Penn Doesn’t Pay Philly Taxes. Here’s Why It Should

{Reproduced from Philadelphia Magazine}

Sandy Hingston 10/17/2016, 2:44 p.m.

If you care about where you live, you try to do what's best for it — right?

A couple of months ago, my husband told me about a flier he found in our mailbox. It was from a lawyer, he said, right in our hometown. A guy who’d gone to the local public schools and then made good. Now he’d come back to town to do something neighborly: He was offering to challenge the real estate tax assessment on our house to try and get it lowered. All he’d ask was a share of any savings we got. 

The first thing I pointed out to Doug was that anytime a lawyer says he’s doing something neighborly, you should put your hand over your wallet. The second thing I said was, “Why in the world would you want to pay even less in taxes than we do?” If that makes me sound like an insane person — and to Doug, it clearly did — here’s the deal. We live in a small town on the outskirts of Montgomery County. We bought our house in 1994 for $72,500. There’s no way we’d ever get that much for it now.

Whatever. We’ve never been the kind of people who make a killing at real estate. We like where we live; we like our neighbors. The local schools did all right by our kids. Maybe they didn’t have as many AP choices as in other districts. But they learned to get along with and respect (and go to prom with) those whose life experiences and family backgrounds and incomes were different from theirs.

We pay about $3,500 a year in local taxes. To me, that doesn’t seem like much. That money goes to the local schools, and pays for filling potholes, for police and fire protection, for crossing guards, for the pretty planters that get hung on Main Street in summertime. I’m never happy when we have to scrape together the money for our tax bills — one comes due in April, and the other in August. We have to scramble sometimes, and rob Peter to pay Paul, but we manage, somehow. We got both kids through college without having to borrow too much money. We’re not rich, but we’re better off than a lot of people in our town, where the median household income is $41,500. Let me put it this way: We don’t have a lot of needs. The town does. So I figure: Pay the taxes and don’t complain.

I thought about all this last week when I read a long article in Inside Higher Ed called “The Question of the Tax-Exempt University.” It’s written by a guy named Matthew Fernandez who got his undergrad degree from Penn and is now a PhD candidate at Columbia. In the article, Fernandez cites Penn as one of a number of big, wealthy, tax-exempt universities that are increasingly being called on to contribute what are known as Payments in Lieu of Taxes, or PILOTs, to their communities. Penn and Columbia are the only Ivy League universities currently not paying PILOTs to their hometowns. (Princeton University just announced it will pay $18 million to the town of Princeton to settle a lawsuit brought against it by local homeowners challenging its tax-exempt status; $10 million of the money will go to property-tax relief.)

Fernandez takes a deep dive into the history of Penn’s founding by Benjamin Franklin, its role as a “forerunner of the modern idea of a public university as an institution dedicated to serving the local citizenry,” and the way the school’s “philanthropic character” has changed over the years.

Today, tuition, room and board and required fees at Penn cost $66,000. The school’s endowment is worth $10.7 billion, up six percent from 2015.

Yet Penn doesn’t pay any taxes. Its position, according to Fernandez’s article, is that it contributes to civic life by providing jobs, donating to the University City District, and running a nonprofit that offers students opportunities to volunteer.

Fernandez points out that according to the Pennsylvania Constitution, only “institutions of purely public charity” are exempt from state and local taxes. He also notes that last year, City Council passed a resolution calling on then-mayor Michael Nutter to demand PILOTs from Penn. Mayor Kenney was elected on a platform calling for such payments. Look across the Schuylkill at the raft of new Penn-related construction. Penn doesn’t act like a nonprofit anymore; it prioritizes research over the education of the undergraduate students it was founded to serve. Fernandez says universities like Penn are no longer “producers of knowledge”; they’re “producers of wealth.” Check out the website of the Penn Center for Innovation, with its mission statement of “helping to translate Penn discoveries and ideas into new products and businesses,” its links to “frequently asked questions about patents, inventions, distributions, et al.” As Fernandez notes:

Innovation districts tend to be self-contained spaces where technocrats can work and then mingle with other technocrats over craft beer or pour-over coffee. As every Philadelphian knows, the divide between University City and the neighborhoods that make up the majority of the city is stark.

And it’s only going to get more stark.

It took a while, but I talked my husband out of meeting with that lawyer. We live in our hometown. We care about our hometown. I want to contribute to its solvency. I would hope those in charge at Penn would feel the same.

Because here’s the thing. There was just a story in our local newspaper. Real estate taxes are going up 5 percent next year. Guess why?

So many homeowners have successfully challenged their assessments and had them lowered that there’s a $380,000 budget gap.

Yep. There go my neighbors, putting the “unity” in “community.”