Connecticut towns would be able to tax the private university located there under new bill

CT Insider – Monday, February 10, 2025
By Brian Zahn

Universities have been baked into the fabric of Connecticut before much of the state came to exist as it is; Yale University was founded in 1701, prior to the incorporation of more than 130 of the state’s municipalities.

Despite that history, universities’ exemption from paying property taxes has made it difficult for the state’s college towns and cities to balance their budgets. For years, government has attempted to address the inequity, with the state providing Payment in Lieu of Taxes funds worth 77 percent of what a municipality would receive on university property if it weren’t tax-exempt — so long as that fund is adequately funded by the state to do so.

Locally, some leaders have looked to negotiate agreements with colleges and universities to provide voluntary financial contributions to make up the difference.

This session, eight Democratic lawmakers introduced a bill that would allow municipalities to tax the endowments of private universities located within their borders. Most of the legislators represent Middletown, where Wesleyan University is located. The other legislators represent New Haven, New London, Hamden and Fairfield, which all have at least one private university.

Elliott said the proposal attempts to address a clear need in municipalities where raising tax revenue is more difficult because of these property tax exemptions. Co-sponsor Rep. Brandon Chafee, D-Middletown, said it contributes to a cost-of-living crisis in places, such as Middletown.

“I hear it from my constituents all the time: they’re struggling to pay the bills, like property taxes, car tax, electricity, groceries. We’re looking for ways to ease the burden,” he said. “The intent of the bill will be to allow the municipalities that host a private university to place a small levee on the endowment.”

Although some of Connecticut’s 14 private colleges and universities make voluntary financial contributions to municipalities, Wesleyan University, makes no such contribution, Chafee said.

“The university has a good impact on our community. I would never argue it’s a negative for the town to host the university,” he said. “But we’re looking at creative ways to bring new revenue sources into the town.”

Wesleyan University did not respond to multiple requests for comment.

Yale University in New Haven is among those universities that contributes financially to its municipality, although community leaders and advocates have sometimes drawn attention to the disparity in what Yale gives against the size of its endowment.

In 2021, Yale announced an increase in its contribution to $135 million over six years; however, its endowment was worth $40.7 billion as of June 30, 2023 according to the university.

“In recent years, Yale University under former President Peter Salovey’s leadership has taken several significant steps to increase its financial contribution to the city,” New Haven Mayor Justin Elicker said. “As the end of our current agreement approaches and as the city’s financial situation continues to face challenges, we are cautiously optimistic that the university will embrace the opportunity to build on this progress and once again significantly increase its annual contribution to the city.”

Elicker said the city is “not optimistic” about the proposed bill’s passage despite supporting the concept.

Some universities in Connecticut argue their contribution to sustaining town-gown relations extends beyond lump-sum payments to a city’s revenue. For one, Quinnipiac University, located in Hamden and North Haven, has funded several construction projects in those communities.

“Quinnipiac University has a history of supporting our neighboring communities in a variety of ways,” said John Morgan, Quinnipiac’s associate vice president for public relations. “In addition to students, faculty and staff volunteering to offer year-round support of local schools, elder care, community centers and social services, the university has funded a variety of community projects, including the construction of playgrounds, a sports track, town fireworks and public skating programs.”

He said the tax would limit what they could contribute to.

“In addition to diminished resources for community support, a tax on our endowment would reduce resources available for student financial aid and academic resources that are vital ingredients of our students’ education,” he said.

Elliott said the proposed bill’s aim is larger than dollars and cents.

“We are a state that relies deeply on the property tax, which is the most regressive tax just behind the sales tax,” he said. “Because of that, and because of the fact education is anywhere from a third to a half of town budgets and the state historically deprives towns of the money they need to operate well and fairly, this is just an instance where we are looking for more ways to help municipalities where a large footprint is owned by a nonprofit institution, and in some cases that nonprofit institution has tens and tens of millions of dollars at their disposal.”

Elliott said the specifics of how the bill would work are “spare,” but he hopes it will receive a committee hearing so there can be a conversation.

“We’re not looking for this to damage the ability of universities to do their work, but there is a cost to having universities in a municipality,” he said.

The financial relationship between universities and municipalities can often be determined by who helms them, Elliott said.

In his 2019 campaign for his first term, Elicker campaigned on his belief that Yale could be contributing more than it was under then-Mayor Toni Harp, suggesting a fairer amount would be $50 million annually.

West Haven Mayor Dorinda Borer, elected to her first term in 2023, told the City Council recently of her intention to meet with the presidents of Yale and the University of New Haven to negotiate ways to increase their financial support of the city’s budget.

“We welcome what they bring to our city by way of jobs and cleaning up areas, but when the footprint is expanded we still provide services no matter whose name that title or property is in. Those services don’t stop, but the funding we get to provide those services is decreased,” she said earlier this month. “I think there’s creative ways to partner that doesn’t necessarily have to break the bank.”

Chafee said he hopes the legislative proposal can provide data about the municipal resources provided to tax-exempt university properties.

Elliott said the use of municipal services within a town is an issue of equity.

“At a time when there are big questions about how we’re going to be funded through the federal government, I think we’re looking at ways to equitably tax in Connecticut so the cost of running government isn’t borne out in an unfair way on the backs of the middle class and working poor,” he said.

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