Sunday, January 06, 2008

“There are no corporate citizens left in New Haven except Yale”

In Private Cash Sets Agenda for Urban Infrastructure, the New York Times looks at the mismatch in spending between the City of New Haven and Yale University. As noted earlier on the blog, Yale has become rich beyond the dreams of avarice, and so is renovating buildings with a small portion of the money.

Yale now spends more than $400 million annually on its renaissance, nearly six times its outlays for construction and renovation in the mid-1990s. New Haven, by contrast, budgeted $137 million in the current fiscal year for all its capital projects, including those subsidized by state and federal governments. That is less than twice the amount budgeted in the mid-’90s.

Why can't New Haven keep up the spending? The quote in the headline above was buried near the end of the article, but it explains everything. There's no private industry left to tax in the city. Yale itself is a tax-free institution. The middle class left for better schools in the suburbs. Who is supposed to pay the bills? Did industry leave the city because, in effect, the businesses had to pay their own tax bills and Yale's share also? That may be an overstatement, but I can't help but think it was a contributing factor.

I lived in New Haven from 1978 to 1986, when there were more corporate citizens. I had the distinct feeling that the city considered me a resource to be milked, not a customer to be served or a citizen to be respected. High taxes plus high crime plus very low quality public schools plus no voice for middle class families was an unfortunate formula for the city to choose. I was really, really happy to move out. I avoid New Haven whenever I can.

That $400 million in annual construction spending by Yale sounds large in dollar terms, but it amounts to a rounding error in the context of their $22.5 billion endowment. What's more, the article reveals that Yale so likes today's interest rates that about 1/3 of the construction money is borrowed, leaving more to earn tax-free returns!

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