The University of Pennsylvania and Payments in Lieu of Taxes

Reviewed by Samuel Henick

April 12, 2015

Marietta Catsambas, Debby Chiang and Leyla Mocan argue in “The University Of Pennsylvania and Payments in Lieu of Taxes” that the University of Pennsylvania (UPenn) has the chance to improve the education of the Philadelphia School District, which is currently in need of help, and in performing this civil duty, “the University can increase its marketability as a service-oriented institution in a highly desirable location.” Payments In Lieu of Taxes (PILOTs) could include initiative such as pledging $12 or $13 million per year to provide adequate books, classroom, equipment, and supplies for the public schools. The PILOT programs would have benefits for UPenn as well; the university would be a model for other nonprofit organizations and would live up to its goal of integrating research, learning, and service. This increase in prestige would be coupled with better students in the Philadelphia area and thus more desirable public schools, which would then raise real estate and ultimately lead to “a safer, more beautiful, and well-maintained city.” Thus the authors maintain refute the claim that “the current status quo is best and the University of Pennsylvania is meeting, if not exceeding, its obligation to the local community through the “Philadelphia Model.”” The authors also provide an “Action Items” section, in which they address the implementation of the PILOT program.

The PILOT program is the authors’ solution to “The Philadelphia School District’s fiscal crisis,” which is  “a wakeup call in an era of growing inequality.” A $1.19 million PILOT would only constitute 0.02% of the University’s $6.6 billion annual operating budget and would lead to substantial benefits for the school district.

“The University Of Pennsylvania and Payments in Lieu of Taxes” offers a promising solution to one of the most important issues in this country. UPenn could be a model for other universities around the country and can inspire a host of charitable organizations that spur education funding and in turn help the country move forward. It is worth noting that the benefits to UPenn that the authors describe are indirect and are not as evidently economically effective as investing that money in a program that promises gains on the investment. That said, if PILOT programs spread over the country, then UPenn will not only have made its community better, but would have served as a role model for the rest of the nation and nations around the world.


See the full paper here!

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