Can anchor institutions build communities?

June 1, 2012

In a recent profile of Manhattan’s Morningside Heights neighborhood, the New York Times described the area around Columbia University as one of the most desirable places to buy an affordable home in Manhattan. The neighborhood is particularly attractive to families who do not wish to leave the island, but cannot afford to live downtown. Morningside Heights is dominated by Columbia University and Barnard College—institutions that have been instrumental in making the community attractive to faculty and students. Columbia and Barnard are “anchor institutions,” acting as real estate developers, generators of human capital, and employers of community members. Universities, medical centers, and museums around the country have often taken an increased interest in developing their surrounding neighborhoods. These investments in real estate, infrastructure, and local businesses are strategic initiatives intended to create a favorable work environment and to reconnect the urban campus with city life. So far, however, the academic and political debate about these organizations has not resolved the extent to which anchor institutions contribute to community building and neighborhood revitalization.

Neighborhood development

Urban planner and researcher Eugenie Birch has considered the value of anchor institutions as engines for economic growth. In an effort to attract top talent, employers commission the construction of livable accommodations and other amenities close to the workplace. Those investments can revitalize disadvantaged inner-city neighborhoods. The University of Pennsylvania, for example, made significant investments in the New Kensington neighborhood that surrounds the campus. Community gardens and landscaping took the place of empty lots, and abandoned buildings were demolished or transformed into livable units. Economist Susan Wachter estimated that property values in the improved area increased by forty percent, a net increase of $16 million. At the same time, Birch acknowledges that tensions can arise if the goals of the anchor institution do not match the desires of the community.

Institutional development

Using cases studies of hospitals and universities, social scientists Henry Webber and Mikael Karlström analyzed the costs and benefits that nonprofit institutions like universities and hospitals may experience when they choose to invest in their local communities. Benefits include creating an environment that attracts staff and customers, as well as generating goodwill from local politicians, community leaders, and potential donors. The goodwill of community leaders becomes especially valuable when the anchor institution needs local support to circumvent zoning restrictions that could prevent its expansion. Webber and Karlström also reported that Yale University experienced alumni support for community improvement initiatives such as the rebuilding of downtown New Haven. Trinity College’s endowment increased vastly after the school decided to invest in the Hartford, Connecticut, community surrounding the campus. Webber and Karlström acknowledged that it is difficult to assess precisely how returns on investments in the local community compared with those derived from other direct institutional investment. Community investment also has indirect costs. When embarking on a community investment agenda, anchor institutions often hire urban planners or other professionals with relevant experience, who are better prepared to build relationships with political and community leaders. Webber and Karlström concluded that the community investment and long term gains in goodwill and improved community relations outweighed the human capital costs of hiring specialized staff members.

Loss of Revenue

Many anchor institutions, such as universities, medical centers, and museums, are nonprofits, meaning they are exempt from paying taxes. The idea of a large nonprofit institution with thousands of employees and a significant footprint in the community being tax-exempt may not always be seen as beneficial to the community by municipal government. Instead of property taxes, many anchor institutions make much smaller voluntary payments, commonly known as “Payments In Lieu Of Taxes” (PILOTS). The New York Times reported that in times of fiscal crisis, cities across the country are trying to find ways of working with nonprofit anchor institutions to counteract the negative economic impact such institutions’ exclusion from the tax rolls might have on the cities’ bottom line. Yet the ability of cities to force their nonprofit anchor institutions to increase payments is limited. In Philadelphia, the voluntary payments by major anchor institutions has fallen significantly, from almost $700,000 in 2009 to slightly less than $400,000 in 2011. The University of Pennsylvania made no contributions at all.

While examples like Morningside Heights in Manhattan or the New Kensington neighborhood in Philadelphia seemed to show the powerful impact anchor intuitions can have on their local communities, systematic research analyzing both their benefits and their revitalizing effects—as well as their burden on tax revenue—is just beginning. According to Birch, the research needs to develop more objective indicators for measuring the success or failure of community investment. Scholars must not only take into account visible improvements, but also interactions between political partners and anchor institutions that may or may not generate effective neighborhood change.

Homepage photo by Flickr user Shreyans Bhansali