a small land grab (the gym) with big racial implications. It’s about a big land grab, 18 acres worth with hectares of class and race consequences.”
New York University: The Wannabe Empire
NYU has long been Avis to Columbia’s Hertz: it has tried harder than its Ivy League counterpart to attract students, faculty and prestige. Although it was for decades a commuter school, drawing a largely local, live-at-home undergraduate student body, in the decades toward the end of the 20th century, it transformed itself “very quickly from a commuter school to a residential school.”
As a result of this transformation and its increasing national reputation, NYU began to acquire an appetite for more space for housing and other facilities. This, in turn, placed it squarely in competition with Columbia in another fundamental but less positive category: as the source of considerable community conflict over its real estate expansionism and empire-building, first, in its original home of the Washington Square area of Greenwich Village, and increasingly, in neighborhoods beyond. (See NYU’s website at www.nyu.edu for a map of the epicenter of its property holdings, running from 16th Street to the north, Prince Street to the south, Sixth Avenue to the west, and First Avenue to the east.)
NYU currently provides housing for more than 11,000 undergraduate, graduate and professional students, and 2,000 faculty and administrators. It has 25 residence halls scattered from East 26th Street to Wall Street, including a 16-story Palladium dorm on 14th Street, which was the site of one of New York’s hottest and most fabled discos years decades earlier.
Not that NYU was ever a real estate slackard, either in relative or absolute terms. In fact, in 1992, NYU was the largest property-owning private university in the city, with 19% of the assessed value of all university properties, compared to Columbia’s 16.5%, and accounting for 18.9% of all university property tax losses, compared to Columbia’s 15.2%. And although Columbia has since far surpassed it in real estate holdings and tax expenditures, NYU remains in solid second place, separated from its closest competitor by almost $20 million in tax expenditures. (See Appendix B, and Appendix G, Property Holdings of NYU, p. 114.)
As of the FY 2005 property tax rolls, it owned 105 properties, with an assessed value of $503, 303,875 and tax expenditures of $42,133,034. Of its properties, 67 or nearly 64% were educational, almost 23% (24 properties) were permanent residential properties, and just over 10% (11 properties) were student dorms. More importantly, it is currently planning several major real estate expansions.
Founded in 1831, NYU has long prided itself on being the largest private university in the country, with more than 39,000 undergraduate, graduate and professional students enrolled in its 14 schools, colleges, and divisions. That NYU has achieved its goal of becoming an nationally recognized university and attracting students from far beyond New York City is evidenced by the fact that in 2004, only 15.6% of its overall student body consisted of city residents (see Appendix A), well below Columbia’s city resident rate. Its growing popularity is also reflected by the fact that, for the second year in a row, a survey by the Princeton Review ranked it as the top choice of college applicants throughout the country.
Tuition and fees vary by specific school or program, but start at $31,690 for undergraduates in 2005-06 and go north from there. In terms of racial/ethnic breakdown, 5% of NYU undergraduates and 6% of graduate students are African American, 14% of undergraduates and 11% of graduates students are Asian, and 7% of undergraduates and 5% of graduate students are Hispanic/Latino. Percentages for white students are not given, although it is reasonable to conclude that about 74% of its undergraduates and 78% of its graduate students are white. (See Table 5.)
Unlike Columbia, whose literature emphasizes its unique and positive contributions to New York City, NYU acknowledges the importance of New York City in enriching the university and attracting faculty and students. But NYU’s relative humility (or reality check) on this score neither negates nor minimizes its history of past conflicts or current skirmishes with its neighbors.
Although NYU currently lags behind Columbia in real estate empire-building, as with most matters relating to the highly competitive relationship between the two institutions, NYU is clearly embarked on a path of real estate catch-up. NYU has long dominated the Washington Square area of the Village, and has progressively spread its real estate empire to the east, north, south and west, also spreading community conflicts from its original Greenwich Village neighbors to its newer neighbors in the East Village and Noho. (It also owns properties well to the south, which anyone walking on lower Broadway could guess, by the frequent passage of purple buses and street car-type vehicles emblazoned with NYU’s name and logo, but since these properties are in less developed and populated areas, they have not yet given rise to the same degree of town-gown conflicts.)
Greenwich Village’s cultural heritage and well-organized and activist citizenry has lent NYU’s town-gown problems there a special flavor. In addition to common concerns regarding displacement, gentrification, local employment and community input, issues such as historic preservation, building height and density, and contextual relationship of new structures to the surrounding area have fueled opposition to the university’s expansion plans.
In 2003 and 2004, tensions were heightened by two long-planned construction projects on properties that bordered Washington Square Park (the Kimmel Center, which replaced the smaller-but-still-outsized Loeb Center, and a new law school building). The majority of residents found both projects oversized, ugly and intrusive. Provoking special community ire was the fact that one project resulted in the partial demolition of a building that was home to Edgar Allan Poe. Between 2000 and 2004, “NYU spent $400 million on construction and renovation, a by-product of which was noise, grit, street shutdowns and sundry other irritants,” leading many locals to see NYU as “an institutional King Kong afflicted by an ‘edifice complex.’ ”
In the midst of this turmoil, John Sexton, formerly Dean of NYU’s Law School, became president of the university in 2001. Initially, he seemed to signal a change in university-community relations by publicly acknowledging that NYU had not always been perceived as a good neighbor. Sexton declared that “the Village is our great asset” and that he recognized the need to protect the Village’s “fragile ecosystem.” He also indicated his intention to work more closely with neighbors on NYU planning and development issues.
Nevertheless, community tensions flared again when NYU announced an arrangement with a private developer to build a 26-story residence for 700 students mid-block on East 12th Street, a side street that runs between Third and Fourth Avenues, using air rights from an historic post office, to create what community activists have called the tallest building in the East Village. In addition to concerns over the building’s height, bulk and high number of occupants, the air rights transfer raised additional concerns because the post office sold these development rights without going through a review process required by the National Historic Preservation Act.
This project catalyzed has strong opposition from residents and community groups, including the Greenwich Village Society for Historic Preservation. It is viewed as evidence of NYU’s seemingly insatiable hunger for real estate and as a prime example of its penchant to undertake outsized, non-contextual, community-unfriendly developments. Exacerbating local hostility is the fact that the development is going forward at a time when the Department of City Planning has begun a process to consider the contextual rezoning of the East Village.
The East 12th Street dorm is just the latest piece of NYU’s larger real estate empire dream, the goal of which is the development of a second campus somewhere between Union Square to the north, Washington Square to the south, and running through the East Village. In pursuit of this goal, NYU announced toward the end of 2005 that it was establishing a new Campus Planning and Real Estate team to assess NYU’s space needs and work with its neighbors to fulfill them. Heading this effort is a new Vice President for Planning, a woman who had been with the New York City Economic Development Corporation (the city’s equivalent of the state’s Empire State Development Corporation), where she worked with Deputy Mayor for Economic Development Dan Doctoroff, the author of the ill-fated, community-insensitive West Side Stadium fiasco.
NYU’s local “second campus” idea is meeting with serious opposition. In mid-February, 2006, Manhattan Borough President Scott Stringer, City Councilmember Rosie Mendez, Community Board 3’s Housing and Zoning Committee (Lower Eastside/Chinatown) and Community Board 2 (Greenwich Village) united behind a proposal put forward by a number of community groups that urges NYU and the city to work together to find locations for one or more secondary NYU campuses outside of Greenwich Village, the East Village and Noho to avoid saturation development in these areas. President Sexton himself has stated that NYU has “no need for adjacency,” indicating his willingness to look beyond NYU’s traditional neighborhood base for additional space. But community groups discovered toward the end of March that NYU is in negotiations to purchase a site at the corner of 10th Street and 3rd Avenue, which is within, not outside of, the area the community plan opposes additional NYU development.
Urging NYU to look beyond its neighboring communities makes sense in terms of the immediate communities involved. But one problem with a “do-it-in-someone-else’s backyard” approach is that NYU is already a giant presence in other backyards in Manhattan. Another broader problem is the potential loss of tens of millions of dollars in property tax revenues from the city treasury. Its medical school and hospital center, located in the East 30’s along First Avenue, just announced plans to build the world’s largest (at 120,000 square feet) child psychiatric treatment, research and training facility on First Avenue between East 25th and East 26th Streets. The facility will cost $110 million and has already received a pledge of at least $30 million in state funds, not including other possible public subsidies or lost city property tax revenues.
This one example should serve as a reminder that all private university real estate ventures have serious and concrete citywide fiscal and non-fiscal impacts that travel far beyond the burdens and immediate boundaries of the communities in which they occur.

