College pitches lower annual donation to the town amid PILOT agreement re-negotiation

In June 2024, the Payment in Lieu of Taxes (PILOT) agreement — which set a fixed annual contribution from Middlebury College to the town  — expired.

Over the past two years, local town government and college financial managers have been negotiating a new agreement that accounts for the college’s increased investment in individual infrastructure projects in town. Although the new agreement is not yet finalized and is currently under review by the college’s legal counsel, there is the possibility that Middlebury’s annual donation to the town will decrease by nearly $100,000. 

Middlebury College, like most peer institutions, does not pay property taxes on any land it uses for educational purposes, including athletic facilities. Although some of the land the college owns is subject to property taxes, most of Middlebury’s financial contribution to the town comes from an annual payment in lieu of taxes, which has hovered over the past few years at a little more than $300,000. 

Beyond annual PILOT payments, the college donates $600,000 annually to the Cross Street Bridge fund, which performs yearly maintenance on the Cross Street Bridge and pays down debt associated with that project. The college also invested in the recent renovation of the Town Hall Theater ($1 million), the construction of a new childcare center on Weybridge Street ($6 million), the construction of an affordable housing project and the renovation of the Ilsley Library ($1 million). 

As the PILOT agreement is renegotiated, the college seems to be seeking a relationship that focuses more on investing in individual projects than on making a general cash donation to the town’s annual budget. 

“We contribute in a lot of ways, but a lot of times when individual capital projects come up, the town will come to us and talk, and we’ll work with them and support,” Associate Director of Community Relations Amy Carlin said in an interview with The Campus.

As the number of projects the college is involved with varies from year to year, so does its total annual financial contribution. The college’s two set financial contributions to the town are the PILOT and the donation to the Cross Street Bridge fund. 

Although the college’s home-building projects have assuaged the town’s and Addison County’s increasingly tight housing shortage, the town voted to raise property taxes by nearly 10% in the 2027 fiscal year. The cost of living in Middlebury continues to make it difficult for businesses to find full-time employees who live in the area, and many staff members at the college itself are unable to find housing in town. 

“If you don’t find housing, how do you find help? Everybody that works for me now, they don’t live in town,” Farhad Khan, owner of One Dollar Market and ten-year member of the Middlebury Town Selectboard, said in an interview with The Campus. 

During a Middlebury town meeting on March 2, Town Manager Mark Pruhenski predicted “a couple of difficult years ahead,” but hopes that property owners will not see any more double-digit tax increases. 

“Any time the taxes go up, the burden goes on the property owners. So it’s a challenge that most of the business owners are not very happy with the way we have been taxing,” Khan said. 

The town is currently exploring a local option tax. State sales tax applies at 6% to all sales in the town of Middlebury, and the town would then take an additional 1% as another potential revenue source for the annual budget. The town of Stowe is currently reviewing an increase in its local option tax, and if it passes, the Middlebury Selectboard would request a similar policy. 

As property owners cope with increasing taxes, a conversation regarding a fair financial relationship between the college and the town has ensued. While the college’s investment in projects in town helps the town take on ambitious initiatives, a decrease in PILOT funds would put pressure on Middlebury residents to fund day-to-day town needs, such as wastewater management and roads, through their taxes. 

“It's beneficial more to the town to have something that goes into a general fund to be able to support wastewater, roads, maybe not the fun, flattering stuff,” Isabel Gogarty, Middlebury Selectboard member, said in an interview with The Campus. “It’s better to have that continuous fund as opposed to the strategy or ability to pick projects that align with the benefit of the college.” 

Still, the college remains a crucial piece in the renovation and buildout of town infrastructure. Since 2004, when the PILOT agreement was first finalized, the college has substantially ramped up its investment in the town and is factoring in that increase in the PILOT renegotiation process. 

“Anything the college can do to help with workforce advancement, bringing more businesses to town, is something you can’t put into a budget line,” Gogarty said. 

Beyond individual investment projects and annual donations, the college is a key economic driver for the town and the surrounding area. Middlebury is currently the largest employer in Addison County, and students, alumni, staff, and student families are the primary consumers of in-town businesses, although the majority of college staff live outside the town. According to Danielle Boyce, Middlebury Selectboard member and owner of American Flatbread, business at the restaurant was down 40% during the past spring break. 

When NCAA tournaments come to Middlebury, as well as during move-in, graduation, and parents’ weekend, business owners mold their business models to the fluctuation of students and their families over the course of the year. 

“Business owners think about how to make downtown really accessible and lively so that when you’re walking around with your student, you want to pop into their store,” Gogarty said. 

The overall relationship between the college and the town remains positive, as the college provides not only revenue for crucial infrastructure projects but a steady stream of consumers. The college is continuing work on the Stonecrop Meadows affordable housing project and pitching a potential industrial park buildout on Exchange Street. 

“The future will focus on housing development,” Pruhenski said in an interview with The Campus. 

A potential decrease in Middlebury’s annual donation to the town will not be finalized until the new PILOT agreement is ratified, which would last for another ten-year term. For now, the town is focusing on reopening a sustained dialogue with the college administration and mitigating any further substantial increases in property taxes.