The Hechinger Report - Penn’s donation to Philadelphia schools

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This week's newsletter comes to you from The Hechinger Report intern Molly Stellino. -- Delece Smith-Barrow

By Molly Stellino

For years, students, faculty members, teachers and activists have urged the University of Pennsylvania, in Philadelphia, to pay PILOTS, or payments in lieu of taxes, in support of the city’s schools. As a nonprofit, Penn is exempt from local property taxes, as are nonprofit institutions in all 50 states.

But other universities – including Harvard, Yale, Brown and Boston University – make hefty PILOTs to their cities to help offset the cost of the public services they receive like fire protection and sanitation, as well as to support public schools.

Last month Penn announced that it, too, would make such a payment, contributing $100 million, or $10 million a year for a decade, to environmental remediation in the schools. Philadelphia’s public-school system, which serves 203,000 students and has an annual budget of $3.38 billion, is especially needy now that city and state budgets have been hit hard by the coronavirus pandemic. The district has severe problems with asbestos and lead paint, leaky roofs and windows as well bug and rodent infestations in the school district’s buildings. According to Penn’s announcement, the district has $4.5 billion in unmet capital needs.

Activists praised Penn’s commitment as a step in the right direction, but said it falls short of their goal, which is to have the university pay PILOTs commensurate with the amount of property it owns.

Philadelphia Jobs With Justice, a pro-labor nonprofit, has been campaigning for this for years, and the movement gained added momentum in June, when Penn for PILOTs, the first campaign led by staff and faculty members, joined the effort.

Both groups said Penn’s move was important. But both said they would continue to lobby for Penn to pay 40 percent of the amount they calculate the university would owe if it paid property taxes on its holdings. They believe 40 percent of that amount would be about $36.4 million each year.

“Of course it’s important that Penn at least recognizes the profound challenges that the School District of Philadelphia faces with things like lead poisoning and asbestos,” Gerald Campano, a professor at Penn’s Graduate School of Education, said. “But charity is not the same as social and racial justice.”

Nonprofit property-tax exemptions originate from the idea that the government ought to subsidize socially desirable actions or services that the government would otherwise perform. Among other examples, Penn points to its Graduate School of Education’s training of Philadelphia teachers and to the summer programs it offers, often free, to local students.

But since the 1970s, nonprofit universities have grown and municipal budgets have declined.
Some large universities with hefty endowments and real estate holdings have begun to operate more like commercial entities, partnering with for-profit companies, conducting business outside their educational mission and paying executives lavish salaries. This has led city residents and activists to show stronger support for PILOTs, calling them a way for universities to pay their fair share.

About 70 colleges and universities made PILOT-style payments in 2011, according to the most recent data from the Lincoln Institute of Land Policy, a think tank that researches the use and taxation of land. Several institutions with billion-dollar endowments, such as the University of Southern California, Georgetown University, George Washington University, New York University and Rice University in Texas, do not make payments in lieu of taxes and hold property worth billions of dollars.

PILOT advocates also argue that it’s often difficult to identify exactly whom universities benefit with socially desirable activities, and by how much.

“The benefits of the university extend globally [through] their research, educating students from around the world,” said Adam Langley, an associate director at the Lincoln Institute of Land Policy, “but the cost of property tax exemption is borne entirely by city taxpayers.”

Campano said he hoped Penn’s $100 million commitment would “be a catalyst into a larger national movement and a larger conversation about how to more equitably fund our public- school children, especially during this pandemic, but really all the time.”

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The Hechinger Report - Penn’s donation to Philadelphia schools

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