PART V: PRIMARY AND SECONDARY EDUCATION
New York City’s Public School System
Free universal primary and secondary education is one of the few civil rights in America that carries the obligation of public financing to ensure it. Unfortunately, however, the relative responsibility of New York State and New York City to fund the basic education of New York City children remains unresolved, as reflected in the continuing 13 year-long saga of the Campaign for Fiscal Equity v. New York State lawsuit. A similar storyline exists with respect to the federal government’s unfinanced and underfunded educational obligation to localities arising from the Bush Administration’s No Child Left Behind Act, along with many older federal education laws. But notwithstanding legislative indifference to their fiscal responsibilities, the legal mandate of public responsibility for funding the basic education of all children is undeniable.
As the U.S. Supreme Court held more than a half-century ago in the gold standard of civil rights decisions:
(E)ducation is perhaps the most important function of state and local governments. Compulsory school attendance laws and the great expenditures for education both demonstrate our recognition of the importance of education to our democratic society. It is required in the performance of our most basic public responsibilities. …the very foundation of good citizenship… [I]t is a principal instrument in …preparing {the child] …for later professional training … In these days, it is doubtful that any child may reasonably be expected to succeed in life if he is denied the opportunity of an education. Such opportunity, where the state has undertaken to provide it, is a right which must be made available to all on equal terms.” Brown v. Board of Education, 347 U.S. 483, 1954, emphases added.
Nationally, nearly 90% of all children were educated in public schools during 2001-2002. In that same year, 39.5% of public school children at the national level were racial or ethnic minorities, compared to 24% of private school children. By comparison, in New York City, 90.4% of public school kids were ethnic or racial minorities, while just 41.9% of children attending private schools were.
New York City operates the nation’s largest public school system, with approximately 1,300 schools serving a total student body of 1.1 million students. The size of its student body alone would make the system the tenth largest city in the country, just behind Dallas and San Antonio and just ahead of Detroit.
The city spends significantly more money for education than for any other public service. In FY 2005, the Department of Education received a total of $13.8 billion for operations and administration. If funding for education-related debt service and pension costs is included, total funds committed for education in the city climbs to $15.7 billion, which represents 29% of the entire city budget for that year. New York City self-financed $7.5 billion of the nearly $16 billion price tag for education, while New York State provided $6.2 billion, the federal government contributed $1.9 billion and private grants raised an additional $82 million. To place these figures in budget context, the city’s second highest expenses were for public safety and security, with the Police Department receiving approximately $3.7 billion in city, state, federal and private funds.
How is this money spent? Though the public school system is often viwed as a bloated bureaucratic tick that sucks up money for administration, leaving paltry amounts left over to trickle down to the classroom, current reality presents a very different picture.
An analysis for year 2000-01 by the non-profit Educational Priorities Panel (EPP) found that, including fringe costs (but not pension or debt service), 59% of the DOE budget was spent on instruction, 18% was spent on categorical programs, 17% went to operations, 5% went to payments to private schools, and 6% went to administration. The city’s own expense analysis for the same year differed slightly (because fringe costs are broken out), with 45% for instruction, 18% for categorical programs, 16% operations, 11% for fringe benefits (health insurance, etc for DOE employees), 5% private schools, and 5% for administration. In both cases, however, “categorical programs” are defined as “special funding for additional instruction or services for students at high risk for academic failure,” which includes “instruction funding.” This means that substantively, the percentage of funding devoted to instruction actually is higher than the amounts narrowly designated as classroom or instructional funds.
According to EPP, “Given the huge numbers of students in the city’s school district and the larger-than-average size of most city schools, the student-to-administrator ratio is larger than in most other school districts in the nation. School districts with the highest proportion of administrative expenses are usually small rural and suburban districts.”
Dumping on New York City’s public school system is a cottage industry, with news reports routinely focusing on both chronic shortcomings and sporadic horror stories. But the tremendous objective challenges the city’s public school system faces begin with inadequate funding.
New York City’s per pupil expenditure in 2003 was $11,474, compared to a statewide average of $11, 584, a superficially insignificant underpayment of $110. But this comparison paints a false picture of near-equity by failing to factor in unique New York City educational obstacles that should mandate higher per pupil funding. In New York City, 82% of public school students qualify for free or reduced-cost lunches, compared to a statewide average of 50%. 13.7% of New York City public school kids have limited English proficiency, which is fully 73% of the statewide total. Three-fourths of New York City’s school kids are minorities, compared to a statewide average of 45%. New York City’s public school system educates fully 69% of the state’s 1.3 million minority students.
Class size remains a burning issue in the city. According to evidence presented at the CFE trial, “Average city class sizes range from around 25 children in kindergarten to 29 in eighth grade.
Many students are in much larger classes. New York City classes have averaged 3 or 4 more students per classroom than statewide for over 20 years.”
Notwithstanding the CFE victory, the bottom line that remains is that New York State’s complicated and arcane “formulas” for allocating public school aid throughout the state, as implemented by the state Legislature to this day, remarkably freezes aid to New York City at a static, inequitable rate of 38.86% every year, regardless of demographic changes or other factors that should mandate a higher percentage of funding for New York City.
When Michael Bloomberg first ran for mayor, he vowed to reform the city’s public school system. Shortly after winning office, he achieved what no prior mayor had been able to do: he gained full mayoral control of the educational bureaucracy and the decades-old decentralized education system. Since mayoral control of public education began, there have been major programmatic and structural changes, many of which are still in progress. They have created both optimism and confusion, which includes questions about the level of funding for public schools.
An analysis by IBO found that over the 15-year period from 1990 to 2005, the total amount of city, state, federal and private funds allocated to the Department of Education rose by 42.3%, increasing from $10.7 billion in 1989-1990 to $15.2 billion in 2004. But this increase is far from as impressive or meaningful as it first appears, because of the factors driving and comprising it. According to IBO, “Funding for non-public schools was responsible for much of the increases in recent years, growing by 35.8 % just between 2000 and 2004. The primary cause of this growth was significant increases in mandated payments to out-of-state schools for the education of special needs children. IBO reported the per-pupil spending for general education students at $10,500, while per-pupil spending for special education students was over $34,000. During this same period, for example, per pupil spending, including debt service and pensions, grew by only 23%, to $13, 963 in 2004.
A recent analysis by EPP concluded that funding for special education actually dropped by $445 million during the first year of mayoral control (2003-2004), while funding for general education increased by $568 million the first year and then dropped by $144 million in the second year of mayoral control (2004-2005). In short, it appears that mayoral control has not automatically translated into increased funding for education.
The greatest single factor muddying the waters of public school funding for the city is, of course, the still-unresolved issue of judicially mandated increased state education funding in the CFE lawsuit. Since June 2003, when the state’s highest court ruled in favor of the plaintiffs in CFE, the state government has been in contempt of court for failing to meet court-ordered increases in both expense and capital funding for the city’s public schools in order to provide all students with their constitutional right to a “sound basic education”.
After a lengthy trial, the CFE trial court adopted the findings of an independent panel it had appointed to determine the actual dollar needs of city schools, to remedy New York State’s failure to reverse its illegal underfunding of city schools in the time frame ordered by the court. It ruled that New York State was required to increase aid to city public schools by $5.6 billion a year (for a 43% increase to $12.9 billion annually, to be phased in over a period of time), and to provide an additional $9.2 billion in capital funds (also over a period of time) in order to increase the number of city classrooms, labs, libraries and other physical resources to relieve overcrowding. Governor George Pataki immediately appealed this ruling, which has, until now, enabled the state to remain non-compliant with the CFE trial court’s order, pending the appeal. In late March 2006, however, the state’s intermediary appellate court, previously hostile to the CFE plaintiffs, handed down a ruling that may make the state’s continued resistance to providing significantly more funds to city public schools much more difficult. In the long term, perhaps CFE may accomplish what decades of political efforts have failed to do, by achieving fairer and more adequate state funding of city schools, making it one of a handful of educational reforms that profoundly alters the state of public education in New York City.
In the short term, however, state underfunding for city elementary and high schools remains the same old story. Despite a projected $2-3 billion surplus, Governor Pataki’s proposed 2006-2007 state budget includes an increase of just $634 million for education statewide--a far cry from the $2.1 billion in first-year additional funding statewide outlined in the Schools for New York’s Future Act, the legislation that applied CFE funding requirements across the state. In the Governor’s education budget scenario, New York City would receive an increase of only $111 million in state aid, a mere 1.09% increase over last year.
At the same time that he refuses to comply with the court’s order to increase funding for city schools, Governor Pataki is pushing a proposal to spend $400 million statewide in education tax credits that would provide low and middle income families in failing school districts with up to $500 in refundable income tax credits that could be used for private school tuition or other individual supplements to public education. This quasi-voucher program would drain rather than add funds to city schools, an action that vividly illustrates the governor’s contempt for New York City students, if not for the state’s highest court.
The new state budget passed by the state Legislature does significantly increase capital funding for city schools, but provides only minimal increases in funding levels for school operations. And the governor has yet to react, so only time will tell.
The cost of implementing the federal No Child Left Behind Act further burdens the city and other local education systems that are underfunded to begin with and facing mounting budget cuts, as the Bush Administration attacks so-called “discretionary” domestic spending. President Bush’s proposed 2007 federal budget would cut $7.6 billion in education spending nationally; for New York State this would translate into a cut of $452 million over the next five years.
A World of Privilege and Prayer: Private Elementary and Secondary Schools in New York City
The world of New York City private schools contains two parallel universes. One is home to some of the world’s most prestigious private schools, where both the level of tuition and the fierceness of competition for admission can easily rival an Ivy League university. At the same time, the city is also home to hundreds of religious schools, some large, some small, some struggling to survive, others flourishing, especially with the current wave of immigration to the city.
The 2003-2004 Private School Universe Survey conducted by the U.S. Department of Education’s National Center for Education Statistics identified a total of 898 private schools, religious and secular, in New York City. Of the total, approximately three-quarters of the schools are religious-affiliated.
During the 2003-2004 school year, approximately 250,326 children were enrolled in private elementary and high schools in New York City, compared to 1.085 million in the public school system for the same year. Of the combined total of 1.335 million school-enrolled children in New York City that year, 81% attended public schools and 19% attended private schools. Of all city school-enrolled kids, 9% attended Catholic schools (representing to 49% of private school enrollment), 6% attended non-Catholic religious schools (34% of total private school enrollment), and 3% attended secular private schools (equal to 16% of private school enrollment).
As with real estate and much of life in New York City, the world of private schools varies significantly by location. In Brooklyn, which calls itself the “borough of churches,” perhaps surprisingly non-Catholic religious schools outnumber Catholic and secular institutions combined. In the other four boroughs, Catholic schools are the largest presence, although they fall short of a majority in Manhattan (44%) and Queens (41%). In Staten Island and the Bronx, Catholic schools clearly dominate, representing 61% and 73% of all private schools in those boroughs, respectively.
Also perhaps running counter to popular perception, Brooklyn leads with the largest number of children in private schools, with 39% of the total, followed by Queens (24%), Manhattan (16%) the Bronx (14%), and Staten Island (6%). In terms of racial/ethnic breakdown, 47% of private school enrollees citywide for 2003-04 were white, while 17% were black, 15% were Hispanic, and 5% were Asian, with the remainder unreported.
By comparison, New York City public schools showed a markedly different racial and ethnic breakdown. According to the New York State Education Department’s July 2005 State of Learning report, in 2004-05 school year, 14.6% of New York City’s public school students were white, 33.8% were black, 38.6% Hispanic and 18% were listed as “other.”

