By Philip Sean Curran, Staff Writer
Princeton University’s announcement this week, that its endowment had reached $22.7 billion thanks to canny investments, again raised questions about whether one of the world’s wealthiest schools should be contributing more financially to the municipality it calls home.
On Monday, the school said the fund grew by around $1.7 billion during the 12-month period ending June 30, on the strength of a 12.7-percent-investment gain.
“Every dollar that goes into the endowment was given to the university with the understanding that it would be used to support our mission of teaching and research, and every dollar we earn is used for that purpose,” said university vice president and secretary Robert K. Durkee by email Wednesday.
But the enormity of the endowment is grist for local conversation about the support the university provides its host community — and whether it is paying its “fair share” of the local property tax burden, said former borough councilman Roger Martindell, who tussled with the school on that issue during his days in public office.
“The university has always been the white elephant in the room,” said Princeton Councilman Lance Liverman on Wednesday. “They’ve always been that way, because they have so much money, they have so much land, they’re so gigantic. Everyone wants the university to save the world, not just Princeton but the entire world.”
The town and the university are in the second year of a seven-year agreement calling for the school to contribute, voluntarily, a total of $21.7 million spread across the life of the deal. The amount is in addition to the local taxes the school pays, some $11.3 million, according to the school.
“The University is the largest taxpayer in the Municipality of Princeton,” the school’s website says. “In total, the University pays 5.8 percent of total property tax receipts in the community (more than eight times the amount paid by the next largest taxpayer in the municipality).”
Council President Bernard P. Miller was part of the team of municipal officials that negotiated the terms of that voluntary contribution agreement.
“I think there are always people who think the town should get more from the university or the other educational institutions in the community, not just Princeton University,” he said Tuesday.
Ralph P. Widner, a board member of Princeton Future, a volunteer group that studies local public policy and planning issues, looked at how Princeton fared in comparison to other college towns in terms of how much financial support they get from the tax-exempt institutions in their communities. His research found those contributions in 2014 equaled seven percent of the municipal budget, which is higher than in places like Cambridge, Massachusetts.
“The university was founded to educate students. People gave it money to educate students. It invests the money to help educate students,” said Mr. Widner, whose daughter is a university professor. “For the people in town to scream that money should come to us, not to the students, why would I, as a graduate, give money?”
Mr. Miller likened Princeton to a business, one that competes against other peer schools, like Yale and Harvard universities, for top-flight faculty and students. He said the university uses its endowment to maintain its position with other top schools around the world.
“Endowment earnings cover more than half of our operating budget, help support a financial aid program that allows students from all income levels to afford Princeton and graduate debt free, and enable us to strengthen programs in fields ranging from the humanities and engineering to neuroscience and the environment,” Mr. Durkee said.
Other members of the Princeton Council this week weighed in on the issue.
Mr. Liverman said he thinks the school pays “a large share of taxes” and contributes to causes the town has. “Now if you’re asking can they do more, I would say yes,” said Mr. Liverman, who did not have a dollar number in mind.
“The question of the university’s fair share has never hinged on how much money the university has,” Councilwoman Jo S. Butler said Wednesday. She called it “a challenge to figure out what fair share is.”
“I think it would be best and cleaner if the university just paid property taxes on all their property,” Councilwoman Jenny Crumiller said Tuesday. “They can afford to do it, and they should.”
Tensions between the town and Nassau Hall have existed for years, from how much money the school should be providing to questions about the growth of the university. Princeton is poised to add more undergraduate students, this as the school is in the midst of campus planning for the next 30 years.
In a speech on campus in February, Mayor Liz Lempert said the school and the community “are on fundamentally different growth trajectories.”
“We’re basically a small town, and we like being a small town,” said Mayor Lempert, who is married to a university professor.”
Ms. Butler said that as a municipality, Princeton provides a safe town with strong schools — all things that are attractive to prospective faculty members and parents of students. In that way, she sought to make the larger point that the town gives the university a sort of competitive advantage over some of its peer Ivy League schools that are located in large cities.
“No one drops their kid off at Princeton and worries that they’re going to get shot,” Ms. Butler said. “I think this is a nice college town, and I think that it sort of sets the stage for how people feel about the school. When parents are out taking their kids on these (college) tours and you’re trying to decide where to go, I think the town adds to the overall picture.”
Princeton is the largest landholder in town. But any time the university takes properties off the tax rolls, Ms. Butler said that makes it that much harder to support the public school system and, in turn, adds that much more burden on residents.
Mr. Martindell said the sheer size of the endowment raises a “legitimate question” about the role of the school in “our local tax structure.” He said the fund is so large that some have made the argument that Princeton is not an educational institution with an endowment but rather “a hedge fund with an educational function as one of its many aspects.”
The question Mr. Martindell poses comes at a time when Princeton’s property tax exemption is being challenged by four residents in New Jersey Tax court. They want a judge to strip the school of that exemption, a move that would dramatically alter the property tax structure in Princeton and have ripple effects around the state. They have argued that through the sharing of patent royalties on university research and other ways, Princeton is a for-profit business.
Public interest lawyer Bruce I. Afran, the attorney representing the residents in the tax court case, said Monday that the yield of 12.7 percent indicated the school was engaged in high-risk investments that a typical charity could never afford to make.
“If they can afford to risk their endowment on risky investments to create a 12.7 percent yield, then they can afford to pay their property taxes,” Mr. Afran said.
Mr. Afran cited that as of two years ago, the school had reported, in filings with the U.S. Department of Treasury, that it paid bonuses of some $10 million to the four top university employees who manage the school’s endowment.
“There are people being made millionaires working at the university,” he said.
