Universities are not required to pay property taxes

Universities are not required to pay property taxes

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File photo.

Texas State’s main campus sits on over 495 acres of San Marcos land that the university pays no property taxes for. The university, like all publicly owned buildings in the state of Texas, does not pay local property taxes due to intergovernmental immunity.

The school’s mission to educate and inspire students deems it a charitable organization. According to IRS Tax Code, Section 501(c)(3) charitable organizations, such as universities and hospitals, are exempt from paying property taxes.

This can cause friction at a local level as universities and other public buildings occupy land that needs to be maintained by the city. Expenses such as fire, sewage and emergency medical services are used by the university, yet the city is responsible for footing the bill.

“The university puts big drainage needs on the city, and I think it would be nice if (it) could do more to help out with some of the expenses from time to time.” said City Council member Lisa Prewitt, Place 1.

There has been dissention between the city and university for years. Some council members demand payment and change. The city would like to see change, however, it would take major legislative power to enact that shift.

“This issue comes up from time to time,” said Eric Algoe, Vice President of Finance and Support Services at Texas State. “It would take legislative action to change our status as a charitable institution. I meet with the city manager regularly, and we talk about the economic impact of the university. Even though we still use some of the city’s resources, we make contributions to city projects, such as expansion of water conservation and sewer lines to the university.”

The university’s economic impact in San Marcos comes from both students and faculty. The growing university population brings an increase in businesses. Students and faculty also purchase homes and rent apartments, all of which the city collects taxes on.

“Really you have to look at the overall economic impact of the university,” Algoe said. “We bring in faculty and staff who buy houses, which contributes to property taxes. We bring in lots of students who contribute to city taxes in various ways. Overall, we contribute to San Marcos much, much more than the cost of the resources we use.”

Prewitt also recognizes the benefits the university has brought to the city of San Marcos.

“Of course nobody denies that Texas State does a lot for the San Marcos community,” Prewitt said. “(It) provides a lot to local business, and they are definitely going to be a part of a lot of decisions going forward.”

However, the big issues are communication and a relationship that has left some wanting more.

“We’ve got to have better communication,” Prewitt said. “We go sit down and get things done, but I’d like to see a more open door.”

The university and the city have had a rocky relationship in the past, and have experienced difficulties similar to other college towns. There have been issues regarding land and ownership in San Marcos that are in many ways similar to the relationship between the University of Texas and the city of Austin.

“I think we’re missing out in opportunities by not communicating well, but it takes two for a partnership to work, and if you don’t have willing partners it can make things difficult,” Prewitt said.

 

Students are unsure how to feel about the situation, noting that if the university had to pay property taxes, the cost of an already high tuition would increase. This would affect everyone, and is one of the reasons the state has gone out of its way to insure institutions of higher learning do not have to pay property taxes.

“I don’t know, it’s kind of tough,” said Ernesto Cadena, public administration junior. “No, I don’t want them to increase my tuition, and the students probably do bring a lot of stuff in, but so do the outlets.”

Students, however, are the ones most likely to use city services. It has not been calculated if the cost to the city is outweighed by the student contribution to the city. It seems there will be little change in the issue and, for now, students are being spared the fallout of a confrontation between the city and the university.

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