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.”