Some cities are fortunate to co-exist with large non-profits, such as universities and research facilities. That relationship can offer some relief during times of extreme budget crisis.
Take, for instance, Providence, Rhode Island. There, the city is fighting with insolvency, while Brown University sits atop a $2.5 billion endowment. The university is not required to pay property tax, but the city struck a deal with the university, where it would voluntarily provide $8 million in revenue for each of the next five years. In Chicago, Mayor Rahm Emanuel ended free water services to the city’s 6,000 non-profits, including churches. That less-than-voluntary program has sparked some outcry.
It’s proof that desperate times call for desperate measures. Some cities are able to amicably reach an agreement with local non-profits, others have taken a more adversarial approach. Pittsburg tried to implement a tax on student tuition, a plan that was subsequently dropped when schools in the city decided to increase their contribution to city coffers.
Oftentimes, the relationship between cities and universities can be strained. The city provides a variety of services – including police and fire – and must deal with unique situations. Students riot after big sporting events, or hold protests that would have otherwise not been part of the local conversation. But the schools are typically the largest employers in the area and drive the economy in the city.
In 1978, after New York City had barely escaped bankruptcy, Mayor Ed Koch went looking for cash from an unlikely source: the city’s colleges and other nonprofits, which do not pay taxes on their valuable land.
Koch was trying to do then what cash-starved cities are now pulling off: extracting more money from colleges, universities and private hospitals to help restore bare-boned budgets.
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