Should private schools pay their way?

Whenever local budgets are tight and taxpayers eye new sources of revenue, Northwest Corner residents inevitably look to the elephants in the room — the mostly wealthy private boarding schools that dot our landscape.

In 2005, the late George Bednar, who was running as an independent candidate for the Salisbury Board of Selectmen, held a voter forum in which he floated the idea of asking the private schools in the town (Hotchkiss, Salisbury and Indian Mountain schools) to increase their voluntary payments to the town.

The phenomenon is hardly unique. The “freeloader†refrain is heard often in private school towns, including Southborough, Mass., where I spent my teenage years as a faculty brat in a tony prep school that was often on the receiving end of taxpayer ire. And it seems like the city of New Haven is forever badgering poor Yale to fork over cash when the city is hurting and so much of the university property is off the tax rolls.

As 501(c)(3) charities, private schools are mostly exempt from paying property taxes on their leafy and prosperous campuses. That fact alone wouldn’t cause much of a ruckus if not for the children of faculty members who live on campus and attend local public schools.

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At Bednar’s forum, research indicated that in 2005 there were between 40 and 50 children of private school faculty enrolled in the public schools serving the town of Salisbury. Hotchkiss’ voluntary contribution to the school was $65,000 annually. The properties of the three schools had an assessed valuation of between $150 million and $200 million.

In some ways, it’s hard to think of these institutions as charities. After all, in 2007 (the last year for which I could locate the schools’ IRS 990 forms) Hotchkiss had an annual budget of almost $50 million with revenues of more than $89 million. Just down the road, Kent School had revenues of $36.5 million and it paid Headmaster Richardson “Dick†Schell $310,000 a year with benefits and expense accounts totaling another $45,000. And a year after his departure, Hotchkiss was still paying former Head of School Robert “Skip†Matoon in excess of $337,000 in benefits and deferred compensation.

You get the picture. These are numbers that would make many colleges and medium-sized companies green with envy. So why shouldn’t these schools be taxed at the level, say, of a multi-million-dollar corporation? For one thing, the law forbids it, so the statutes would have to be changed. But then we’d have to talk about taxing the churches, too. At that point, I suspect the discussion would end because almost no one wants their neighborhood house of worship to send money to town hall.

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But there is still hope for the tax-the-private-school crowd. Look at what they almost did in the city of Pittsburgh, Pa. Since the decline of the steel industry, Pittsburgh has built its economy around great hospitals and universities — all of which pay very little in property taxes. Indeed, the universities are constantly acquiring new property and further reducing the city’s income. The total lost revenue is estimated at a steady $50 million per year.

So Mayor Luke Ravenstahl came up with a first-in-the-nation proposal: Rather than launching a futile attempt to tax the universities themselves, just impose a 1-percent sales tax on tuition payments. In other words, if you can’t tax the colleges, then tax the parents who are footing the bills. Ravenstahl estimated the tax would raise $16.2 million annually to fully fund pension plans for retired city employees. Not surprisingly, university officials, students and parents went ballistic.

What would such a tax look like here? Do the rough math: There are about 600 students at Hotchkiss and the annual tuition, room and board is about $40,000 for a total of $24 million in revenues. Subtract $6.5 million in financial aid and you would have $17.5 million in taxable payments. A 1-percent tax would yield $175,000 in revenue for the town.

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Of course, if the tax were actually enacted, the $65,000 annual payments to the town from Hotchkiss would then cease and in all likelihood the school would withdraw such town support as its $400,000 matching pledge for the Lakeville Hose Company’s new firehouse. Hotchkiss might even start charging the town and the Region One School District market rates for the use of its hockey rink, swimming pool and auditorium. Who knows? They might even stop paying to remove the weeds from Lake Wononscopomuc and kick us off the school property (sooner than expected) that we’ve been using as a transfer station for the last 35 years.

Back in Pittsburgh, the mayor apparently backed down from his proposal after meeting with university officials who convinced him they were willing to “cooperate†in finding a solution to the city’s financial woes.

Like it or not, we’ve built our economy around private schools and weekenders. The iron industry is long gone. Collectively, the schools are by far the largest employers in the Northwest Corner, but they don’t pay property taxes. The weekenders employ contractors, demand little in the way of services but pay lots in property taxes. I’d say it’s a wash and, in the end, it’s a happy marriage that I can live with.

Lakeville resident Terry Cowgill is a former editor and senior writer at The Lakeville Journal Company. He can be reached at terrycowgill@gmail.com. Follow him on Facebook at facebook.com/terry.cowgill.