The Cause for Conn’s “Voluntary” Payments to New London

Photo courtesy of Conncoll.edu

Over the summer, Connecticut College fulfilled its final obligation in a ten-year contract with the City of New London. From 2007 to 2017, the College paid the City a total of $100,000, contributing a yearly $7,500 during the first five years of the agreement and $12,500 during the second. Such payment structures are standard practice for private colleges and universities: because 33 states and the District of Columbia offer tax exemptions to educational institutions, colleges often enter payment-in-lieu-of-taxes (PILOT) agreements with the cities that host them. Now that Conn’s PILOT agreement with New London has expired, negotiations between the College and the City are opening back up. College President Katherine Bergeron has agreed to consider a new payment plan, and with institutional memory in mind, the Voice investigated how the last one arose.


PILOT payments are considered “voluntary,” but this term does not indicate that they are born purely out of institutional benevolence. The agreement between Conn and New London, dated Oct. 3, 2007 and signed by former College President Leo Higdon and former New London City Manager Martin Berliner, notes that “the City from time to time has expressed its belief that certain properties owned by the College may not be entitled to exemption from property taxes under Conn. Gen. Stat. 12-81 (8) where the College has periodically rented those properties to the public or third parties.” The statement continues: “the City and the College have previously litigated this issue in a dispute over whether Dayton Arena… was entitled to exemption from property taxes,” and adds: “the College and the City wish to avoid further disputes about whether College properties are entitled to exemption from property tax.” Before launching into the particulars of payment, the document concludes that “the College desires to make a voluntary contribution to the City and to enhance the ongoing relationship between the City and the College.”


In simpler terms, this statement tells us that the PILOT agreement signed in 2007 resulted from previous legal battles between the City and the College. The first, the College won. According to public records of the New London Superior Court Case Connecticut College v. City of New London, the College sued the City on May 28, 2004 for the removal of the Dayton Arena from the City’s 2003 Grand List of tax exempt properties. According to a Feb. 4 letter written by city assessor Barbara Perry to former Vice President of Administration Ulysses Hammond, the City determined that the Dayton Arena was taxable at a value of $1,798,650. The College appealed the assessment but was denied on March 31, spurring the College to sue for tax-exempt status in May.


Documentation referenced in the case reflects that in 1999, 2000, and 2001 the College generated “unrelated business income” (i.e. revenue not linked to the College’s educational purpose) in respective amounts of $76,782, $73,035, and $734,000. In court records, the College argues that these numbers reflect the arena’s gross income, rather than “unrelated” income alone. Next in question comes an “operating surplus” of $2.1 million, with which, the City contends, the College finished fiscal year 2003-2004. The College “Denies, except to admit that the College had a cash operating surplus… of 2.1 Million Dollars for the fiscal year 2003-2004, but states that this concept relates to actual cash revenues and cash expenditures of the College, and is not intended to reflect financial performance as measured by Generally Accepted Accounting Principles.” The College responds similarly to accusations that “revenues exceeded expenditures” in three consecutive years preceding 2003-2004, once again confirming the implication, but opposing its significance as an indicator of financial performance.


The College also refuses to produce copies of its documents of incorporation; the College Charter; Internal Revenue Service (IRS) 990 and 990T forms; and the previous five years’ Board of Directors meeting minutes, financial statements, and budgets, citing confidentiality as determined by attorney-client privilege and an “overbroad” timeframe. The City objects to a request to produce documentation of the Dayton Arena’s tax assessment, stating that “the assessor alone is the person charged with granting or denying tax exempt status.”


The case turns more specific when the College is requested to produce documentation of its agreements with the Mohegan Sun Professional Women’s Basketball Team, but it refuses to release them on the grounds that “[the request] contains no time limitations and… seeks information about property other than Dayton Arena.” Though the College releases no information on business dealings concerning the team, the WNBA website notes that in Jan. 2003, the Mohegan Sun casino purchased the Orlando Miracle team, changed its name to the Sun, and moved it to nearby Uncasville, CT.


The College does, however, acknowledge one business dealing: the Dayton Arena’s hosting of the Connecticut Home Show, which former Vice President for Finance Paul L. Maroni states “lasts only a few days, and as such, represents a small fraction of the time that the Arena is actually in use each year.”


Because the suit concerned the Dayton Arena specifically, the College won the case at its conclusion in 2006, but according to City Law Director Jeffrey Londregan, further questions of property usage arose between the case’s 2006 settlement and the signing of the 2007 PILOT agreement.


“I don’t believe there was another lawsuit,” Londregan said, “but the PILOT wasn’t really a PILOT; it came about as part of the College renting out houses.”


In an earlier conversation, New London Mayor Michael Passero made a similar comment: “These payments that just ended were to settle a lawsuit… the City claimed, I believe, [College operations] outside its tax-exempt purpose, like renting out dorms over the summer.” The first lawsuit, however, is the only one that appears in New London Superior Court Records, and Londregan clarified: “There was a later case brought by the City involving Connecticut College,” but it never went to trial.


“There was this situation where Connecticut College was renting out—I believe it was dorms—to European students for the summer,” Londregan said. “Prior to it going to litigation, the College and the City agreed that the College would pay X amount of dollars per year, rather than going through the process.”


Londregan described his involvement in the new payment negotiations as “indirect,” as he served as a liaison between Passero and the College to “reach out about starting a dialogue about the payments.” He reports that Bergeron was receptive to reopening payment discussions with the City.
Bergeron agreed to discuss her payment considerations with the Voice once she has met with Passero later this Fall, but did not wish to discuss the PILOT payments prior to her meeting with Passero. The Voice also approached Vice President for Finance and Administration Richard Madonna to speak on the issue, but Madonna did not return the Voice’s call to his office. As negotiations progress, the Voice will continue coverage of the College’s anticipated payments to the City.