The history and future of the Cornell-Ithaca Memorandum of Understanding

August 23, 2023  -  By Mikayla "Mack" Rovenolt  as reported in the Tompkins Weekly

Originally established in 1995 and amended in 2003, Cornell’s Memorandum of Understanding (MOU) with the City of Ithaca is set to expire in 2024. Thus, negotiations between the city and the university are underway.

How we got here

Former Ithaca Mayor, Cornell professor and Ithaca DSA member, Ben Nichols, secured the 1995 MOU by withholding building permits from Cornell until the university agreed to provide larger contributions to the city. Specifically, he asked for $2.5 million from Cornell in 1994, a drastic increase from its contribution that same year of $143,000. The Ithaca Common Council and the university board of trustees eventually approved the MOU, which increased Cornell’s budgetary contributions to $250,000 for that year.

Nichols was not the only mayor to ask for increased payments to the city. A few years after the 1995 MOU came an amendment from then-Mayor Alan Cohen. Under the amendment, the MOU is effective until 2024 to provide both parties with a stable agreement, and the Consumer Price Index (CPI) escalator, a measurement of the change in the costs to an average consumer of goods and services, was added. This means that the amount the university contributes moves in tandem with the CPI.

When the 2008 economic crash hit Ithaca, former Mayor Caroyln Peterson (2004-2011) was faced with budget constraints and placed a hiring freeze on city jobs, understanding that this would hurt the community and city operations. According to a report from the Cornell Sun, she asked for increased payments from Cornell in 2011.

Then, in 2013, former Mayor Svante Myrick also asked for increased payments under the MOU and described the contributions from the university as “shameful,” a word residents are using today to describe the MOU during the public comment of Common Council meetings.

Over the years, Cornell has also entered into MOUs with Tompkins Consolidated Area Transit (TCAT) and the Ithaca City School District. 

The MOU today

Cornell currently owns an estimated 47% of the property value within the City of Ithaca but, as an educational institution, is almost entirely tax exempt. Under the MOU, Cornell provides a Payment in Lieu of Taxes (PILOT) of approximately $1.6 million annually into the city’s total general fund of about $71 million. By comparison, Ithaca property owners who are subject to the property tax levy will pay $30.5 million.

“The university does make some other contributions, and … they are very minimal. Even compared to its peer institutions, the other contributions it gives to the school and to TCAT. It’s still below its peers. The contribution to the city is a fixed dollar amount that increases with inflation,” said Jason Houghton, a Common Council candidate. 

“I will say the truth of the matter is that Cornell is not legally obligated to give anything, and I don’t anticipate any memorandum of understanding getting Cornell to contribute to a level that really reduces the existing tax burden,” Houghton added. “We are in a situation where we have very high taxes and we still have underfunded city services and departments, so it would be my goal, in the short term, to get Cornell to contribute enough to fully fund some of those critical city services that are suffering right now.”

Houghton continued to say that if the city cannot get more support from a new MOU, then there should not be any additional burdens on residents, either. A 2022 assessment found that “Cornell’s city property exempted from taxes totals more than $2.7 billion.” Cornell only pays around $8 million in property taxes.

According to the Cornell University Student Assembly’s proposed Make Cornell Pay resolution, “Former Mayor of Ithaca Svante Myrick ’09 was quoted saying Cornell ‘owns so much 19 land in our community, if they paid taxes they would pay somewhere around $35 million a year. Right now they pay like $1.25 million. … Just for scale, that would be half the city budget.’”

The resolution also states that “in 2023, Cornell contributed $1,575,204 to the City of Ithaca, which ‘amounts to just a bit less than the amount collected by the city for dog and other licenses and permits.’” The full resolution can be viewed at assembly.cornell.edu/sites/default/files/resolution_25_-_make_cornell_pay_1.pdf.

As the resolution and Houghton both state, Cornell continues to benefit from many city amenities, yet the university does not pay enough under the MOU to cover its use of those amenities. An example of this comes from 2022, when the TCAT Board of Directors requested an 8% funding increase, mainly due to supply chain issues and inflation, from Cornell and was denied. This led to the closure of various bus routes.

While the university argued that TCAT’s emergency funds and reserves were enough for TCAT to get through uncertain times, as Cornell also claimed it would be using reserves, TCAT estimated that based on driver needs, bus repairs and upgrades, the transit service would run through its reserves by 2024 and fall into a multimillion dollar operating deficit.

