New York famously forgoes hundreds of millions of dollars in revenue by not collecting most property taxes from exempted institutions like Columbia University and New York University.
But clawing back just some of that money could result in up to $700 million in fresh revenue for basic services such as street cleaning, according to a new study.
The report, from the New School’s Center for New York City Affairs, calls for amending the state’s constitution to allow the city’s largest nonprofit colleges and hospitals to pay at least some of what could be collected on their sizable holdings, which blanket neighborhoods such as Morningside Heights, Washington Heights and Greenwich Village.
And the nonprofits, which includes Memorial Sloan Kettering, NYU Langone and Cooper Union, appear to have enough money socked away to make these voluntary payments in lieu of taxes, or pilots, and so should no longer enjoy their centuries-old exemptions, the study said.
“New York’s large hospitals and universities are important contributors to the city’s vibrancy, benefiting New York in numerous ways. But they are not alone in such contributions,” said the study, whose chief author is George Sweeting, a former longtime official with the watchdog group the Independent Budget Office.
“The size of their endowments and their annual revenue indicate an ability to pay something for those services,” the study added.
Following the lead of other college-packed Northeastern cites such as Boston, Providence and New Haven, New York would first need to more fairly evaluate the properties held by the institutions, which are generally undervalued by 25%, the study said.
Still the report takes a somewhat narrow view of the schools’ and hospitals’ responsibilities, reasoning that because police protection, fire fighting and sanitation account for about 15% of the city’s budget, the nonprofits’ pilots should be in line with this amount.
Recognizing that many of the more than 200 nonprofits focused on health care and education are small and not well endowed, Sweeting and his co-authors propose a cutoff: Only entities with real estate that has $500 million or more in exempt market value would be on the hook for pilots, though tax rates would be determined by assessed value, a much lower number, as they are today.
By that measure, the list, which is based on 2024 Department of Finance data, would total 14 nonprofits and include Cooper Union, which owns the land under the Chrysler Building in addition to its Astor Place campus; the Mount Sinai hospital system, which has locations across Brooklyn and Manhattan; and St. John’s University, which owns a more than 100-acre campus in Queens.
But the top two finishers, respectively, are New York-Presbyterian hospital, with $3.9 billion in exempt real estate, and Columbia, with $3.6 billion.
All told, the study says, the city could see between $345 million and $690 million in new revenue from these places, depending on how the total tax pie for the city budget is calculated.
Yet the study seems clear-eyed about the hurdles facing the proposal. Because giving tax breaks to charitable institutions is enshrined into law by the New York state constitution, changes would require the approval of two consecutive Legislatures and then passage by a state referendum, “a daunting process.”
The report does take aim at the defense commonly mounted by Columbia and others — that their well-regarded programs yield many intangible upsides, such as research and education, that enrich the general public.
Still, “while the entire region or nation may recoup those benefits, the burden of the foregone tax revenues is only borne locally,” the study says.
New York gave tax breaks to hospitals starting in the 1800s as a sort of reward because the government didn’t offer health care services at the time, according to the report, which added that even though governments started picking up the tab during the Great Depression, the tax system never adjusted to the switch.
C. J. Hughes , 2024-05-21 19:14:48
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