by PILOTs Action at Penn
In Philadelphia, the poorest large city in the U.S., Penn is both the largest employer and largest private landowner. It has a $14.9 billion endowment and a $12.5 billion operating budget. It continually pours money into ultramodern facilities and expensive renovations. In all, it owns over $3 billion worth of property spread out across more than 1,000 acres of land. However, due to its federal status as a nonprofit institution, it does not pay property taxes.
The city of Philadelphia as a whole has an extraordinary amount of nonprofit tax-exempt land. As a result, it loses out on about $414 million a year in tax revenue. The federal nonprofit tax exemption was created with good intentions — to support small, charitable organizations that provide essential services. However, most of Philadelphia’s tax-exempt land is owned by multi-million dollar nonprofits including universities like Penn, Drexel, and Jefferson. Penn alone accounts for almost one quarter of the city’s foregone tax revenue.
Nonprofit tax exemptions acutely affect Philly’s ability to provide public services. The public school district is particularly impacted. It relies heavily on local revenue, most of which comes from property taxes. The consequences that schools face due to lack of funding are glaring. Many schools have been closed in recent years due to serious environmental hazards, and dozens of others remain open with damaged asbestos, peeling lead paint, and mold, posing daily threats to the health of students and employees. Remediating public schools’ most pressing environmental issues would cost about $200 million, and just maintaining all school buildings will cost billions due to an overwhelming backlog of deferred maintenance.
“For as long as I can remember, attending a public school meant dirty bathrooms, broken doors and chairs, never having enough textbooks, and always lacking supplies.”Sophomore at Central High School
“Asbestos, lead, and mold spores…don’t belong in our classrooms, and neither do rodents, or leaking pipes, or crumbling ceilings, or overflowing toilets – all of which exist in my school and have for years.”Senior at Masterman High School
Furthermore, public schools are grappling with severe resource scarcity. Many only have a nurse assigned to check in if there is a spare moment, and some have no nurse coverage at all. Many classrooms lack necessary supplies to the point where teachers are forced to put learning on hold or contribute out of their own pockets. The school district, which primarily serves low-income students of color, is struggling to make ends meet. Meanwhile, Penn exists in its midst as a predominantly white institution and one of the wealthiest in the city, whose tax exemptions deprive public schools of essentials taken for granted on its own campus.
This situation is not unique to Penn and Philadelphia. Other large landowning nonprofits, including Penn’s Ivy League counterparts, likewise operate under nonprofit tax-exempt status. However, these Ivy Leagues contribute to their cities through Payments in Lieu of Taxes (PILOTs) agreements. PILOTs are a solution through which wealthy nonprofits pay a portion of what they would otherwise owe in property taxes to their cities in order to offset lack of funding for services like public schools. In fact, Penn is the only Ivy League university that does not have some form of a PILOTs agreement.
For years, student and community activists have called on Penn to stop dodging its financial obligations and pay PILOTs, which they define as 40% of foregone tax revenue. Undergraduates at Penn began a concerted campaign in 2015. In 2018, the citywide coalition Our City Our Schools joined the fight, and in 2020, Philadelphia Jobs with Justice began a year-long, concerted effort to advance the campaign. Currently, PILOTs Action at Penn, a group formed by Penn students, faculty, alumni, and community members, is working with groups at Penn — including the faculty group Penn for PILOTs — as well as at Drexel, Jefferson, and across the city to win PILOTs.
These efforts are making a difference. In November 2020, Penn committed to paying $10 million a year for 10 years to help the school district combat lead and asbestos. However, Penn’s pledge falls far short of the 40% demand, is not an ongoing commitment, and does not hold Penn accountable to the school district or to the city.
Penn is certainly capable of meeting activists’ demands. 40% of the university’s foregone tax revenue would constitute about 0.35% of its annual unrestricted revenues or 0.26% of its endowment. If Penn can budget hundreds of millions of dollars for shiny new buildings and capital improvement projects, and if it can pay President Amy Gutmann an excessive $3.6 million a year, the issue is not whether it can pay PILOTs but rather what it chooses to prioritize. Currently, its own wealth and image take precedence over furthering equity across the city.
“Colleges are building rock climbing walls for their students while our children’s classrooms are laced with asbestos.”Philly public school parent
“Almost all of us have sacrificed during this pandemic, and almost all of us pay taxes…We shouldn’t be filling budget holes by taxing working people more. Wealthy institutions need to pay up.”Philly public school teacher
Penn avoids addressing calls for PILOTs directly. Instead, it makes statements that exaggerate its contributions to Philadelphia and distract from the real issue at hand. While Penn masquerades as a nonprofit, it operates unapologetically as a corporation, continually increasing its wealth and expanding its campus while its tax exemptions deprive Philadelphia public schools of essential resources.
This extractive relationship cannot continue. We must work to create a relationship in which Penn is accountable to its surrounding communities. Join our movement by filling out our interest form or contacting us at firstname.lastname@example.org. Stay up to date on our work by following Philly for PILOTs on Instagram @fundphillyschools.