Columbia and NYU would lose $327 million in tax benefits under the proposal

State lawmakers will unveil legislation Tuesday that would eliminate huge property tax breaks for Columbia University and New York University, which have become the top 10 largest private property owners in New York City.

The bills would require private universities to pay their full annual property taxes and redistribute that money to the City University of New York, the nation’s largest urban public university system.

Columbia and NYU have collectively saved $327 million on property taxes this year. The amount the schools save annually has skyrocketed in recent decades as the two have purchased more properties and the value of their properties has also risen.

Withdrawing the tax breaks would face significant obstacles. The exemptions — which apply to universities, museums and other nonprofits — are nearly 200 years old and are part of the state constitution. Overriding it would mean lawmakers would have to approve the changes in successive legislative sessions. Then voters would have to approve them in a statewide vote.

“When the state constitution was written, there was no idea that such an exemption could apply to two of the top landowners in New York City,” said Assemblyman Zohran K. Mamdani, a Queens Democrat who introduced the bill. Assembly introduces. . “This bill is intended to address universities that have so brazenly gone beyond operating primarily as higher education institutions and instead act as landlords and developers.”

The proposed constitutional amendment follows an investigation by The New York Times and the Hechinger Report in September that found the city’s wealthiest universities were bigger and richer than ever before, amassing vast real estate portfolios that have drained the city’s budget.

The study also found that as Columbia has expanded its physical footprint and become the city’s largest private landowner, it has enrolled fewer students from New York City.

A Columbia spokeswoman said university officials were reviewing the legislation. But she added that Columbia has been a driver of the city’s economy through its research, faculty and students, and its capital projects, including $100 million in upgrades to local infrastructure since 2009.

An NYU spokesperson said repealing the tax exemptions would be “extremely disruptive” and that the university would be “forced to rethink much of the way we operate.”

“To pick two nonprofit charities out of the thousands in the state and force them to be treated as for-profit organizations certainly seems misleading and unfair to us,” the spokesman, John Beckman, said in a statement. “We deeply appreciate these policies, which have been in place for two centuries, but we are also somewhat proud of the many, many ways, small and large, in which NYU contributes to the city’s well-being and economy.”

All fifty states offer property tax exemptions for some private nonprofit organizations. Advocates argue that these are critical so that these organizations can provide social, economic and cultural benefits to their communities. But in some cities, officials have put pressure on private universities make voluntary payments, known as payments in lieu of taxes, or similar annual donations. Private universities often have endowments in the billions of dollars and charge annual tuition in the high five figures.

The legislation would apply only to Columbia and NYU and not to other large private universities that own significant land, such as Cornell University in Ithaca. Lawmakers said other universities would be excluded because their tax benefits are much lower than those of Columbia and NYU; the annual property tax exemption threshold would be $100 million.

“I don’t blame these institutions for pursuing their tax breaks and using the tax breaks to vastly expand their empires,” said Senator John C. Liu, a Democrat from Queens. introducing the legislation in the Senate. “But this is a point where we need to look at where all the revenue is coming from and where all the revenue is leaking out. We have to stop those leaks.”

The city is facing a series of cuts to areas including primary schools, libraries and police, partly because of the rising costs of caring for the influx of homeless migrants.

CUNY, which consists of 25 campuses across the city and serves 225,000 students, is also eyeing city cuts. Most of the university’s $4.3 billion budget is provided by the state, but earlier this year the mayor proposed a 3 percent cut in funding provided by the city.

If the constitutional amendment were approved, property tax payments would go to CUNY each year. That would make a significant difference in the quality of education students receive, said James C. Davis, the president of the Professional Staff Congress, which represents 30,000 CUNY faculty and staff.

“Would an additional injection of operational funding impact retention and graduation rates?” said Mr. Davis. “The answer is clearly yes. Even a relatively small amount would make a big difference.”

He noted that 80 percent of first-year CUNY students are graduates of New York City public schools, and the majority are students of color. Half come from families with an income of less than $30,000 a year.

“When you talk about the city being committed to economic equality and social mobility,” Mr. Davis added, “there really is no wiser investment than CUNY.”

This story was produced in association with The Hechinger Report, a nonprofit education news channel. Hechinger is an independent unit at Teachers College, Columbia University.