The Historical Role of Private Schools and Religion
During the colonial years, throughout America, the task of educating the young--to the extent it occurred--was performed primarily by religious institutions, joined later by other private, often religious-affiliated, charitable institutions. It was years before state constitutions mandated public education and local infrastructures were developed to provide it. In New York City, the development of both public and private educational systems was convoluted, largely because of religious, ethnic and class differences, overlaid by immigration status. As the city’s population grew, tensions between “nativists” and Irish Catholics “exploded in the great school controversy,” sparked in 1801 when New York State began to give money to different churches for the education of poor children.
After 30 years of conflict between the so-called “public” education camp (which, in fact, reflected the existing power of the Protestant ruling elite) and advocates of religious education, in 1842 the New York State Legislature finally settled the matter in a way that was satisfactory to neither side. The Legislature enacted a law that denied state funding to any school in which any religious doctrine was taught, and gave control over the New York City school system to officials elected by city voters. A decade later, the Public School Society, the last vestige of the old Protestant educational power structure, was disbanded and its schools turned over to the new board of education. At this time, Irish Catholics, under the leadership of their powerful bishop, decided to create and maintain a completely separate Catholic educational system of their own.
These long-lived conflicts may explain why New York City was “the last American city of any size to establish public high schools,” opening its first in 1897.

The Costs of Contemporary Private Education
In New York City today, the cost of private education is as variable, and often as high, as the cost of higher education. A number of private high schools in the city recently made banner headlines by breaking the $30,000 tuition bar for the first time. At the city’s most elite schools, tuition of over $26,000 for kindergarten is now par for the course. Tuition at most religious schools tends to be considerably lower and far more affordable. (See below.)
Sample Tuitions at New York City Private Schools
School Tuition 2006-07 Grades
Riverdale $31,200 k-12
Trinity School $28,770-$30,170 k-12
Dalton $29,250 k-12
Allen-Stevenson $28,975 k-9
St. Joseph of Yorkville $3,500 pk-8
St. Stephan of Hungary $3,400 k-8

Property Tax Exemptions for Private Education
While real estate expansionism and other related non-neighborly actions on the part of individual large private universities like Columbia and NYU periodically spark town-gown style conflicts that may attract citywide attention, rarely is any public scrutiny given to the hundreds of tax-exempt properties owned by private primary and secondary schools scattered throughout the five boroughs.
According to IBO’s 2005 exemption analysis for City Project, at least 533 private schools, both secular and religious, own a total of 826 properties throughout the five boroughs. They cost the city treasury at least $119,030,693 in lost revenues in FY 2005. This figure may well be proportionally more underestimated than tax expenditures for colleges and universities. There are far more institutional owners and both the number and value of their properties are considerably lower than the larger, more highly concentrated properties owned by higher education institutions, making these primary and secondary properties more likely to fly below the radar of DOF tax assessors.
These property-owning private schools comprise slightly less than 60% of all private schools in the city. Presumably, the remaining 40% of private schools rent property, pay commercial property taxes, and are able to fulfill their missions without relying on public subsidies in the form of property tax exemptions.
Unlike the realm of higher education, where a small number of individual institutions dominate the tax expenditure scoreboard, primarily through constant real estate expansion, the majority of the elementary and secondary institutions own just one or two properties. Enrollment at most private schools is relatively flat or in decline (particularly the case with many Catholic schools) and while new schools do start up (and remove any properties they purchase from the tax rolls), the number of property tax exemptions for lower education is not expanding as rapidly as for higher education. The value of existing exempt properties, of course, does continue to rise, as a result of the city’s blazing-hot real estate market.
Nevertheless, despite the small number of real estate giants among private schools, at almost $120 million a year, their cumulative property ownership accounts for a significant loss of tax revenues.
Because of the large number of property-owning private schools, City Project concentrated its analysis on institutions whose total tax expenditures amounted to $100,000 or more. Of the 533 property-owning institutions, 296 schools own one or more properties with tax expenditures totaling over $100,000. Together, these 296 schools account for $108,859,528 in tax expenditures, or 91.4% of the total tax expenditures for this portion of the educational sector.
Of particular interest is the list of the twenty private schools with the largest tax expenditures. (See Table 9, Top 20 Private Elementary and High School Tax Expenditures, FY 2005, below.)

