PILOT rather than MOU

OP ED: Pilot Rather Than MOU - September 11, 2023  

Submitted by Margherita Fabrizio - Ithaca City Resident and Democratic Nominee for the Ithaca Common Council, 5th Ward, 4-year seat 607 351 6631

Ithaca’s financial burden related to its enormous amount of tax-exempt property is not unique. Universities and colleges throughout the country are some of the largest property owners in countless cities and towns. Many communities have waged long, public efforts for a more equitable partnership in the form of a PILOT or payment in lieu of taxes.

The PILOT rather than the MOU recognizes the university’s responsibility to contribute toward services and amenities it and its thousands of students, faculty and staff rely on. A Payment in Lieu of Taxes means the university knows it enjoys tax-free status and also acknowledges the financial cost of running a city and keeping it affordable and vibrant. It would acknowledge that taxpayers can’t make up Ithaca’s gap of $32M created by large amounts of tax-free Cornell property. Cornell’s city property exempted from taxes totals more than $2.7 billion.

PILOT agreements typically range from 2-6 years, rather than Ithaca’s expiring 20-year-long MOU.

Some states, like New Hampshire, allow taxation of campus buildings not strictly educational in their mission. Dartmouth, for example, is required to pay taxes on all dormitories, dining rooms, and kitchens with assessed values above $150,000. This accounts for $6.2M to Hanover. 

NYS municipalities could organize for a legislative solution like this: a tax on residence halls, dining halls, cafes, stores, hotels, summer camp facilities, etc. –campus operations that are non-academic, profit-making centers.

What would this look like for Cornell? By rough estimates, Cornell receives over $100 million/year in undergraduate residence hall fees. The standard formula for valuing rental property (taking into account expenses and capital improvements) would be 8x the annual rent. If you apply our current city tax rate to that number, a voluntary payment to the city for just residence halls would be $10 million. Add another $4.7 million for the county, and $14 million for the Ithaca City School District just based on these undergraduate facilities alone.

Even without taxing legislation in place, Cornell could follow the example of some schools who are making voluntary tax payments for tax-free properties. 

Yale pays real estate taxes – over $5 million– on all its non-academic property. They also recently made a new six-year commitment of $135 million to New Haven.

For decades, Princeton has voluntarily paid taxes on properties that were eligible for exemption from taxes under state law. They also recently made a $14.6 million commitment to Princeton Public Schools over the next 5 years.

In contrast, Cornell does not pay taxes on property that falls into the non-academic category, and they recently gifted a mere $650,000 to the Ithaca City School District, equating to 0.4% of ICSD’s annual budget.

A contribution of $10 million to the city would recognize some of the campus buildings which enjoy tax-free status, though are not strictly educational, and in fact, are also profit-making.

It’s important to note that none of these agreements referenced came without massive efforts and broad community support. All interested in joining with the Fair Share Campaign can reach out to fairsharecampaign@gmail.com.