“I think people generally recognize that there’s a benefit on the city side from having an involved and engaged community as this renegotiation is happening, because community sentiment overwhelmingly favors Cornell giving more money to the city and more money to the community generally,” said Nathan Sitaraman, chair of the Make Cornell Pay Coalition. “But having a process that’s not transparent, not knowing who’s on the negotiating team and, of course, not having the city council releasing any updates about the status of the negotiation or otherwise trying to engage the community feels like we’re not getting the potential engagement we could be getting. City Council could be angling towards more transparency or more community engagement in the process.”

Situations like this are the reason that Make Cornell Pay and Fair Share exist, both of which advocate for transparency and resident representation in negotiations between the city and the university.

Negotiations are ongoing

During the Common Council’s open floor periods, many Ithaca residents have overwhelmingly called for the city to request more funds from Cornell and for more transparency throughout renegotiations. 

Houghton said that while Cornell may have some kind of privacy policy about these negotiations, the city could at least share its goals with the public, especially if it cannot give detailed information. 

“This is something that’s going to impact all of us, and the city has rebuffed our efforts to share information,” Houghton said. “The city isn’t sharing with its constituents what its plans are and what it’s hoping to get out of this. So, I fear that the city is going to try to bind us to some 20-year agreement that is not advantageous for taxpayers.” 

Houghton continued: “I understand that when negotiations happen we don’t need to be informed about all of the details and Cornell might be demanding some nondisclosure to some degree. Nonetheless, as taxpayers – and the city is supposed to be representative of the taxpayers – we should understand what the city’s goals are.”

The efforts Houghton references are the efforts Fair Share has taken to inform the city about the MOU’s impact and Cornell’s history of contributions to the city. Common Council candidate Margaret Fabrizio started Fair Share, which is now made up of 10 members who work to research the city’s issues and Cornell’s history of contributions to the city and areas it occupies. 

Houghton continued that Fair Share’s efforts to share its findings with the city, specifically with Common Council and Mayor Laura Lewis, have been dismissed.

“We wanted to share this information with the city so they could be as informed as possible when entering these negotiations, and that’s really how I became involved, just as a concerned resident,” Houghton said. “Margaret Fabrizio and I had a meeting with the city to try to inform them of  the effort that was being made and some of the data that we had gathered, and we were completely rebuffed. We were basically told in so many words that our efforts and our information weren’t very welcome, and it was very disappointing. We aren’t entirely sure why this is, either.”

While the city’s goals and what happens behind closed doors remain unclear, both Fair Share and Make Cornell Pay continue to work and advocate for change in the next MOU. 

“I think there are a lot of potential answers to this,” Sitaraman said. “One I’ll give is one of Cornell’s favorite counterarguments to make against this kind of thing is that they’re going to have to pick and choose whether to, for instance, give more money to the city or give more money to their workers or more financial aid for students. That’s not actually true. They can withdraw more money annually from the endowment than they’ve been doing in recent years.”

Sitaraman added, “The New York state limit is 7% a year for how much a school can withdraw from its endowment. Cornell used to regularly withdraw like around 5% a year. Recently, they’re withdrawing just a little over 3% per year. They are far from their historical level of tapping into their endowment and very far from what the legal limit is on how much they can withdraw.”

Sitaraman argues that the university can do more. “What we’re asking them for, in the scope of these numbers, is around 0.1%,” he said. “There should be no case against the argument that Cornell could fully fund all the assets that we’re talking about without affecting the operating budget at all. I think that’s something that’s important to understand, for sure.”

Houghton emphasized the tax burden placed on residents because of Cornell’s property tax exemptions.

“I understand that our tax burden is a large contributor to our high cost of living here, and housing and affordability for both homeowners and renters. As a homeowner talking to other homeowners, our tax burden, our current local tax burden can almost double your mortgage payment. So, it’s like you’re buying two houses when you buy one here,” Houghton said. 

“And talking to some landlords, most of them say about a third of rent payments go to property taxes. We’re having such affordability issues here, and our major institution in the city doesn’t contribute to the tax burden that we all pay,” he added. “It feels like it’s really a form of corporate subsidizing. We’re subsidizing Cornell by having them tax exempt.”

In the coming months, residents can expect more information from both Fair Share and Make Cornell Pay. Both organizations are launching websites for Ithacans’ benefit, and both groups’ representatives urge people to watch the ongoing situation and are working for more transparency from the city. When their respective websites are launched, information about the sites will be included here. 

Although the groups do not work together at this time, their missions are aligned, despite some differences in methods and fine details. Both are working toward more funds for the city and the general community so that Ithaca can operate at its fullest and most effective potential to the benefit of everyone who comes here.

At this time, there is no set date for the end of negotiations or when residents can expect more information. 

Cornell University has no comments at this time. The Mayor’s office was unable to respond to an interview inquiry.