Borough searches students' pockets
Students erode local tax base

By RACHEL HOGAN
Collegian Staff Writer

For University students, State College is part of a transient stage in life, lasting about four years. For the borough, students are a constant.

And for a borough whose income comes primarily from earned income tax, students can be a constant problem.

"Students generate issues that have a cost assigned to them," said Ron Davis, assistant borough manager. But the problem that remains is finding a way for students to pay for those costs.

The State College borough's general budget is about $8 million, said Tom Daubert, State College Borough Council member. About 50 percent of the tax base comes from earned income tax.

And because most students claim residency and pay taxes in their hometowns, the money received from student income tax is minimal.

Of the property taxes received by the borough, $100,000 comes from rental housing, Davis said. Landlords can pass some of their property taxes on to student tenants through leases, but it still does not amount to much money, he said.

This leaves the borough to foot the bill for services provided to students.

The budgets for police, fire and other services are considerably higher because of the students' presence, he said. The police budget is $3 million a year, but without the University's presence, it could be a lot less, he said. Only in the last few years has the University started paying for the extra police necessary at large functions, he said.

"What you have to realize is that students are residents of the community and get the same services as everyone else," Davis said.

If there is a fire, students expect to have firefighters arrive, and they expect working lights at an intersection, he said. Students also benefit from the aesthetic improvements -- such as trees and other decorations that line the roads, Davis said.

Because most students don't pay taxes, they are not paying for these amenities.

The borough has tried to alleviate this lack of tax money through a .15 percent business privilege tax. This means businesses must pay $1.50 on every $1,000 they earn, Daubert said.

Davis said this provides some diversity in the tax base, allowing the borough to make money from the tourist population during football weekends and from student shoppers. Still, this tax amounts to about $300,000 for State College.

Bob Price, executive director of Downtown State College Inc., said he tried to get a breakdown of this tax because he wants to know how much each store generates. But he said that is privileged information.

And Price said he thinks students generate large revenues.

But Mike Groff, financial director, will not make such a claim.

"We have no way to differentiate what would be spent by a student or townsperson," Groff said, pointing out that the money can not be attributed to the students alone.

But Andrew Chi (senior-premedicine) said students probably spend more in town than other people because they do not have time to make meals.

"If I was living off campus, I'd be going out to eat all the time," he said.

Add bars to the list of student haunts and students really make money for the borough, said Jennifer Shabin (senior-mathematics).

Undergraduate Student Government President Mike King said he thinks students create a need for resident jobs and, therefore, create a tax base for the borough.

Council member Jerry Wettstone agreed that students are important to the job market, but he had a different idea as to why.

"Even if students are only working for minimum wage and aren't providing much money, they are still performing a valuable service. We need people to take these minimum wages," he said, citing fast food restaurants as an example of jobs primarily filled by students.

But Daubert noted that even if students do create a need for jobs, most business owners do not live in State College, so they do not pay any income tax or property taxes to the borough. The main thrust of taxes come from permanent residents, not retail owners or students, he said.

Davis agreed, but added that students are taxable.

"Students who live here and work here pay taxes, but they don't have as much income," Davis said, comparing a student living in State College to a professor living in the area. The professor would bring in more money, he said.

King maintained that the low income of students helps the borough because it receives federal and state aid for the low per capita income.

Daubert explained that this aid, the Community Development Block Grant, totals $800,000 per year. He said the money can only be used for low-income areas -- primarily student populated areas.

In these designated areas, 65 to 70 percent of the money is used as capital for road repairs.

One of the major financial woes of the borough is that there are no taxable industries in the borough due to the University's presence, Wettstone said.

The University is protected from taxation as an educational institution, and eclipses other industries that might otherwise enter the area, Davis said.

But when the University started putting commercial businesses in the HUB, the county sued the University for about $1,000 in tax money, Daubert said.

The suit was dropped, but the University agreed to pay the borough a $600,000 per year impact fee. Half of that money goes to State College and the other half is distributed to the surrounding townships, based on how much impact the University has on the particular area, Daubert said.

The impact fee is also added to concert and football tickets.

Davis said the borough is not necessarily asking for more than what the University gives them.

"We don't expect the students to pay more money, but we do want sensitivity to why we want some balance in our neighborhoods," he said.