Evanston’s Struggle with Northwestern University’s Tax Exemption

Nearly 175 years ago, Illinois lawmakers exempted Northwestern University from paying property taxes to Evanston and other entities. This 1851 charter remains a significant obstacle for officials seeking more funds from the city’s largest employer. On July 27, Evanston’s City Council rejected a proposal to place an advisory referendum on the November 3 ballot, asking voters if tax-exempt organizations like Northwestern should pay a tax equivalent when using property for commercial purposes not related to their nonprofit missions.

The council was split 4-4, with Ald. Juan Geracaris abstaining due to his employment with the university. Evanston Mayor Daniel Biss was absent and could not break the tie, meaning the question will not appear on the ballot.

Illinois tax law requires real estate owners to pay taxes but provides exemptions for some entities, such as schools and charities. Northwestern’s corporate charter exemption allows its property to be tax-free permanently. This privilege is rare, with Northwestern being one of only 80 institutions to have it and possibly the most recognized.

Ald. Parielle Davis, 7th, has led efforts for Northwestern to make payments in lieu of taxes (PILOT) for its commercial ventures like a childcare center and restaurant. Davis stated, “We want Northwestern to be taxed as a nonprofit entity, which they are.” The proposed referendum would also have allowed tax avoidance if three-fourths of the City Council approved each use.

“We’re not asking for much more than what really every other university does pay the municipalities that they’re in,” Davis said.

Several Council members agreed the state’s exemption for Northwestern is unfair, but questioned if a referendum would solve the issue. Ald. Bobby Burns, 5th, noted, “I don’t need a referendum for this discussion.” Ald. Jonathan Nieuwsma, 4th, felt a non-binding referendum wouldn’t advance solving the funding problem.

The conversation referenced Evanston’s recent deal with Northwestern for the new $875 million Ryan Field football stadium, where zoning approval was granted in 2023. Nieuwsma noted, “We were able to get more than expected from the community benefits package.” He urged for strategic planning in future engagements with Northwestern.

Evanston Corporation Counsel Alex Ruggie mentioned previous legal challenges to the charter by both state and national supreme courts which upheld it. “No other not-for-profit has anything like this,” Ruggie said.

Ald. Matt Rodgers, 8th, supported a referendum to gauge public opinion and proposed later legislation to address the issue. The deadlock reflects the city’s careful approach in dealing with its affluent institution.

“Northwestern is the anomaly here, not the norm,” said Ald. Matt Rodgers.

Nieuwsma concluded, “The charter is law. Any ordinance following a referendum could result in legal action from Northwestern, costing the city money. This issue needs addressing, but a referendum isn’t necessary for that conversation.”