These top twenty institutions together own 76 properties, which are assessed at just over $300 million and account for just over $30 million in lost tax revenues, or 27.5% of the total tax expenditures for private schools. Eleven of the top 20 are religious-affiliated, while 9 are independent. (Two of the secular schools are special education schools--the Lexington School for the Deaf and the New York Institute of Special Education--which present special policy considerations. See A Special Case for Special Ed, p. 79.)

Manhattan and the Bronx are each home to five of the top twenty. Queens has three, as does Brooklyn, despite having the largest number of private schools and the highest private school student enrollment. Two are on Staten Island, which is somewhat surprising given that it has the smallest private school inventory of the five boroughs. Two of the top twenty institutions are “bi-borough” in nature, with branches located in two boroughs.

Although the total tax expenditures from tax-exempt private school properties are relatively modest, especially compared to those generated by colleges and universities, they nonetheless raise important public policy issues that surely merit broad public discussion. Property tax exemptions are public subsidies to private education. Revenue diverted from the city’s coffers by virtue of such exemptions is money that could otherwise be spent on public services, including, most obviously, the city’s struggling, inadequately funded public school system.

Given the hard-won, absolute constitutional requirement of universal free public education, a number of fundamental issues should be addressed:
-- Should the city be subsidizing private elementary and secondary education at all through property tax exemptions?
-- If some level of public subsidies for private education is determined to be desirable public policy, what form should the subsidies take, and what objective criteria should be applied to determine their level, the particular schools to receive them and the individual or classes of students to benefit from them?
-- What level(s) of government should make these determinations?
--What level(s) of government should bear the cost of them?
--Should religious-affiliated schools even be eligible for property tax-exemption and/or other subsidies?

Other Public Subsidies for Private Education
Property tax exemptions are not the only type of public subsidy that New York City and state provide and fund for private education. As mentioned above, approximately 5% of the Department of Education’s budget is allocated to private schools. The bulk of this is for the cost of private tuition and transportation of special education students unable to be served in regular public schools, which is a legitimate expense.
But the city also underwrites other aspects of private education that seem much less defensible, including providing city-funded school nurses to private schools (funded through the Department of Health) and paying for transportation of general education students attending private schools who meet certain distance (not means) requirements.
The issue of city-paid nurses in private schools came to a head most recently in 2002, when Mayor Bloomberg cut funding and reduced the number of nurses in private and parochial schools as a cost-saving measure. While state education law requires districts to provide nurses to both public and non-public schools, it does not mandate a ratio that districts must adhere to. After repeated cuts and restorations during the ongoing budget crisis, in 2004, the Council introduced legislation (and overrode a later mayoral veto of the bill) that required the city to provide a full-time nurse in every private school with more than 200 students that so requested.
While state law requires rural districts to provide transportation under certain circumstances, urban school districts are not required to do so. The rub is that if an urban district chooses to provide transportation, it must be offered equally “to all children in like circumstances residing in the district,” which results in yet another unfunded state mandate that has city taxpayers picking up the tab for transporting private school kids.
The DOE provides school bus service or free or subsidized MetroCards to general education students at both private and public schools who meet certain distance eligibility requirements. Bus service is available when DOE deems it feasible; if not, kids who meet distance requirements (which vary with a student’s age) automatically qualify for free or half-fare (depending on the distance) MetroCards.
In the 2005-05 school year, approximately 115,000 general education students received free school bus service, at a total cost of $188 million ($78 million of which came from city funds). Some 69,000 of these kids attended public schools, while 46,000--or roughly 40%--attended private schools. In addition, the city spends $45 million on subsidized passes for public transportation for 591,000 children, 22% of whom (130,000 kids) attend private schools.
The city spends over $40 million to subsidize bus or subway service for families who choose (and are financially able) to send their kids to private school, without any needs-based eligibility requirement. City taxpayers are paying for buses or MetroCards to ferry kids to some of the most elite and expensive schools in the nation, no questions asked. But here’s a question that should be asked: if a family chooses and can afford to pay as much as $26,000 a year for kindergarten tuition, why are taxpayers footing the bill to deliver them there?
A number of other public subsidies for private schools deserve brief discussion. New York State provides $57.30 per student, in both public and private schools, for the acquisition of textbooks. (This money flows through the city’s budget and is accounted for as part of the pass-throughs for private schools). More than half of the $27 million the state spent on private school textbook aid for the 2003-04 school year went to New York City students. The elimination of the subsidy for private schools would result in savings at the state, rather than city, level, but if the state savings were redirected to public schools across the state according to existing formulas, New York City public schools could receive an additional $10 million in textbook aid. The state also grants discounts in gasoline and diesel taxes for private and parochial schools. Finally, the state reimburses private schools for the cost of faculty and staff time spent complying with various state reporting mandates, including attendance records, pupil evaluation tests, and graduation reports. And private schools are eligible for tax-exempt bond financing for the purchase, construction or capital improvement of their properties.

A Special Case for Special Ed
In response to discriminatory treatment by public schools of students with disabilities, in 1973 Congress passed the Education of the Handicapped Act (EHA), which made special education programs for disabled children mandatory. EHA was later strengthened and renamed the Individuals with Disabilities Education Act (IDEA), which governs special education today. The two basic rights ensured by IDEA are that every disabled student is: 1) entitled to a free and appropriate public education; and 2) that the education must be provided in the least restrictive environment.
During the 2003-04 school year, 137,930 students or 11.1% of the citywide student population in New York City public schools received special education services. The special education budget for 2003-04 was $3.4 billion, or 25% of the total education budget for the year. The three largest disability types are: learning disabilities (46%); speech-language disabilities (24%); and emotional disturbance (13%).
The disparity between the number and percent of special education students and the proportion of the general education budget spent to educate them reflects the higher cost of providing these specialized services.
The majority of these students received special education services at regular public schools, in accordance with IDEA’s commitment to provide such education in the “least restrictive environment.” However, when a student’s needs cannot be met within the context of the regular public school system (usually, though not exclusively because of physical disabilities), a school district is required to cover the cost of tuition and transportation to an approved private school. In New York City, for 2003-04, 4,743 students (3.4%) were educated at private day schools, at a cost of approximately $612 million (or 18% of the total special education budget).
We believe that property tax exemptions for private schools that educate New York City children with special needs who are unable to be served by the public school system are a legitimate public expense. City Project would propose exempting these special education institutions from any changes to existing laws that would result requiring private schools to pay all or some property taxes for their property.

Does Money Make a Difference?
Simply put, money matters in education, as it does, for better or worse, in most aspects of life generally, and with public services in particular. Of course, public education funds must be spent well, accountably, and be designed to ensure maximum student achievement. But only fools claim that money doesn’t make a difference.
Almost without exception, modern research shows that “although socioeconomic disadvantages have strong detrimental impacts on the achievement of many minority students, the education opportunities that money can buy can substantially compensate for these disadvantages.” Reduced class size, intensive reading programs, and pre-school initiatives have consistently been documented to increase student achievement, but each of these efforts adds costs to the public school system. That money has to come from somewhere. One place to start that search is the city’s growing property tax exemptions for private educational institutions.

