THE BLOG

Taxing the Economic Engine: Higher Education vs. 'The Town'

03/03/2014 09:05 am ET | Updated May 03, 2014

One impact of the great recession has been resurgence in demand by cities and towns that colleges and universities pay a greater portion of the region's tax bill.

Municipal authorities make valid arguments to support these demands. They point to the percentage of taxable land taken off the tax rolls by higher education institutions. They note additional burdens on police, fire and first responder calls. City officials differentiate further by "type of use" among facilities and college owned properties and land.

Further, in many instances the request for new taxes-typically called PILOT's (or "payments-in-lieu-of-taxes") extends increasingly to public as well as private higher education. Interestingly, these requests do not typically encompass basic education or other nonprofit groups like churches.

Historically, college and university officials have argued that, like basic education, higher education performs a public service. In the case of private colleges and universities, these institutions educate students who would otherwise be placed in public colleges and universities at significantly greater cost to the taxpayer.

Like their municipal counterparts, higher education's leadership has a valid argument. Further, the courts have historically backed their position.

Part of the problem is, of course, that cities and towns have duplicative, overlapping jurisdictions dating from colonial times that rely upon taxes. In Pennsylvania, for example, there are 67 counties and 2,565 incorporated municipalities. In addition, there are 500 school districts. Any of these taxing entities might seek relief from nonprofit institutions.

For colleges and universities, it's a bewildering and frustrating exercise as overlapping jurisdictions threaten, cajole, and raise demands in the courts, as well as the court of public opinion.

Set against this backdrop is a growing understanding of the role that colleges and universities play as economic engines in a community. Historically, most colleges and universities have acted as isolated "cities upon a hill." Few of them linked their own strategic planning to the well being of their region.

This splendid isolation exacerbated tensions between town and gown. Townies saw colleges as havens for spoiled rich kids who felt entitled to a college education and its benefits. The fact that 30 to 90 percent of those students attending the college required financial aid failed to change their impression of what the local college accomplished for society.

In recent times, higher education institutions sought to improve their image by completing economic development studies to demonstrate their contributions, both direct and indirect. They encouraged their student services operations to support efforts to staff volunteer fire, first responder, soup kitchens, and homeless shelters, among other town-based services.

While these efforts by college officials are admirable, they are insufficient. It is unlikely that municipalities will combine in more rational ways to create efficient economies of scale over the near-term. Economic impact arguments make sense but they also demonstrate taxing potential. And, student, faculty and staff contributions to the town are appreciated but are seldom seen as an institution sponsored response to an eroding tax base.

The crisis between town and gown over taxation continues to percolate and threatens to boil over. What is needed now is a reconsideration of how colleges and universities can contribute to the economic growth of their region.

In the end, all politics is local.

This reconsideration begins with a joint assessment of how best to build upon the economic strengths and develop the workforce in the region. It must also address broader quality-of-life questions that translate to a college's attractiveness and "curb appeal" bottom line.

In doing so, college and town officials must come together to develop a common approach to growth. If the college or university is an economic engine, what assets can it bring to the table to support regional growth? It is wrong to say that only national research universities have the capacity to make their regions better.

Higher education institutions-of whatever scale-have underutilized assets like bookstores, theater complexes, art museums, off-campus student housing, athletic facilities and back office administrative staff that can be integrated into space beyond the college gates.

Re-imagining how these pieces fit together can spur economic development in the region. Better utilizing the numbers of students, faculty and staff can create a critical mass -- adjusted for scale depending upon the size of the institution -- is the stuff of which public/private partnerships are made.

Accomplishing a new agenda will require rethinking how colleges and universities define their facilities. Higher education's leadership must break through facilities fiefdoms that shun partnerships because they fear a loss of control. And municipal authorities must re-imagine colleges and universities less as "cash cows" and more as economic triggers to spur regional growth.

If both sides can agree to approach the question of how to grow the tax base together through the public/private partnerships that they can create, the tax base will grow substantially. While the numbers have to work, there is room to support new growth that includes more taxes on properties developed jointly beyond the college gates.

Put it this way. If you ask the question differently, you might get a better response. With pent-up new facilities demands delayed by the great recession, now might be a good time to open the discussion.