As Chicago City Council works to pass a 2025 budget that will likely include a property tax increase, organizers are calling for private universities to pay their fair share for public services.
“We know these private institutions that are benefiting from services – like law enforcement, like the fire department – aren’t having to pay property taxes,” says Jesse Hoyt, executive director of the community organization ONE Northside, which is pushing for universities here to participate in a tax-paying program named PILOT. “Now, more than ever, we need to see progressive revenue options, and we see the PILOT program as one of those ways of really achieving that.”
Hoyt is working with several local orgs that are banding together to encourage the city to implement a “payment in lieu of taxes,” or PILOT, program in an effort to balance the budget. Here’s the backstory.
Universities technically don’t have to pay property taxes due to their tax exempt status. This is law. However, the University of Chicago sits on at least 217 acres in prime Hyde Park land. Northwestern University owns tracts of land in expensive Streeterville and several hundred more lakefront acres in Evanston. Depaul and Loyola both take up major acreage, as does Columbia College and numerous other city colleges. If they paid property taxes, it might help bridge the city’s projected billion-dollar budget deficit, organizers say.
“This unfair exemption burdens everyday Chicago residents, resulting in higher property taxes and underfunded city services. Meanwhile, we need more, not less, for our City,” posted The Grassroots Collaborative on Instagram. The Grassroots Collaborative is urging Chicago residents to write letters or email the Black and Progressive Caucus in City Council to “ensure that corporations and the ultra wealthy pay their fair share” instead of balancing the budget on “the backs of working families.”
PILOTS aren’t a new concept. Brown University in Providence, Rhode Island; Harvard University in Massachusetts and Notre Dame in South Bend, Indiana are notable institutions that have agreed to PILOTs to help pay for their use of city services. These services include fire, police and traffic services. (Most universities already independently pay for water, sewer, garbage and electricity.)
PILOTs can include other tax-exempt entities such as hospitals, but Hoyt said they are strictly focusing on calling universities this go around. Given that, it’s worth noting that universities tend to own the hospitals.
Boston, a city with a plethora of high-end institutions, including the Massachusetts Institute of Technology (MIT) and UMass, established its PILOT task force in 2011. The task force estimates payments per university based on the valuation of the institution’s tax-exempt property value. Tax-exempt organizations with properties valued at more than $15 million participate in Boston’s PILOT and as of October 2023 contributed 76% of the payments requested.
“You begin to see municipalities begin to revisit the possibility of PILOTs when they’re facing budget deficits in their city budgets,” said Davarion Baldwin, director of the Smart Cities Lab at Trinity College in Connecticut. There, he helps residents establish PILOT agreements with universities across the country. In his experience, such agreements are usually considered by municipalities during economic recessions.
Baldwin worked on efforts to force Yale University to increase its payments to the city of New Haven, Connecticut. With pressure from community organizers, in 2021 Yale agreed to increase its payments in a deal that would bring $52 million to New Haven’s budget. The process began slowly, in 1991, when the Ivy League institution began making voluntary payments to the city of New Haven, Connecticut in exchange for the city’s fire department protection. At the time, the city was facing a nearly $40 million budget shortfall.
Yale’s financial contributions to New Haven were just a “drop in the bucket” compared to what the community needed, said Baldwin. But the additional funds have helped balance the city’s budget.
According to Baldwin, this ties into why unfettered university expansion can be both financially and physically detrimental to communities and taxpayers.
“From the perspective here on the North Side, Loyola University has been a major player in gentrification and displacement,” explained Hoyt of the limited parking, crowded landscape and high rents. “They’ve been destroying naturally occurring affordable housing across communities across Rogers Park and Edgewater.”
In fact, earlier this year, Rogers Park residents began pushing for landmark status of a building in the neighborhood that contained apartments and small businesses after Loyola purchased the building with plans to demolish and repurpose it.
Last year, calls for Evanston-based Northwestern University to agree to a PILOT resurfaced after the school said it was considering hosting other events at its newly under-construction football stadium. The school has not agreed to a PILOT, instead saying it would pledge over $150 million for 15 years to Evanston through a community benefits agreement on top of the $1 million a year donation it currently makes to Evanston through its Good Neighbor Fund established in 2015.
Organizers claim they have found room in the budget of each local university. They point to endowments as the solution, though to be clear, endowments are monies gifted to a university for a specific and limited reason. Cancer research and student scholarships, for example, are often endowment categories. Loyola’s endowment for 2023 was $1.15 billion, the University of Illinois in Chicago reported an endowment of $803 million for 2022 and Depaul’s endowment for 2023 was $907.6 million. The University of Chicago has the largest endowment of universities in Chicago at $10 billion for 2023. Northwestern University in Evanston reported a $14 billion endowment last year.
The returns on endowments rise and fall with the market. Meanwhile, university footprints consistently grow and in so doing, often remove land from the tax rolls. The University of Chicago in particular has a large real estate portfolio, the school owns multiple buildings in communities including Hyde Park and Woodlawn. The university has expanded its footprint over the years by purchasing various buildings and leasing some of them to third-party or commercial entities. For example, it owns the Hyde Park Shopping Center, whose anchor tenant is a Walgreens and a Trader Joe’s.
When tax-exempt entities purchase property, often that purchase is also tax-exempt. Baldwin said this factors into how property rates are equated based on the amount of tax-paying properties within a jurisdiction, referred to as the mill rate.
“What happens if you are in a neighborhood where more and more of the properties are not calculated in the mill rate because they’re tax-exempt?” said Baldwin. “More of the burden is passed on to residents, either in higher property taxes or in higher rents.”
The TRiiBE reached out to Northwestern, Depaul and The University of Chicago, but did not receive responses to inquiries about establishing a PILOT agreement with the city.
Community members say such participation would help the University of Chicago to repair its strained relationship with the community. Historically, the university supported homeowner associations that favored racial covenants, restricting Black Chicagoans from buying property in Woodlawn during the 1920s and 1940s. The University also initially rejected the idea of having an emergency room with a level 1 trauma center on its campus.
Cities can leverage their power to persuade schools to pay their fair share, Baldwin said. Ithaca, New York, for example, denied construction permits for Cornell University’s expansions when the school refused to increase its payments for city services.
“Most cities don’t want to do that. A lot of times, city officials either went to the university or are from a [upper] class background,” Baldwin said. “They see their interest [as] being more aligned with the university.”
Baldwin said it’s important for cities like Chicago, that have not implemented PILOTs, to establish conditions that include benefits for the city’s residents and to bring in experts to help with negotiations.
“People will see these things elsewhere and see different formations of understanding, because these institutions have teams of lawyers and communications departments and economists, they’re very tricky,” Baldwin said. “A PILOT is not a means to the end. The PILOT is a trigger for more democratic conversations.”
The local PILOT campaign has received support from 13 City Council members including Ald. Angela Clay (46th Ward), Ald. Jason Ervin (28 Ward), Ald. William Hall (6 Ward) and Ald. Maria Hadden (49 Ward).
According to Hoyt, the next step in the process is for the mayor’s office to issue a letter to the universities asking for a PILOT agreement, “So now the ball is in the mayor’s court.”
The mayor’s office said they did not have a comment at this time.
“People don’t want to see more speed cameras go up,” said Hoyt. “They’re excited about hearing about options that are progressive revenue options that won’t cost the average resident anything.”
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