PART VI: A PUBLIC AGENDA FOR REFORM
City Project’s Recommendations
City Project began its examination of property tax exemptions in New York City out of concern for the city’s fiscal health, specifically, its ability to generate sufficient revenues, in an age of shrinking state and federal aid, to maintain a balanced budget while providing for the full array of services and infrastructure essential to the well-being of city residents and its overall quality of life. But the more closely we examined effects of New York State’s system of property tax exemptions on New York City, the more interested and alarmed we became at the impacts of property exemptions on tax fairness, governmental accountability, and the achievement of or interference with a gamut of statewide and local public policy goals, in addition to the fiscal bottom line.
As cited in this report, City Project is hardly the first to examine the issue and impacts of property tax exemptions and propose serious reforms, but it is the first to do so in many years. In fact, we discovered that, ironically, as the number, value and tax expenditures from property exemptions escalated uncontrollably in the last decade and one-half, the frequency and thoroughness of official reviews of this issue have declined, until they receded altogether into the dustbin of state legislative history. So, taking a page from that history, we reiterate one of the ultimate goals of the Cuomo Panel on Real Property Tax Exemption and Classification Issues, the last comprehensive state review of New York State’s property tax exemption system and proposed series of sweeping reforms: “Local and state officials should be educated to view exemptions as expenditures of government funds, the same as cash expenditures, and balance the purpose of the exemption with financial ability to give the exemption. And all should realize that every time we give someone and exemption, other persons must pay for it.”
Our report has raised a number of fundamental substantive and procedural issues about the breadth, impact and rationality of New York State’s system of wholesale, uncontrolled, permanent property tax exemptions as it affects New York City. The report focused on exemptions that pertain to private property-owning non-profit educational institutions at all levels, from pre-kindergarten through college, graduate and professional schools, and assessed how well or poorly such exemptions actually fulfill their “public benefit” rationale of providing education to all New Yorkers, and doing so in ways that are appropriately targeted, publicly accountable, and provide “services to the public, on a not-for-profit basis, which otherwise might have to be provided by government itself.”
We chose to begin our review of private non-profit property tax exemptions with educational institutions because the federal and state constitutional mandate of free universal elementary and secondary education, and the state and city commitment to providing more generally available and affordable higher education, as well as other trends, raise fundamental questions about the effectiveness and necessity of such public subsidies for private educational institutions.
The recommendations that follow are of two types: first, those that are specifically oriented to educational institutions, some of which might be applicable to other non-profits; and those that should be considered for most, if not all, “institutional” exemptions or “organizational social purpose exemptions” as they are called by the Cuomo Panel.
The following are options for reforming the current broad-brush system of permanent, full tax exemptions for educational properties, particularly higher educational ones, starting with the most modest.
1. The New York State Legislature should immediately enact legislation that defines the nature and use of private educational ( and religious and charitable) institutions properties that are eligible for property tax exemption, as specifically authorized in Article XVI of the New York State Constitution.
The 1938 constitutional amendment that conferred tax-exempt status on properties owned by non-profit education, religious and charitable institutions specifically authorized the state Legislature to define the nature and use of properties to be included in the exemption of properties “used exclusively for” educational (and religious and charitable) purposes.
Over the years, however:
“(T)he constitutional exemption has merely been repeated in the statute, without legislative definition. As a result, the courts have been forced to determine the application of the statute on a case-by-case basis without any further guidance from the Legislature. The consequence to local governments has been an expansion of the scope of the exemption into properties traditionally associated with private, entrepreneurial activity and also traditionally subject to taxation. The mandatory exemption of these properties is both a fiscal liability to the community and a source of local irritation.”
Such decisions, absent a clear legislative definition, have stretched the definitions of these and other exempt properties beyond any reasonable or rational interpretation.
There have been periodic legislative efforts to define and limit exemptions for some non-profits. One of the most interesting efforts occurred during the 1991-92 legislative session. At that time, a bill introduced in the Senate (S-3384) clarified the definitions of eligible exempt organizations, narrowed the definition of the types of properties that could be “used exclusively” for exempt purposes, and provided a specific definition for what “in good faith contemplated” meant for unused property to qualify as exempt. The same year, the Assembly proposed a bill (A-3266) that would have defined what various organizational purposes meant for application of property tax exemptions. With respect to “educational purpose,” the definition explicitly excluded properties used for faculty residential housing or social relations. It also excluded facilities used for “unscheduled, unstructured and unsupervised recreation,” but left facilities used for organized school sports exempt, an obvious gesture to sports-loving alumni and others. Both bills received insufficient support to pass.
A more recent effort by the New York State Senate attempted to narrow definitions of eligible properties and organizations. The bill contained restrictive language and went so far as to mandate “strict construction” of the law and limited application of exemptions. In the section of the proposed law that applied to educational institutions, the language continued exemptions for student dorms, but seemed (by omission) to exclude permanent housing for faculty and other staff. All other properties owned by educational institutions and improvements to such properties would be subject to local real estate taxes in whole or part, if they were not used for wholly exempt purposes. Unfortunately, this reform effort was exclusively focused on reducing homeowners’ property taxes, with little discussion of the need to ensure adequate revenues to meet local public service needs; and language in the legislative findings was overtly hostile to non-profit organizations in general. As a result, the legislation gained no traction in the state Assembly and has remained in limbo.
These periodic efforts to narrow the scope and application of automatic tax exemptions have failed, perhaps at least in part, because the general public is unaware of the impact of property tax exemptions on the ability of local government to adequately fund public education and other essential services, as well as the impact on their own tax obligations.
But it remains within the power of the state Legislature under the 1938 constitutional amendment to limit these elastic definitions without the need for a constitutional amendment, and the Legislature should do so immediately, by narrowing the definition of “used exclusively” to properties used solely for educational, religious and charitable purposes, as strictly construed. Such a narrowed redefinition should, at the very least, eliminate from exemption and restore to the tax rolls all residential properties that are used to provide year-round housing for faculty and other employees affiliated with the exempt institutions. Further, the Legislature should examine the possibility of restricting or eliminating exemptions for student housing, as well.
As illustrated in Appendix B and discussed above, a rising number (and value) of properties acquired or developed by universities and colleges are permanent, full-year residential structures. Most of these were pre-existing, taxpaying residential buildings (or individual housing units) that were purchased by colleges and universities, taken off the tax rolls, removed from the general housing stock of the city, and repurposed for use as below-market rate faculty and other institutionally restricted housing. In addition to shrinking the tax base, such purchases may also cause housing values to rise and reduce housing affordability in the neighborhoods where these buildings are located.
Whatever their local extra-fiscal impact, such properties bear no intrinsic relationship to the exempt educational mission of their owners, and can by no stretch of definition be classified as being “exclusively used” for educational purposes as required by the state Constitution and should not remain exempt from taxation. However important--or necessary--the incentive such below-market rate housing is to enable local universities to recruit and retain valued faculty and other staff, the development and allocation of rare housing subsidies should be determined by publicly determined city housing policies, not by the unreviewable unilateral actions of private educational institutions.
More New York City-based private universities (e.g., NYU, St John’s, etc.) are transitioning from “commuter schools,” primarily serving city residents who lived at home or elsewhere off-campus, to “campus schools,” attracting many more of out-of-town students. As Appendix A illustrates, of the city’s 40 private property-owning colleges and universities, only 12 serve a student population that had a majority of city residents in 2004, with the overall percent of city resident students of all private institutions averaging only 38.2%. This shift is producing a greatly expanded need for additional residential student space, resulting in the ironic and untenable situation in which private institutions are developing more properties as student dorms and other forms of less-than-permanent residences to house their growing number of non-city-resident students, while receiving ever-increasing city resident-subsidized property tax exemptions.
We would urge that both houses of the Legislature consider enacting a law, which should apply to religious and charitable properties as well as educational properties, limiting tax exemption to properties exclusively used for mission-related purposes, as required by the state Constitution, which would exclude all Class A residential properties, as well as impose limitations on student residential facilities as proposed above.
If property tax exemptions for student residences are to be continued, we recommend that they be restricted to dorms owned by institutions where a majority of the overall student body is comprised of city residents.
2. New York State should compensate New York City and all other localities for all lost tax revenues that are attributable to state-imposed property tax exemptions.
As the New York Conference of Mayors and Municipal Officials observed over a decade ago, “More and more the state government uses the local property tax as a means of funding statewide social and economic policy. …State officials take the credit, and local officials and taxpayers pay the bills.”
Having the state reimburse localities for property tax exemption-related revenue losses would have several salutary results:
- It would make the state government more deliberate and cautious about creating, continuing or expanding property tax exemptions; more responsive to local spending needs and priorities; and more directly accountable for the local fiscal impacts of statewide policies and priorities that are funded by local, rather than state, taxpayers;
- It would reduce or eliminate one source of huge, mounting unfunded state mandates by requiring the state to put its funds where its stated priorities are;
- It would equalize fiscal burdens from tax-exempt properties that provide services or benefits to people from outside the immediate jurisdiction of the exempt entity.
This idea is neither original nor far-fetched. New York State itself voluntarily pays local property taxes or payments in lieu of taxes (PILOTS) on a small number of its own tax-exempt properties. More on point are the examples of Connecticut and Rhode Island, which reimburse localities for a significant portion of their actual revenue losses from exempt properties owned by universities--although the percentage of reimbursement is different between the two, and varies for each from year to year, as do the actual payments. The above-mentioned proposed Senate bill also included a provision for state aid to be made available to localities with tax-exempt properties upon their application, but would have limit the amount of state appropriations to an unrealistically and inadequately low amount of $10 million statewide.
The arguments in favor of full state reimbursement of lost local property tax revenues are compelling for localities throughout New York State, and especially for New York City.
There is an existing imbalance of payments between New York City’s revenue contributions to the state and state aid to the city, which has been estimated at between $7 billion to $11 billion per year. And, as noted before, many of universities and colleges in the city (as well as other non-profits) directly serve and indirectly benefit large numbers of people that come from and go back to locations far beyond the city’s borders. Moreover, because of New York City’s status as a national and international center of finance, arts and culture, more private universities and colleges have chosen to locate here than anywhere else in New York State and the nation, saturating the city with tax-exempt educational institutions and properties that do not even serve a majority of New Yorkers. In fact, tax expenditures from private non-profit colleges and universities in New York City exceed those from state-owned properties in the city.
If it were it possible to get such legislation enacted, the only drawback would be a very practical one: just as the state’s revenues ebb and flow from year to year, so do its legislative priorities. There is little assurance that reimbursing localities for lost property revenues would become or remain a firm fiscal commitment. As the Scottish poet Robert Burns wrote (and John Steinbeck cribbed and anglicized): “The best laid plans of mice and men often go awry.”
3. After narrowing the definition of exempt properties, the New York State Legislature should enact a law enabling New York City and all other municipalities to impose user fees or service charges on tax-exempt properties, for their institutional owners’ use and/or consumption of specified local services from which they benefit, and for which they currently do not reimburse the city. The exact design and coverage of these fees could be left to local determination.
The theory behind imposing service charges or user fees on property-owning non-profits is simple and straightforward: such institutions consume and/or use local services and infrastructure and should therefore contribute to the costs that local governments incur to provide them. As the Cuomo Panel report put it, “Tax-exempt property benefits from many kinds of municipal services, just as taxable property does.”
Another collateral benefit of imposing service charges/user fees is that it would remove the incentive for exempt institutions either to over-invest in real estate or to retain vacant or underused land they no longer need.
We believe that such legislation would be legally permissible under Article XVI of the state Constitution without amendment.
In municipalities throughout New York State (e.g., Buffalo) and elsewhere, user fees are now charged to a variety of tax-exempt properties for various local public services, including water, sewer and/or waste disposal. In New York City, although certain categories of non-profits are exempt from or pay discounted rates for water and sewer, private colleges and universities are required to fully pay for water and sewer charges related to their properties. This represents a clear precedent for the ability of New York State and municipalities to impose other user or service fees by statute.
The proposed law would simply expand this recognized concept to encompass other basic local public services that property-owning universities and colleges and other tax-exempt institutions make use of, consume or benefit from, and extend the ability to impose such charges to all localities throughout the state.
In 1971, on the heels of the Becker Commission’s report and recommendations on property tax exemptions, the New York State Legislature enacted an optional service charge law to do what we are proposing here, but the law was repealed before it took effect. According to the Cuomo Panel, which discussed this prior legislative effort in its own recommendation to re-enact such a law, while there were and would be some “practical difficulties” in imposing such charges, “it is not an impossibility.” The Cuomo Panel’s own service charge proposal (Recommendation #15) would have included fees for four municipal services (police, fire, emergency medical services and snow removal) and for the costs of capital infrastructure, while excluding the costs of education and social services “because those services do not directly benefit exempt properties.”
Given the expansion of New York City’s public services and their increased costs since the mid-1990’s, City Project proposes that a service charge formula should include the costs of the following local public services and expenses: police and fire protection, sanitation, transportation, traffic control and basic road repairs and maintenance, environmental protection, the Department of Information Technology and Telecommunications (operation of the 311 system), the Corrections Department, the offices of the District Attorneys and the Department of Finance, all of which would include pension and fringe benefit costs for city employees engaged in providing these services. Like the Cuomo Panel, we would also include proportionate charges for city-financed debt service payments for infrastructure maintenance and improvements.
