News & Politics

Spire Education: Cooper Union’s Towering Tax Break

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Next time you see one of those purple NYU flags flying from yet another
building, don’t just take it as a sign that soon lower Manhattan will be
unfit for habitation by the non-college-going public. More significantly
for New Yorkers as a whole, every building acquired by educational
institutions is also removed from the city’s property-tax rolls. According
to “Fatal Subtraction,” a new report from the budget watchdog City
Project, the resulting tax loss to the treasury amounted to $385 million
in 2005–and is growing by about 12 percent each year.

If NYU and Columbia’s metastasizing scholastic empires are the obvious
targets, though–the two institutions, according to City Project, combine
for 45 percent of the city’s educational tax breaks–the 125-page “Fatal
Subtraction” contains some surprises as well. Take, for example, the
Chrysler Building. Built on land owned by Cooper Union, the
hubcap-bedecked home of
giant Quetzalcoatls
has never paid a dime in property tax, even though
the educational tax break is supposed to be limited to buildings used for
classrooms or student and faculty housing.

The Chrysler Building’s tax-free status, explains City Project’s Bonnie
Brower, dates back to an early 1930s court ruling that Cooper Union’s 1859
charter gave it a pass from paying property tax on any of its land,
regardless of how it was used. Decades later, Mayor John Lindsay would
urge the state legislature to amend the school’s charter, to no avail.

“It was a classic Albany story,” says Brower. “In a backroom deal, they
decided to keep the exemption for the Chrysler Building and two other
properties, and simply require that any future properties being used for
commercial uses would be subject to taxation. And since 1969, no city
administration has seen fit to take it on again.” Adding insult to injury,
Cooper Union still levies “tax-equivalency charges” on the Chrysler
Building’s tenants–an arrangement that last year enabled the school to
pocket $17 million in ersatz property taxes, while the city received
bupkis.

This, notes Brower, points up the absurdity of the argument, enshrined in
the New York state constitution, that exempting universities from taxes
represents a “public benefit”: The private Cooper Union has been able to
afford free tuition for its students, regardless of financial need, in
part thanks to its Chrysler Building boodle–while CUNY students face
tuition hikes every time the city budget needs trimming.

“CUNY’s per-student aid is the lowest it’s ever been in its history, and
its tuition is now among the two or three highest public-university
tuitions in the country,” Brower says. “So this vast system, which is New
York City’s commitment to higher public education, is being starved
fiscally, while some of the most elite institutions in the country are
draining the public treasury through their property-tax exemptions.”

“Fatal Subtraction” is also City Project’s swan song: The 22-year-old
non-profit, which been analyzing city spending priorities since the Koch
era, ran out of funding last month, and its two remaining staffers worked
without pay to put the finishing touches on its final report. “While the
fiscal crisis was in its most acute state, some funders were willing to
say this is really important,” sighs Brower. “But once the worst of the
fiscal crisis disappeared and we’re merely left with our normal, chronic
underfunding, that urgency has gone–and so have we.”