• April 18, 2014

For Many Public-College Presidents, Home Is an Uncalculated Benefit

For Many Public-College Presidents, Homes Don't Count in Pay Packages 1

Mary Levin, U. of Washington

Hill-Crest, home of the president of the U. of Washington, has 35 rooms and a lake view. "It's extraordinarily useful," says the current occupant, Michael Young.

A few weeks before Michael Young became president of the University of Washington, almost two years ago, he made use of one of his new job's perks: the president's mansion. In a small ceremony, with just a few family members and close friends, he got married on the patio of his new home, in Seattle's posh Madison Park neighborhood.

The residence was an obvious choice for the wedding. Hill-Crest, as it's called, has 35 rooms, comprises 12,800 square feet, and sits on about 1.4 acres, overlooking Lake Washington. It was bequeathed to the university in 1931 by the estate of the Walker-Ames family, timber barons, with the stipulation that the president must reside there or the university would have to sell it.

Among university-provided homes for public-college leaders, none is worth more than Washington's, which has a market value of $8.5-million, according to data provided by colleges for The Chronicle's annual analysis of presidents' pay.

Many presidents of large universities are given houses in which to live and to play host to fund raisers and other events. According to the survey, at least 20 of the houses provided to public-college presidents are valued at over $1-million; more than three dozen are worth $500,000 or more.

But at most public institutions, according to The Chronicle's survey, the value of living in these residences is not calculated as part of the chief executive's compensation package, even though it saves the president from having to pay what amounts, for most people, to the single biggest monthly expense.

In many cases, there isn't a current market value for the property on the books. Of the 118 public institutions in the survey that reported providing the chief executive with a residence, more than half didn't report any value for it.

"We own the house, and the house is on university property," said Pat Hanson, director of human resources and payroll services at the University of North Dakota, of the residence where Robert Kelley, the president, and his wife reside. "There's no reason for calculating a value, so we don't."

Public universities are not required to calculate or report the value of housing provided to their leaders. Because the institutions are public, they don't have to pay property taxes on the homes. And because the presidents are obligated by their contracts to live in the houses, they don't pay income tax on them.

"The general rule—and this applies to all industries, not just higher education—is that housing and meals that are provided for the convenience of the employer are not included in the taxable income of the person who is required to live there," says Virginia Sikes, a Philadelphia-based lawyer who specializes in tax-exempt organizations.

Similarly, private-university presidents do not have to pay income taxes on the value of housing they are provided. But unlike their public counterparts, private colleges are required to report the estimated annual value of this benefit, along with other nontaxable benefits, such as health care and business travel, to the Internal Revenue Service on Form 990, which private, tax-exempt organizations must file. The IRS added this requirement in 2008 to help it determine whether nonprofit groups were paying their top employees "excess benefits," in violation of federal law.

But that doesn't mean the value of private-college presidents' houses is entirely clear. Although tax experts say most private colleges report the fair rental-market value of the home as a benefit to the president, nowhere in the 99-page instructions for Form 990 is it explained how a college-owned house should be valued. And because the housing benefit is grouped with other nontaxable benefits on the form, discerning its value to the president is difficult.

Some public-college presidents say that a college-provided house shouldn't be considered a benefit at all. Mr. Young, who joined Washington in July 2011 from the University of Utah, where he was president, says he used to joke with the governor of that state that they were the only successful, midlevel professionals he knew who lived in public housing.

Early in his tenure at Utah, Mr. Young says, he tried to drop hints that he preferred to live in his own house. He says he believes most presidents feel the same way.

"If you were to give us a choice, would I rather have exactly the salary I have and live in my own house?" Mr. Young says. "I think anyone would."

He acknowledges that free housing sounds like a good deal, especially a mansion like Hill-Crest. But there are downsides. Because he regularly plays host to events, sometimes as many as four times a week, his home can often feel less like a private residence, he says, than a public meeting space.

Colleges say the public/private nature of a president's house is also what makes it hard to determine its value to the individual leader who lives there.

"We don't call it the president's home, we call it the home for Virginia Tech presidents," says Larry Hincker, associate vice president for university relations at Virginia Tech. "There's a reason for that nuance, which is really that it's a public place more than it's a private place."

On other campuses, housing is considered an important, if elusive, part of a president's compensation.

Steve Stein, a senior compensation specialist at the University of Missouri system, says he includes the insurance-based replacement value of university-provided homes when calculating compensation packages for campus leaders. He uses insured value rather than rental value because it is less susceptible to the fluctuations of the housing market.

"When I get a request from one of our chancellors or vice chancellors to provide compensation-related information regarding a position, I try to capture all of the elements, which means more than just, Do you get a house or not?" Mr. Stein says. "If I'm just giving them yeses and nos, I'm not giving them a whole picture."

In Seattle, Mr. Young agrees that the multimillion-dollar house is a benefit; he just thinks it benefits the university more than it benefits him and his wife.

"It is extraordinarily useful to have a president's residence," the president says. "It allows you to draw people into an inner circle. It allows you to say that they are more than someone who you just see in passing on the campus, and they are more than someone you just go out to dinner with at a restaurant."

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