The services and expenses included in City Project’s service charge proposal are all funded primarily by city-generated funds and benefit all city residents and properties. We would apply the service charge only to the city-funded portion of a given service or department. Similar reasoning applies to the imposition of charges related to a share of city-financed debt service for infrastructure maintenance and improvements. As the Cuomo Panel stated and the Becker Committee previously found, these types of services “provide benefits of an essential nature to the public as a whole which are not, and cannot, be efficiently absorbed by any segment of the private sector.“
Of course, defining the services that should be included in a user fee formula is ultimately a matter for public debate and decision. Our proposed list is a starting point.
The amount of user fees that would be charged to universities would be derived by applying the following formula: divide the city-funded (excluding state and federal aid) cost of property-related services by total city tax revenues, and to the resulting percentage, apply the applicable property tax rate for the current year. The resulting percentage is then in turn applied to the assessed value of the property being charged, which yields the service charge.
At current assessed values (which, as noted previously, are likely to be considerably understated and must be brought up to date), the FY 2005 combined assessed value of all properties owned by private non-profit colleges and universities in the city was $2,613,332,458 billion. (See Appendix B.) To determine the total amount of service fees that would be charged proportionally to such institutions, the city would make the following calculations: it would divide the total city-funded costs for the itemized public services to be included (a total of $14.052 billion in FY 2005, Appendix D, Select Agency Expenses for Proposed Fee for Service, p. 102.) by total city tax revenues for the same year ($25.915 billion, Appendix D), and take the resulting 54.2% rate, multiply that by the current generally applicable property tax rate of $12.28, to arrive at a service charge rate of 6.6%. Applying this rate to the cumulative assessed value of all college and university properties would yield new service charge revenues of $172,479,942 for FY 2005.
To determine the amount of service charges/user fees to be billed to individual institutions, the city would simply apply the 6.6% service charge rate to the total assessed value of each institution’s exempt properties. The larger and more valuable the real estate holdings of an institution, the higher its service charges would be.
For example, Columbia University’s own property holdings have a total assessed value of $623,558,768. Applying the 6.6% service charge rate to that assessed value would yield a total annual charge of $41,154,879 for its use and consumption of the itemized public services for 2005. Since Columbia’s property tax expenditure (without its two affiliated institutions) was $61,217,801 for FY 2005, the proposed service charge is discounted by almost one-third, which represents a continuing public subsidy. (See Appendix E, Sample of Proposed Service Charges for Universities Compared to Current Tax Expenditures, p. 103.)
Institutions with fewer properties and lower assessed values will pay proportionally lower user fees. Toward the low end of the property ownership scale, for example, Boricua College, which had an annual tax expenditure of $300,636 in FY 2005, would pay a service charge of $177,012. (See Appendix E.) At the very bottom of the property value scale is The New York Academy of Art. This institution owns just one property, which had an assessed value of $1,048,500 and a tax expenditure of $117,526 in FY 2005. Using our proposed formula, the Academy would be liable for service charges of just $6,291.
As noted above, some policymakers might justifiably argue for the exclusion of one or more of our proposed service charge categories, and/or for inclusion of the costs of libraries, parks, cultural institutions, and/or other categories of public services, including public education, which, despite problems and criticisms, supplies both consumers and workers for all city-based non-profit property-owning institutions. The ultimate determination of which services to include in any service charge formula should be the product of a robust and transparent public debate, and might best be made discretionary for individual localities.
Finally, we would also recommend considering the inclusion of a circuit breaker provision in the statute, which would enable a municipality to grant appropriate relief to any tax-exempt institution that could demonstrate its inability to pay all or part of the user fee.
4. Enact state legislation that requires the affirmative consent of local jurisdictions before tax-exempt institutions may purchase taxable properties and remove them from local tax rolls, unless a compelling state interest in such purchase, as defined by detailed criteria spelled out in state law, is established, and a specific state legislative finding is made that demonstrates how the proposed purchase meets all such written criteria.
This approach, which gives decision-making authority to the level of government that bears the cost of exemptions, has been used elsewhere (e.g., in Hartford, CT) and is, at least in theory, indistinguishable from processes now in use to confer property tax and other tax exemptions on commercial and industrial properties. Such prior local approval process would enable a democratically elected, publicly accountable entity (such as the local city council) to make a rational determination as to whether the lost property tax revenues are justified by other public benefits from the proposed purchase and use of the property by a tax-exempt entity. It would allow the locality to effect more rational and comprehensive land-use planning, and would give it greater leverage to impose terms and conditions for the purchase of taxpaying properties that reflect local policy priorities (such as set-asides of jobs or housing for residents of the neighborhood where the new purchase is to occur, etc.). Finally, such prior approval could act to offset the leverage that a non-profit has in bidding for particular properties against for-profit entities.
5. The state Legislature could enact a law requiring Payments In Lieu of Taxes (PILOTS) from educational institutions and other tax-exempt non-profits.
There are ample precedents for and examples of localities receiving PILOT payments from various non-profit institutions, particularly colleges and universities within their borders. Both Cambridge and Boston have negotiated various arrangements with Harvard and MIT for different amounts of PILOTS and other forms of payments for otherwise tax-exempt properties. Boston has also negotiated PILOTS from its non-profit hospitals. Beyond partial property tax reimbursements made by Connecticut, Yale University in New Haven, and Stanford University in Palo Alto, California, each make contributions to their respective fire departments for fire service. (See Recommendation 3, above.) To our knowledge, New York City has never tried to negotiate PILOT payments from any of its private, institutionally exempt non-profits, including educational institutions.
In its most recent bi-annual “Budget Options for New York City,” IBO includes the possibility of obtaining PILOT payments from colleges and universities in the city, either voluntarily or by legislation. IBO’s proposal sets payments at 25% of the tax expenditure for each institution, and estimates that the total PILOT payment would currently amount to $67.4 million.
As required by the city Charter, IBO presents arguments both in favor of and in opposition to this proposal, taking no position itself. IBO’s case in support of PILOTS from higher education institutions includes: 1) the institutions’ consumption of expensive local services (e.g., police and fire) without payment, which shifts tax burden to residents and for-profit employers; 2) their provision of benefits to “a wider community beyond the city,” which makes it appropriate to shift some of the burden of supporting their use of city services to the broader base; and 3) the precedent of several large cities that collect PILOTS either directly from large private educational institutions or from their state governments.
IBO’s case against such payments centers on educational institutions’ economic benefits to the city--from providing jobs to purchasing local goods and services and providing an educated workforce, and the general enhancement of city life through research, cultural contributions, public policy work and other programs and services. In addition, IBO mentions the argument that tax exemption for faculty housing encourages faculty to live in the city, pay taxes and consume local goods and services.
But there are at least two other practical arguments against the city’s trying to obtain such payments on an institution-by-institution basis. The first and most powerful is the sheer enormity and impracticality of achieving it. Unlike Boston, New Haven, Philadelphia and other smaller municipalities with just one or a handful of universities to deal with, New York City has 40 property-owning institutions that own more than 700 properties. Assuming the PILOT payments are voluntary, such individual, ad hoc arrangements would place an enormous burden on the city with no predictable or long-term fiscal benefits.
The second reason is that traditionally, where PILOTS have been negotiated, they have generated a minute fraction of the revenue that would be generated by actual property taxes set at the appropriate local tax rates.
In fact, one of the rare efforts to evaluate the effectiveness of PILOT programs from the point of view of both local governments and institutional non-profits concluded that even the more organized PILOT programs, such as those in Boston and Philadelphia, “are piecemeal in nature, unevenly enforced, difficult to administer and produce very little revenue in relation to the city’s overall tax base.”
Because of these intrinsic problems, coupled with the large number of institutions involved in New York City, we believe that PILOT payments fail to adequately address the basic problems created by property tax exemptions: the lack of any meaningful limitations on the number, nature, value and tax expenditures of such properties; their detrimental impact on the local tax base, and their inequitable shifting of tax burdens to other local residents and property owners.
Unless the state Legislature were to pass a law requiring property-owning educational institutions throughout the state to make payments in lieu of taxes to their home localities that represented a significant percentage of their tax current expenditures, PILOTS would be impractical and inadequate for New York City and elsewhere. We also believe that such a law would be ruled unconstitutional by state courts if –and when—challenged, as contrary to the current provision of the state Constitution that requires constitutional amendment to alter current property tax exemptions for educational, religious and charitable institutions
6. The state Legislature should undertake a public review of other exemption-limiting options that would establish a better balance between the interests of individual tax-exempt institutions and the broader public fiscal and other policy needs of local jurisdictions.
A number of other proposals have been made over the years by various entities that represent options to impose rational and necessary controls, restrictions and value recapture on exempt properties and the tax expenditures they produce, which are well worth further exploration. They include:
a) limiting the total tax expenditures from the operation of automatic property tax exemptions to a specified percentage of real estate tax revenues and/or limiting tax expenditures for any single institution to a specified percentage of the assessed value of all their properties;
b) phasing in tax exemptions when taxable property is purchased and removed from the tax rolls, to cushion the impact from lost tax revenues on local budgets;
c) imposing a set limitation on the duration of tax exemptions and phasing them out after a certain period of time. This would allow younger or smaller non-profits to acquire property without the burden of paying property taxes for a specified period of time, while protecting the locality from perpetual exemptions, especially from larger, older and wealthier institutions;
d) excluding future property purchases or the increased value of property from tax exemptions. This approach might be restricted to non-profit institutions with real estate portfolios above a certain value, number of properties, or total tax expenditures;
e) establishing a sliding scale of tax exemptions that would vary according to the geographic impact of the services or benefits being provided by the particular tax-exempt property and institution, conferring the highest exemptions to local-serving organizations, and allowing diminishing to no exemptions to those whose services or benefits extend statewide, nationwide or internationally; and
f) imposing a municipal “flip tax” or a recapture tax on the profit from exempt properties that are sold for market rate prices.
The options reviewed in this section not necessarily mutually exclusive. The state Legislature should consider applying different combinations of restrictions generally, and even tailoring different approaches to different categories of exempt institutions, in order to obtain the best balance among conflicting interests of individual property-owning non-profits and the non-profit sector as a whole on one hand, and local fiscal needs, the general welfare of local residents, and other fundamental policymaking considerations of localities on the other.
7. The state Legislature should immediately undertake a comprehensive statewide joint legislative review of the state’s entire property tax exemption system, widely disseminate its findings and recommendations, and hold public hearings on them throughout the state.
The Legislature must undertake a comprehensive, official bi-cameral examination of the current scope and operation of property tax exemptions and their impacts on fiscal stability, land use planning, and other issues in New York City and other localities. The review should produce, among other things, a comprehensive statewide register (by municipality, county or other appropriate legal-political jurisdiction) of all fully and partially exempt properties, the category of their exemption, their location, owner, nature of usage, value (exempt and assessed), and tax expenditure (with date of last assessment).
The results of this review must be made available to all the executive and legislative branches of all municipalities and localities in the state, and to members of the public via a widely advertised website, and in hard copy by request.
8. Pending the review proposed in Recommendation 7, above, the state Legislature should immediately enact an absolute moratorium on: a) the addition of new categories of exempt institutions and types of exempt properties; b) the acquisition of new exempt properties by existing exempt institutions; and c) on increased tax expenditures that exceed a specified percentage resulting from either the addition of new exempt properties or the substantial rehabilitation of or major capital improvements to existing exempt properties.
There is a need in New York State to immediately freeze the growth of tax expenditures from existing exempt institutions and properties and from the addition of new exempt categories and properties. Enacting an absolute temporary moratorium would hold the line during the critical, comprehensive legislative and public examination of the state’s tax-exemption system. A moratorium should temporarily prohibit at least the three following activities statewide:
a) the addition of new categories of exempt institutions and types of exempt properties;
b) the acquisition of new exempt properties by existing exempt institutions; and
c) increased tax expenditures that exceed a specified percentage resulting from the substantial rehabilitation of or major capital improvements to existing exempt properties.
Such a moratorium would provide the state Legislature with a powerful incentive to undertake a thorough bi-cameral examination of the problem in a timely manner.
9. New York City and other localities and/or the state Legislature should consider initiating a constitutional amendment to delete the language in Article XVI that bars legislative changes to tax exemptions for properties owned by religious, educational and charitable entities, thereby placing such exemptions on an equal legal footing with the property of all other exempt institutions and making them subject to alteration or repeal by general laws.
Property tax exemptions are essentially public subsidies that do not necessarily reflect or promote contemporary publicly-determined priorities. Property tax exemptions apply to only a self-selected minority of private non-profit institutions, including educational ones, that have had the means to acquire and maintain property for reasons of history, endowment or other factors unrelated to their provision of services that constitute “public benefit” to either the broad and general public, or a segment of the public with the greatest need for such services.
As this report documents, in New York City, educational tax-exemptions tend to favor large, well-funded private institutions with valuable property portfolios whose missions and benefits often extend well beyond local borders, over smaller, younger, less-well funded colleges and universities that provide services primarily to local residents, and either rent space or own only one or two properties. Moreover, the current scope and cost of the three mandatory categories of property tax exemptions are so broad and deep that piecemeal reforms can achieve only limited results.
The most appropriate action that could be taken is to remove the constitutional barrier to changing or repealing tax exemptions for religious, educational and charitable institutions by simple legislative act. If this is not possible, other appropriate state action, as outlined above, should be taken immediately.

