New London Questions Conn’s Financial Contributions

In the aftermath of the defeated New London budget last week, David Collins of The New London Day published an opinion article criticizing the amount of money that Connecticut College, a tax-exempt institution, contributes to New London.

 
A poll run alongside his article asked, “Should Connecticut College and other non-profits make higher payments in-lieu of taxes to the city of New London?” Fifty-one percent (approximately 694 people) responded, “Yes, it’s outrageous these institutions have the audacity to charge so much for tuition and give so little to the city.”

 
This poll begs the question, how does one quantify “giving” to the city? In an email interview with the Voice, President Lee Higdon said, “As an educational institution, we have an obligation to spend tuition and gifts to the college in a way that provides a direct educational benefit to our students. We support New London within the framework of this mission.”

 
President Higdon cited the community-learning program, through which Conn students contribute thousands of hours of volunteer service each year. He also mentioned the Bredeson Scholar program, which gives scholarships to New London residents to attend the college. Conn is also the third largest employer in New London, according to a speech made by President Higdon in April of our Centennial year.

 
In fact, President Higdon has recently made contributing to New London a priority. Last spring, the administration met to brainstorm new ways to achieve this end. The first effort is during Fall Weekend (October 5-6). All tickets from the onStage performance featuring Irish band “Cherish the Ladies” will benefit New London arts organizations. The fundraiser is likewise named “Cherish New London.”

 
The money raised next weekend will be given to the Community Foundation of Eastern Connecticut, who will decide which specific New London organizations will receive funding.

 
“It’s important that people have the big picture of how Conn contributes to New London,” said Deborah MacDonnell, Director of Public Relations. MacDonnell described the wide range of benefits the college has for the city of New London including the programs, lectures and athletic events we open to the public free of charge.

 
Furthermore, the Connecticut Independent College and University Institute for Research and Public Service published in September that currently, 4,137 Conn alums still live in Connecticut, contributing tax revenue (sales and excise, income and property combined) of $35,187,303 to the state.  That being said, Collins’ opinion piece and the opinions expressed by New London residents through online forums spoke only about monetary concerns. So, let’s break down the numbers.

 
On the college website, a page titled “The College’s Economic Impact” describes the state law that allows educational institutions to be exempt from local property taxes based on the premise that the education provided at Conn is beneficial to the public. The exemption relies on the assumption that should the college pay taxes, the money that would be diverted from education would have a negative impact on the public.

 
So, financially, how does Conn contribute? There are two ways. The first is through voluntary payments – sums of money paid by Conn directly to New London. The second way is through PILOT (Payment in Lieu of Taxes) funds that are allocated by the state to New London to compensate for the tax revenue lost from non-profits.

 
In the fall of 2007, the college agreed to a 10-year voluntary contribution plan, totaling $100,000. The past five years have seen an annual $7,500 contribution while the next 5 years will see an increased annual payment of $12,500 to meet the full $100,000 budget. The agreement was described as “radical” at the time, but is considered meager in the context of the budget debacle in New London today.
Aside from voluntary payments, PILOT funds in New London account for non-profits including the Coast Guard Academy, Mitchell College and L&M hospital.

 
When allocating PILOT funds, the state of Connecticut considers all the property that is tax-exempt and assesses the value the municipality is losing as a result of the exemption.

 
For the fiscal year ending in June 30, 2012, the Connecticut Conference of Independent Colleges reported that a total of $6,032,101 was paid to New London (PILOT and Pequot funds combined). An estimated $2,296,210 is considered “attributable” to Connecticut College, meaning that it is paid in lieu of Conn taxes.

 
The perception of Connecticut College’s presence in New London, however, is lacking both in terms of financial support and community involvement. David Schwartz, a New London resident, said that Conn is a big business with a large endowment and handsome salaries paid out each year. Comparatively, he thinks the voluntary payments to New London are small, “$7,500 a year is not even big enough to put to the laugh test. It is a meaningless figure. $100k a year is essentially meaningless as well.”

 
Especially when presented next to schools like Yale and Wesleyan University, this viewpoint is not unwarranted and Schwartz represents the perspective of many New London residents. Collins cited that Wesleyan pays Middletown $250,000 a year while Yale recently increased payments to New Haven to around $8 million. Adding fuel to the fire is Conn’s high tuition rate, recently named the most expensive school in the country by multiple publications including CNNMoney, BusinessWeek and the U.S Department of Education.

 
However, these figures depict a one-sided portrayal of the story. As MacDonnell points out, Conn has a relatively small endowment at $211 million (compared with $19.2 billion and $601.5 million for Yale and Wesleyan respectively). The cost of tuition doesn’t even cover the cost of an education at Connecticut College – this means the school pulls from the endowment each year to cover students’ education costs. Quite obviously, a school like Conn simply can’t afford to make payments like Wesleyan and Yale.

 
It may make more sense to compare Conn to Trinity College, with a $417.8 million endowment and Mitchell College, whose endowment wasn’t listed online.

 
The Connecticut Conference of Independent Colleges reported that Connecticut College spends more than $83.6 million annually on goods and services that translates into an economic impact of $146.78 million. Similarly, the college’s student population of 1,900 as well as thousands of campus visitors spends approximately $2.28 million in the local economy. Comparatively, Trinity has an economic impact of $202.97 million. The Trinity student body, slightly larger than Conn’s, and visitors spend a total of $5.32 million. Mitchell College has a total impact of $40.92 million and the student body and visitors spend about $2.76 million in the Connecticut economy.

 
These figures put Conn’s seemingly low contributions in a different perspective.

 
“At first blush, [the current agreement] would appear to be a rather meager amount of money however I think a lot of people in the community including myself view that as just a piece of the contribution the college gives to the community,” said Michael Passero, President of the New London City Council.

 
Passero explained that much of the debate is attributed to the current financial stress on the city. “One of the sad parts about the debate on both sides is they seem to be looking for villains. There isn’t really a villain in all of this; every community is dealing with it. It’s part of the great recession we’re in. There isn’t a cash cow up on this hill that is going to solve our problem. That’s the bottom line,” he said.

 
It appears that one impetus for this sudden concern over payments is recent developments at both Yale University and Trinity College. Their college towns – New Haven and Hartford respectively – have recently asked non-profit institutions to contribute more to the city during the economic downturn. In 2009, Yale increased voluntary payments to New Haven, and its current rates are the highest in the nation among all colleges and universities. This past summer, Hartford moved to implement a PILOT plan that would compensate the city for the tax-exempt properties. The question is whether New London will follow a similar route.

 
“It’s a debate that has always been out there. But I don’t know that people even understand that the city already entered into a contract with Conn College. But then by the same token when everyone looked at it and saw how much it was they said wow, that’s too low, Passero said.”

 
Passero said that much of the revived discussion about Conn’s contribution is in the context of last week’s defeated budget referendum and the current budgetary issues in New London.
“Right now there is not an organized effort [to reconsider the agreement with Conn]. There hasn’t been a policy decision made that Conn College is not contributing enough. That discussion has not been officially reopened so right now it is just the citizens questioning it,” Passero said.

 
Mayor Justin Daryl Finizio echoed these sentiments, “We are looking into PILOT funding from the various non-profits in the city and any additional funds from Connecticut College would be greatly appreciated but this is an ongoing process and we will examine all options.”