Area universities should make payments to the city but not without evaluating its contributions.
Philadelphia’s budget deficit is causing more than financial turbulence, and the city’s PILOT program is certainly not helping.
The problem is simple: universities and colleges are considered non-profit organizations and by law, aren’t required to pay certain taxes, as long as it’s for the “benefit of the academics,” said Mike Burns, a partner for BWB Solutions, a national consulting firm for nonprofits.
Instead, nonprofits usually issue payments in lieu of taxes. The PILOT problem in Philadelphia, the Daily News reported earlier this month, is last year, “agreements with 17 [nonprofit] institutions brought in only $686,922,” and city colleges and universities – including Temple, the University of Pennsylvania, St. Joseph’s University and Drexel – donated zilch even though all of the institutions use city services.
Temple is a state-related institution, which means it receives funds from the state. Essentially, a portion of Pennsylvania taxpayer dollars already goes toward Temple, so the university’s lack of donation makes some sense. If it donated with state funds, it would be like regifting a bad Christmas present.
But Penn, a private university that attaches a $40,514 price tag to its tuition and mandatory fees and donated $0 in PILOT funds last year, hasn’t agreed to a PILOT program since its agreement expired in 2000, according to the Daily News.
“I’m really torn on the PILOTs,” Burns said, emphasizing that as a nonprofit, under law, Penn is not required to give money to the city. “If you can truly put a price tag on the tangible benefits the university is receiving, then it makes sense. It’s up to what the university thinks is best and if it feels it morally owes [money].”
However, a decade-long gap without a PILOT agreement between Penn and the city makes it seem like the city government hasn’t put forth many requests for the university to pony up some cash in lieu of paying for city services. Pittsburgh Mayor Luke Ravenstahl threatened to apply a 1 percent tuition tax to city students until University of Pittsburgh, Carnegie Mellon and insurer Highmark Inc. stepped up, offering an undisclosed amount in PILOT contributions instead. Thankfully, Mayor Michael Nutter hasn’t threatened to tax students’ tuitions, but really, the city has not made any strides to collect money from Penn.
If you weren’t charged for something on your receipt, would you say anything to the clerk? Probably not, but if you’re in the big business of higher education like Penn, I’d bank on definitely not.
After all, at the core of this predicament is the fact that the colleges and universities are nonprofits, which means in some way, they are giving back to their community. Though Penn’s campus uses the Philadelphia police and fire departments, it also has its own Penn Police, who patrol the campus to alleviate, if only a little bit, the burden on the Philadelphia Police Department for the city blocks Penn occupies.
Sure, if Penn, a private institution that compensated its president, Amy Gutmann, with $1.22 million in salary and benefits in 2007-08 – the 12th-highest-paid private school president, according to the Chronicle of Higher Education – the university has some money to throw around. But, as Burns pointed out, in order for the city to evaluate how much Penn indirectly compensates the city for its services, the two parties need to “sit down and show each other what they’ve got.”
Since Penn is a learning institution, it should utilize its intelligent student body to meet the city halfway by determining a price tag for how much the university benefits the city, therefore forcing Penn make right by coughing up a reasonable amount of cash.
Finance- and tourism-related majors might research how Penn generates revenue for the city. How many people who check into various Philadelphia hotels while visiting Penn for events such as major sports games – not the university’s largest revenue hook – conferences, alumni receptions and graduations is one angle. Allotting the visitors a certain number of meals at Philly restaurants is another. Do they visit museums, whose funds are on the city’s tab, and contribute to the arts? Do these people forget to put money in the meter on Broad Street while at the Kimmel Center? Cha-ching – the Philadelphia Parking Authority can claim additional victims while putting money in the city’s pocket.
Real estate majors can look at the property values of spaces surrounding Penn as it has expanded. Have private businesses – which pay all real-estate taxes unlike nonprofits, which only pay for “moneymaking purposes like retail,” according to the Daily News – moved closer to the university to reap the benefits of its campus population?
And, on the less tangible side, sociology and education majors can examine how Penn’s position as the No. 1 non-governmental employer in Philadelphia – it employs 31,000 people – benefits its employees and therefore the city.
Since students don’t owe the university’s administration anything, the probability of them being partial to making the university out to be more than it’s worth will be less likely.
Penn should offer the city some sort of payment, but since it does benefit the city, a little research won’t hurt. It may take more than a semester and surely won’t solve the city’s budget deficit overnight, but at least it will give Penn students one more accomplishment to brag about when they help solve the issue at hand.
Ashley Nguyen can be reached at firstname.lastname@example.org.