University Endowments Should be Taxed?

Interestingly enough, most of the money that the universities have in their endowments and what they get from students, which is increased every year due to more sweetheart loan deals from the federal government now, is looked at with increasingly envy and thoughts of getting some of that cash to help local communities is coming to a head.
 
U.S. Cities Wrestle with Universities for Cash
Source: Hilary Russ, "Analysis: U.S. Cities Wrestle with Universities for Cash," Reuters, May 18, 2012.

National attention to government debts is almost exclusively paid toward the federal government and its occasional budget showdowns. Beyond that, some still recognize the budget crunch faced by the 50 states as they attempt to cover deficits during the fragile recovery. This leaves few who recognize the enormous problems confronted by municipal governments nationwide on the same issue, says Reuters.

To this end, many local governments have found a helping hand in the non-profits in their jurisdictions. By requesting voluntary aid from these nonprofits, city governments are able to continue many services to them while receiving help, thereby maintaining a symbiotic relationship.

•Across the country, at least 154 municipalities in 27 states have persuaded nonprofits to make voluntary payments in lieu of taxes for the period from 2000 to 2011, according to researchers at the Lincoln Institute of Land Policy in Cambridge, Massachusetts.
•In many such agreements (especially in the Northeast), nonprofits simply pay a portion of what they might otherwise owe in property taxes.
•This can allow nonprofits to pay mere millions in lieu of the tens of millions that they might otherwise owe in taxes.

One of the most common targets for these types of policies is elite universities. With substantial endowments and revenues that often exceed those of local governments, there institutions are often seen as a cash cow.

•Recently, Providence, Rhode Island, Mayor Angel Taveras struck a deal with Brown University, which doubled its annual voluntary contribution to nearly $8 million for five years.
•For 2012, Princeton University increased its payments to local governments to nearly $2.5 million, and paid $7.7 million in property taxes -- a third of which was tax-exempt.
•Similarly, in Ithaca, New York, Cornell University will increase its $1.19 million payment for 2012 to $1.23 million for 2013, according to John Gutenberger, Cornell's director of community relations.
•The city of Boston will also receive a handsome $10 million from its local universities for the first half of 2012 alone.