Appendix C
How City Project Recreated the [Property Tax Exemption] Universe
It took a lot longer than seven days for City Project to create a reliable property tax exemption universe
or database of higher education properties that forms the foundation of much of this report.
We started with a 400-page printout of the city’s 2005 tax expenditures for over 900,000 properties
derived from records collected and maintained by the New York City Department of Finance (DOF) and
obtained for City Project by the NYC Independent Budget Office (IBO).* DOF groups tax-exempt
properties into roughly 200 categories of exemptions; each exemption category is
assigned a different “exemption code” (or “excode”). For each tax-exempt property within any category,
IBO’s exemption analysis contains the following information: the name of the owner, the property’s
location (street address as well as block and lot number), assessed value, exempt value, and amount
of its tax expenditure.
For this report, five exemption categories were of primary interest to us: college/university (Exemption Code 1601), elementary/high school (Exemption Code 1602), student dorms (Exemption Code 1603), faculty & student housing (Exemption Code 1604) and religious school (Exemption Code 1022). A sixth category, properties listed as “owned by” by the Dormitory Authority of the State of New York (Exemption Code 3500), contained higher education properties of various types and usages and owned by various institutions. DASNY is a state-controlled public authority that helps public and private education institutions, healthcare facilities and other institutions finance property acquisitions, new construction projects and facility upgrades through tax-exempt bonds.**

