College presidents call Worcester endowment tax proposal short-sighted and ill-timed

A woman and a man sit at a table in front of banners advertising WPI and College of the Holy Cross.

PHOTO | COURTESY OF WORCESTER POLYTECHNIC INSTITUTE AND THE COLLEGE OF THE HOLY CROSS Grace Wang (left), president of Worcester Polytechnic Institute, and Vincent Rougeau, president of the College of the Holy Cross, are two of the five leaders of Worcester-based higher educational institutions which signed on to a letter criticizing a proposed 0.5% tax on endowments. The two are seen here at the signing of a partnership agreement between the two schools in June 2023.

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By Eric Casey

Presidents of five Worcester colleges and universities are pushing back against the City Council’s decision to move forward with a non-binding ballot initiative asking voters if college endowments should be subject to a 0.5% tax.

In a letter to the Worcester City Council shared with WBJ on Thursday, leaders of Clark University, Massachusetts College of Pharmacy and Health Sciences, College of the Holy Cross, Worcester Polytechnic Institute, and Assumption University said the proposed endowment tax would harm students and increase pressure on the schools, which are already reeling from the federal government’s slashing of funding and revocation of international student visas.

“We are surprised and disheartened by the seemingly short-sighted nature of the council’s actions that selectively target certain institutions, even those that are already contributing through existing PILOT agreements,” the letter reads. “Furthermore, the introduction of a non-binding resolution is not only unnecessary, but potentially a roadblock to ongoing discussions with city leaders about further strengthening our partnerships.”

Saying the schools already annually contribute approximately $2 million in payments-in-lieu of taxes and paid more than $1.5 million in direct real estate taxes in 2023-24, the five presidents said the proposal could undermine the schools’ operational stability.

The letter attacked the timing of the proposal, as local universities like WPI and Clark University deal with the federal government’s targeting of international student visas and higher educational institutions deal with the fallout from the President Donald Trump Administration's slashing of federal research grants.

“Higher education is under extraordinary pressure across the country,” the letter reads. “These challenges are not abstract; they have immediate and long-term implications for our ability to fulfill our missions and to contribute meaningfully to the community we have long called home.”

In addition to calling the proposal ill-timed and as unconstructive, the letter also questioned the legality of the proposal.

“We believe the non-binding resolution and any forthcoming ballot initiative are likely based on a misunderstanding of the City’s legal authority to unilaterally impose an endowment tax,” the letter states. “If such authority did exist, it would also apply to every other nonprofit organization in our community, something that should concern each of them.”

The Worcester City Council voted unanimously to support District 2 Councilor Candy Mero-Carlson’s proposal to add the non-binding ballot question during Tuesday’s meeting.

Both Mero-Carlson and Mayor Joseph Petty insisted the proposed mandatory payment to city government should not be considered a tax. The City’s solicitor noted it would take action from the state legislature in order for there to be a potential pathway for the mandatory payments to be implemented.

Eric Casey is the managing editor at Worcester Business Journal, who primarily covers the manufacturing and real estate industries.