Ahead of consolidation, University and new municipality prepare to negotiate over PILOT payment

Even as the January consolidation of the Borough and the Township opens new possibilities for interaction between the town and gown, the University has no plans to change the size of its voluntary contribution to the local community under the new system. However, the mayor-elect of the new Princeton thinks the University should increase the size of the annual payment it will make to the consolidated town.

Both sides are currently preparing for negotiations over what is called a payment in lieu of taxes. Liz Lempert, who was elected the first mayor of the new town last month, said the towns supported consolidation because they are seeking to lower costs and called on the University to increase its payments in response. She said this would help the municipality keep property taxes on its residents at low levels.

"Most of us who’ve looked at the numbers on the municipal side still feel like the University’s contribution is not at the level that it should be," Lempert said. "And I think one of the things we've shown through consolidation is that the town is doing everything in our control to bring down our costs."

Last year, the sum of the University’s contributions to the Borough and Township was nearly $2.5 million. The University will likely contribute a similar amount to the single municipality this coming year despite the changes to the towns, according to University Vice President and Secretary Robert Durkee ’69.

The official contribution agreement will most likely be finalized near the beginning of 2013, after the new Princeton government has begun its term. Later in the year, the University and the local government plan to negotiate a longer-term agreement to determine the contribution for the next few years. This would be similar to the agreement that University President Shirley Tilghman's administration made with the Borough government to determine its contribution from 2005 to 2011.

These discussions on a longer-term agreement are currently on hold in part so that Tilghman’s successor — who has not yet been named — can play a role in the negotiations, Durkee explained. Tilghman’s successor expects to be named in early April and assume the office in early July.

Finalizing this agreement is a second priority for the local government as well. Lempert said discussions are being put on hold until the beginning of 2013 because members of the new government are currently focusing on preparing for consolidation.

Both Durkee and Lempert said that they hoped both sides would agree on a five- to seven-year agreement, saying a longer-term agreement is better for both entities' planning needs and for maintaining good town-gown relations.

"From our end, it helps to know in advance for budgeting purposes," Lempert explained. "It also eliminates one of the sources of tension to not be going in and renegotiating that every year and to know where we stand.”

Durkee added that the main benefit of a multiyear agreement was the "predictability" it allows the University in its relationship with the town.

"It’s helpful in terms of the nature of the relationship between the University and the community,” Durkee said. “I don’t think it’s particularly healthy to, every year, have to have a discussion about what the contribution’s going to be.”

Under the previous agreement, the University’s contribution level increased in proportion to year-to-year increases in the municipal tax rate. When long-term negotiations begin, local government representatives will most likely ask for an agreement in which the amount of the contribution escalates slightly from year to year.

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"Some costs tend to go up every year" in the municipal budget, Lempert explained, adding that the local government usually has to look for additional sources of revenue in order to keep the tax rate from rising year to year.

In the past, the level of the contribution has been mutually agreed upon by both parties, according to Durkee. Lempert said she would prefer to see the contribution take into consideration the precise financial burden that the University places on the town, possibly by estimating what share of government costs benefit the University.

“We want to find the balance where the University is paying at least what the town is spending on the services that it’s providing," Lempert said.

The legality of last year's PILOT contribution is currently being litigated. Several local residents are alleging that the Borough and Township only passed zoning changes that the University requested because the University increased its monetary contribution.

Both Durkee and Lempert said that the ongoing lawsuit did not affect either body's willingness to offer or accept a voluntary contribution.

"That lawsuit has absolutely no merit," Durkee said.