As we began to review the properties listed under each category, it became apparent that DOF record-keeping inconsistencies and outright errors were rampant. As a result, we had to conduct a labor-intensive line-by-line review of the names of hundreds of property owners in the six categories listed above, as well as a less thorough review of several other categories for the possibility of relevant “stray” properties.

One major type of DOF coding inconsistency arose from variations or differences in the names in which institutions held title to their properties or in how DOF entered these names into its records. For example, Columbia University’s properties were variously recorded under “Columbia “or “Trustees of Columbia” or any number of variations of these.

Since DOF’s “sorting” of properties by owner was done alphabetically, such name variations were not grouped together as one ownership body of properties. In order to produce an accurate and comprehensive list of properties owned by each institution, we had to search for all name variations, standardize them and group them together under the correct institutional owner. In addition, slight misspellings or variations of the abbreviation of an institution’s name also had to be identified and corrected in order to recreate an accurate universe for each institutional owner.

DOF errors we encountered fell into two general categories: miscodings and “mystery entries.” Miscodings involved numerous instances of institutional listings coded or filed under incorrect exemption categories. For example, we found elementary schools listed as university properties, museums listed as elementary schools, etc., and other miscategorizations of the types and/or uses of properties. These errors were relatively easy to correct once we identified them.

“Mystery entries,” on the other hand, were properties whose listed owner offered no clue as to the nature of the property, its actual institutional owner (if any), and whether it was indeed correctly categorized. For example, a number of properties coded as university properties were listed under the names of private individuals, for-profit corporations, various public authorities (including the state Dormitory Authority) or city agencies. We researched every such anomalous ownership listing individually in order to be confident of the accuracy of our data, with respect to both individual institutions’ property holdings and tax exemptions, and the cumulative categorical totals.

Appendix C, cont’d
IBO generously assisted us in tracking down several anomalous ownerships that required access to DOF data bases which we lacked, while we used other methods and resources to verify additional institutional ownership.
Despite these efforts, we were unable to determine the exact nature of 17 educational properties categorized by DOF as Dormitory Authority properties but in fact owned by various private universities. This resulted in our having to list them under the category of Dormitory Authority rather than by the proper DOF category in several tables throughout this report.
Finally, the biggest (literally) anomaly entailed the “four“ properties that make up St. John’s University campus in Queens. All four properties are listed in DOF records as owned by the Dormitory Authority; three are also coded as DASNY properties (Exemption Code 3500) while one was coded as a university property (Exemption Code 1601). The latter costs the city almost $22 million in annual tax expenditures, making it the single most expensive university-related tax expenditure in the city. In fact, however, the single “property” in question is actually 24 or 25 separate buildings (city records differ on the exact number) located on St. John’s main campus. To our knowledge, this treatment of multiple buildings as one property did not occur in other institutions, including those with a traditional campus setting. But the St John’s anomaly results in an understatement of both the number of properties owned by St. John’s as well the cumulative number of properties owned by all city-based colleges and universities.
The figures (number of properties, value of tax expenditure per category, etc.) cited in this report, then, derive from our corrected and resorted “database” that was produced from our research of many of the individual properties listed in the original IBO Exemption Analysis of DOF’s records. We made every effort to establish the accuracy of every property listing, but given the sheer number of properties and error-ridden nature of the original files, some margin of error is inevitable. We did however, err on the side caution: if we could not verify the owner or nature of a questionable property, we did not include it in our database.

While our time-consuming research efforts did not significantly alter the total amount of tax expenditures for higher educational institutions, they did pin down and/or change the distribution of ownership among the various educational institutions.

* This document is referred to as IBO Exemption Analysis, August 5, 2005, throughout this report.
** The joint state legislative Becker Committee specifically criticized tax exemptions for properties financed by DASNY based on “the lack of adequate statutory definitions of the type of property to be exempted. To this problem, City Project adds our complaint that over a six-month period, DASNY, a public authority, failed to provide us with any information on a relatively small number of specific DASNY-funded university projects that we submitted to them, on the grounds that they could not find the information in their files without spending an inordinate amount of time.